Bureau of Internal Revenue Cumulative Bulletin 1952-2

Treasury Department : ureau of Interna Revenue
Interna Revenue uetn

Cumuatve uetn 19 2-2
ULY-D C M R 19 2
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SP CI L TT NTION drected to the cautonary notce on ths page that pu
shed rungs of the ureau donot have the force and effe
of Treasury Decsons and that they are appcabe ony to facts presented n the pubshed ca:
Treasury Department : : : : ureau of Interna Revenue
Interna Revenue uetn
Cumuatve uetn 19 2-2
ULY-D C M R 19 2
IN T IS ISSU
Introductory Notes I
Contents
Rungs Nos. 13 61-1 001
Ta Court of the Unted States, The 1-6
Income Ta
Part I (Interna Revenue Code) 7-220
Part II (Revenue ct of 193 and pror Revenue
cts) 221-222
state and Gft Ta es ... 223-236
mpoyment Ta es 237-2 6
cse Ta es
Msceaneous Rungs 27 -3
Legsaton 3 -367
Commttee Reports 369-37
Inde . . ... 377-390
The rungs reported n the Interna) Revenue uetn are for the nformaton of ta payers and ther counse as
showng the trend of offca opnon n the admnstraton of the ureau of Interna Revenue; the rungs other than
Treasury Decsons have none of the force or effect of Treasury Decsons and do not commt the Department to
any nterpretaton of the aw whch has not been formay approved and promugated by the Secretary of the
Treasury. ach rung embodes the admnstratve appcaton of the aw and Treasury Decsons to the entre
state of fads upon whch a partcuar case rests. It s especay to be noted that the same resut wD not neces-
sary be reached n another case uness a (he matera facts are dentca wth those of the reported case. s t s
not aways feasbe to pubsh a compete statement of the facts underyng each rung, there can be no assurance
that any new case s dentca wth the reported case. s bearng out ths dstncton, t may be observed that the
rungs pubshed from tme to tme may appear to reverse rungs prevousy pubshed.
Offcers of the ureau of Interna Revenue are especay cautoned aganst reachng a concuson n any case
merey on the bass of smarty to a pubshed rung, and shoud base ther |udgment on the appcaton of a
pertnent provsons of the aw and Treasury Decsons to a the facts n each case. These rungs shoud be used
as ads n studyng the aw and ts forma constructon as made n the reguatons and Treasury Decsons pre-
vousy ssued.
a addton to pubshng a Interna Revenue Treasury Decsons, t s the pocy of the ureau of Interna
Revenue to pubsh a rungs and decsons, ncudng opnons of the Chef Counse for the ureau of Interna
Revenue, whch, because they announce a rung or decson upon a nove queston or upon a queston n regard
to whch there e sts no prevousy pubshed rung or decson, or for other reasons, are of such mportance as
to be of genera nterest. It s aso the pocy of the ureau, to pubsh a rungs or decsons whch revoke,
modfy, amend, or affect n any manner whatever any pubshed rung or decson. In many nstances opnons
of the Chef Counse for the ureau of Interna Revenue are not of genera nterest because they announce no
new rung or new constructon of the revenue aws but smpy appy rungs aready made pubc to certan
stuatons of fact whch are wthout speca sgnfcance. It s not the pocy of the ureau to pubsh such opnons.
Therefore, the numbers assgned to the pubshed opnons of the Chef Counse for the ureau of Interna
Revenue are not consecutve. Uness otherwse specfcay ndcated, a pubshed rungs and decsons have
receved the consderaton and approva of the Chef Counse for the ureau of Interna Revenue
UNIT D ST T S GO RNM NT PRINTING OFFIC : W S INGTON : 19 3
For sae by Superntendent of Documents, U. S. Government Prntng Offce Washngton 2 , D. C
Prce 1.00
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INTRODUCTION
Interna Revenue Cumuatve uetn 19 2-2, n addton to
a decsons of the Treasury Department (caed Treasury Decsons)
pertanng to Interna Revenue matters, contans opnons of the Chef
Counse for the ureau of Interna Revenue, rungs and decsons
pertanng to ncome, estate, gft, saes, e cess profts, empoyment,
soca securty, and msceaneous ta es, and egsaton affectng the rev-
enue statutes, as ndcated on the tte page of ths uetn, pubshed
n uetns 1 to 26, ncusve, for the perod uy 1 to December 31,
19 2. It aso contans a cumuatve st of announcements reatng
to decsons of The Ta Court of the Unted States, pubshed n the
Interna Revenue uetn Servce from uy 1 to December 31, 19 2.
Income ta rungs are prnted n two parts. The rungs under the
Interna Revenue Code are prnted as part I, the aw headngs corre-
spondng wth the sectons of the Code, as amended, and the regua
tons headngs correspondng wth the secton headngs of Reguatons
111 or 103. Rungs under the Revenue ct of 193 and pror revenue
acts are prnted as part II, the aw headngs correspondng wth the
secton headngs of those revenue acts and the reguatons headngs
correspondng wth the artce headngs of the appcabe reguatons.
Rungs under ttes III and I of the Soca Securty ct and
under subchapters and C, chapter 9 of the Interna Revenue Code
n force pror to anuary 1, 19 0, are pubshed under artce headngs
of Reguatons 91 and 90, respectvey; rungs under subchapters
and C, chapter 9 of the Code n force on or after anuary 1, 19 0, are
pubshed under the secton headngs of Reguatons 106 and 107,
respectvey; rungs under the Carrers Ta ng ct of 1937 and under
subchapter , chapter 9 of the Code for perods pror to anuary 1,
19 9, are pubshed under the artce headngs of Reguatons 100, and
rungs under subchapter , chapter 9 of the Code for perods subse-
quent to December 31, 19 , w be pubshed under the secton head-
ngs of Reguatons 11 .
R I TIONS
The foowng abbrevatons are used throughout the uetn.
, , C, etc. The names of ndvduas.
. R. M. Commttee on ppeas and Revew memorandum.
. R. R. Commttee on ppeas and Revew recommendaton.
. T. coho and Tobacco Ta Dvson.
. T. . oard of Ta ppeas.
C. . Cumuatve uetn.
Ct. D. Court decson.
C. T. Ta as on empoyment by carrers.
D. C. Treasury Department crcuar..
m. T. Ta es mposed by chapter 9 of the Interna Revenue Code.
. O. ecutve Order.
. P. C. cess Profts Ta Counc rung or memorandum.
(n)
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I
. T. state and gft ta rung.
G. C. M. Genera Counse s, ssstant Genera Counse s, or Chef Counse s
memorandum.
I. R. . Interna Revenue uetn.
I. R. C. Interna Revenue Code.
I. T. Income Ta Dvson.
M, N, , Y, Z, etc. The names of corporatons, paces, or busnesses, accordng
to conte t.
Mm. Mmeograph.
MS. or M. T. Msceaneous ranch.
O. or L. G. Soctor s aw opnon.
O. D. Offce decson.
Op. . G. Opnon of the ttorney Genera.
P. T. Processng Ta Dvson.
S. T. Saes Ta ranch.
S. Sver Ta . ;
S. M. Soctor s memorandum.
So. Op. Soctor s opnon.
S. R. Soctor s recommendaton.
S. S. T. Ta es on empoyment by others than carrers.
Tob. Tobacco ranch.
T. . M. dvsory Ta oard memorandum.
T . R. dvsory Ta oard recommendaton.
T. C The Ta Court of the Unted States.
T. D. Treasury Decson.
and y are used to represent certan numbers, and when used wth the word
doars represent sums of money.
NNOUNC M NT R L TING TO D CISIONS OF T T COURT OF T
UNIT D ST T S
. In order that ta payers and the genera pubc may be nformed
whether the Commssoner has acquesced n a decson of The Ta
Court of the Unted States dsaowng a defcency n ta determned
by the Commssoner to be due, announcement w be made n the
Interna Revenue uetn at the earest practcabe date. (No
announcements are made n the uetn wth respect to memoran-
dum opnons of the Ta Court.) Notce that the Commssoner has
acquesced or nonacquesced n a decson of the Ta Court reates ony
to the ssue or ssues decded adversey to the Government. Decsons
so acquesced n shoud be reed upon by offcers and empoyees of the
ureau of Interna Revenue as precedents n the dsposton of other
cases.
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CUMUL TI CONT NTS
Rung
Treasury Decsons:
S 13
913
91
91 .
916
917
91
919
920
921
922
923
y.ra ....
92
927
92
ma
930
931
932
933
93
93
9 6
937
. . OS
939.
9 0.
9 1
9 2
9 3
W
wa.v s
9 6
9 7
9 -
S9 9
9 0
9 1
9 2
9 3
Court decsons:
17 6
17 7
17
17 9
17 0
17 1
17 2
Chef Counse s memoranda:
27169.._
27322..
27 0
27 91
Unted States Ta Court:
2 9.
729 ..
1 31 .
1 316..
1 3 ..
1 96..
1 630..
1 631..
1 91..
1 S62..
Rung No.
19 2-1 -13 6
19 2-1 -13 7
19 2-1 -13 6
19 2-1 -13 73
19 2-1 -13 7
19 2-1 -13 76
19 2-16-13 0
19 2-16-133 3
19 2-16-13
19 2-17-11 96
19 2-17-13 97
19 2-1 -13913
19 2-1 -13911
19 2-1 -13912
19 2-19-13921
19 2-19-13922
19 2-19-13923
19 2-20-13931
19 2-20-13933
19 2-20-13932
19 2-21-13936
19 2-21-13939
19 2-21-139 0
19 2-22-139 6
19 2-22-139 0
19 2-22-139 9
19 2-23-139 9
19 2-23-13960
19 2-23-139
19 2-2 -13970
19 2-2 -13967
19 2-2 -13969
19 2-2 -1397
19 2-2 -13979
19 2-2 -13976
19 2-2 -139 1
19 2-26-13996
19 2-26-13993
19 2-26-139 9
19 2-26-13991
19 2-26-1399
19 2-26-1399
19 2-1 -13 R2
19 2-19-13919
19 2-19-13920
19 2-20-13929
19 2-2 -1396
19 2-2 -139 2
19 2-26-13992
19 2-1 -13 63
19 2-19-13917
19 2 2 -13977
19 2-23-139 6
19 2-17-13 92
19 2-17-13 92
19 2-1 -13 61
19 2-1 -13 61
19 2-1 -13 61
19 2-1 -13 61
19 2-1 -11 61
19 2-1 -13 61
19 2-1 -13-161
19 2-21-1393
10 2-1 -136 1
19 2-23-139 1
19 2-23-139 1
19 2-20-13927
19 2-26-139
Page
112
3
169
s
232
303
133
306
2 3
209
S7
203
100
161
269
27S
s
M
301
2
79
272
217
W
22
17
2 7
217
223
23
122
219
7
127
02
1
226
176
32
1
202
20
66
211
200
13
0s
167
136
120
62
97
221
1
2
6
1
1
,6
3
3
3
3
Rung
Unted States Ta Court-
Contnued
1 63
19 2
20107
2113 ..
2113 ..
2202 ..
2202 ..
22026..
22027..
220 7..
2211 ..
2237 ..
23221..
23222..
23929..
2 0 ..
2 0 7..
2 2 6..
2 2 7..
2 2 ..
2 71..
2 7 ..
2 6 0..
2 697..
2 9 0..
2 0 2..
2 0 3..
2 73..
2 7 ..
2 97 .-
260 ..
200 9..
20112..
263 9..
263 0..
26 02..
26 03..
26 0 ..
26 0 ..
26 06..
26 07..
26 0 ..
26 22..
26779..
26 ..
26 6..
269 9..
269 0..
271 7..
273 .W .
27397..
27 73..
27 7 .
27 96..
27 97..
2 109..
2 122-.
2U1 0..
291 .
291
293 6.
293 7.
29 3 .
29 09
29 90.
29 99.
29712.
2977 .
Rung No.
19 2 26-139
19 2-1 -1390
19 2-23-139 1
19 2-26-139
19 2-26-139
19 2-1 -13 70
19 2-1 -13 70
19 2-1 -13 70
19 2-1 -13 70
19 2-1 -13 61
19 2-22-139
19 2-1 -13 61
19 2-20-13927
19 2-20-13927
19 2-17-13 92
19 2-19-13916
19 2-2 -1397
19 2-17-13 92
19 2-17-13 92
19 2-1 -1390
19 2-1 -13 61
19 2-2 -1397
19 2-1 -13 61
19 2-17-13 92
19 2-23-139 1
19 2-1 -1300
19 2-1 -1390
19 2-16-13 79
19 2-19-1391
19 2-2 -1396
19 2-1 -1390
19 2-1 -1390
19 2-23-139 1
19 2-19-13916
19 2-19-13916
19 2-23-139 1
1962-23-139 1
19 2-23-139 1
19 2-23-139 1
19 2-23-139 1
19 2-23-139 1
19 2-23-139 1
19 2 2 -1397
19 2-17-13 92
19 2-1 -13 0
19 2-1 -1390
19 2-17-13 92
19 2-17-13 92
19 2-17-13 92
19 2-2 -1396
19 2-2 -1396
19 2-16-13 79
19 2-16-13 79
19 2-21-1393
19 2-21-1393
19 2-20-13927
19 2-21-1396
19 2-1 -1390
19 2-2 -1396
19 2-2 -1306
19 2-17-13 92
19 2-17-13 92
19 2-17-13 92
19 2-17-13 92
19 2-1 -1390
19 2-2 -1396
19 2-2 -1397
19 2-22-139
19 2-2 -1396
19 2-21-1393
Pago
( )
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I
Cumuatve Contents Contnued
Rung
Rung No.
rape
Rung
Rung No.
Page
Unted Stat Ta Court-
Offce decsons Contnued
-
Contnued
106 ..
19 2-23-139 7
130
19 2-21-1393
107...:.;. _
19 2-23-13961
73
29777
19 2-21-1393
6
10
19 2-2 -13966
113
2977 .. . . , mm
19 2-21-1393
109
19 2-2 -1396
13
29779
19 2-21-1393
6
110
19 2-2 -1397
99
297 0
19 2-21-1393
6
111
19 2-2 -139S0
1 1
297 1
19 2-21-1393
|
112
19 2-26-13990
7
29 01
19 2-10-13 79
1
OfTee decsons (S. T.):
29 9
19 2-23-139 1
1
9
19 2-17-13906
2
30136
19 2-26-139
2
9
19 2-2 -13972
2
30230
19 2-1 -1390
3
Offce decsons (M. T.):
19 2-21-1393
3
..
19 2-2 -139
2 1
3031
19 2-17-13 92
1

19 2-26-13997
269
30907
19 2-21-1393
Offce decsons (Tob.):

30909
19 2-2 -1396
337
19 2-1 -13 67
3 9
30910
19 2-2 -1396
33
19 2-1 -13 69
3 1
3111
19 2-2 -1396
2
339
19 2-1 -13 77
3 3
31 2
19 2-2 -1396
3
3 0.
19 2-16-13 7
363
316 0
19 2-2 -1396
1
My/.zv/// / /. . .-
19 2-16-13 90
3 9
31666 _.
19 2-26-139
3
19 2-16-13 91
361
316 7
19 2-20-139
2
3 3
19 2-17-13907
3 3
3169
19 2-26-139
2
3
19 2-1 -1391
3 1
32202
19 2-21-1393
3
19 2-19-1:192
3 9
32203
19 2-21-1393
19 2-19-13926
3
19 2-20-13027
6
3 7
19 2-21-139 1
3 0
r y
19 2-2 -1396
1
3
19 2-21-139 2
3 1
32916
19 2-20-13927
6
3 9
19 2-21-139 3
3
332
19 2-1 -1390
1.2
3 0
19 2-23-13962
3 0
33 29
19 2-23-130 1
1
19 2-23-13963
3 2
97 2
19 2-1 -13 01
6
3 2
19 2-2 -13973
3
9771 -
19 2-1 -13 61
3 3
19 2-2 -1:19 6
3 0
9771
19 2-1 -13 61
3
19 2-2 -139 7
3 2
97716
19 2-1 -13 01
Department Crcuar:
19 2-2 -1397
230 (Rev.)
19 2-1 001
27
10 297
19 2-2 -1397
6
Mmeographs (I ):
10 22
19 2-1 -13 70
19
19 2-19-1391
212
10 306
19 2-1 -13 70
6
26 .
19 2-19-1392
299
10 306
1962-1 -13 70
6
3
19 2-21-1393
239
10 367
19 2-1 -13 70
3 ( mdt. 1)
19 2-2 -13971
2 0
10 6 2
19 2-1 -13 70
3 .....
19 2-22-139
70
19 2-1 -13 70
6
3
19 2-22-139 7
112
1096
19 2-1 -13 70
1
19 2-23-139 3
6
19 2-1 -13 70
6
........
19 2-2 -139
297
Offce decsons (I. T.):
71
19 2-2 -139 3
170
0
19 2-1 -13 71
72
19 2-1 -13S6
3
0 9
19 2-1 -13 72
1 2
19 2-1 -13 6
3
090
19 2-16-13 1
139
19 2-1 -13 7
3 6
091
19 2-16-13 2
1 7
19 2-16-13S
3 7
092
19 2-17-13 93
11
19 2-16-13
3 7
093
19 2-17-13 9
130
19 2-16-13
3
09
19 2-17-13 9
13
19 2-16-13 9
3
09
19 2-1 -13909
90
19 2-17-13 9
3 9
096
19 2-1 -13910
91
19 2-17-13 99
360
097
19 2 1 -1391
20
19 2-17-13900
361
09
19 2-20-1392
7
19 2-17-13901
361
099
19 2-20-1393
117
19 2-17-13902
362
100
19 2-20-13930
O
19 2-17-13903
36
101
19 2-21-13937
11
19 2-17-1390
36
02
19 2-22-139
173
19 2-17-1390
36
103
19 2-23-139 2
31
119 2-1399
369
10
19 2 23-139
71
Msceaneous . ...
10 2-13999
370
10
19 2-23-139
93
119 2-1 000
37
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CONT NTS OF CUMUL TI ULL TINS (I. T.) 1 TO ; S. T. FOR 1920 ND 1921; INT RN L
R NU 1-1.1-2, II-. 11-2, -1. DI-2. I -1, I -2. -, -2. I-1. I-2, II-1. II-2, III-I. III-2.
I -1. I -2. -, -2, I-1, I 2, n-1. II-2, m-1, III-2. I -I, I -2, -1, -2. 1937-1. 1937-2,
193 -1. 193 -2, 1939-1, (P RT 1 ND P RT 2), 1939-2, 19 0-1, 19 0-2, 19 1-1, 19 1-2, 19 2-1, 19 2-2;
NNU L ULL TINS FOR 19 3, 19 , ND 19 ; S MI NNU L ULL TINS 19 6-1, 19 6-2,
19 7-1. 19 7-2, 19 -1, 19 -2, 19 9-1, 19 9-2, 19 0-1. 19 0-2. 19 1-1. 19 1-2. 19 2-1, ND 19 2-2
Cumuatve uetn
ung Nos.
Income Ta :
December 1919 (No. 1)
anuary- une 1920 (No. 2)
uy-December 1920 (No. 3)..
an nary- une 1921 (No. )...
uy-December 1921 (No. )..
I Ta :
.T. 1-20)
anuary- une 1921.
uy-December 1921.
terna Revenue uetn:
anuary- une 1922 (No. 1-1).
uy-December 1922 (No. 1-2)
anuary- une 1923 (No. II-)
uy-December 1923 (No. II-2)
anuarv- une 192 (No. III-)
uy-December 1921 (No. III-2)
anuary- une 192 (No. I -)....
uy-December 192 (No. I -2)
anuary- une 1926 (No. -)
uv-December 192 (No. -2)
anuary- me 1927 (No. I-1)
uy-December 1927 (No. I-2)
anuary- une 192 (No. II-1)
uv-Dceember 192 (No. II-2)
anuary- une 1929 (No. III-1)
uy-December 1929 (No. III-2)
anuary- une 1930 (No. I -1)
anuary- une 1931 (No. -)..
uy-December 1931 (No. -2)
anuary- une 1932 (No. I-1)
uy-December 1932 (No. I-2)
anuary- une 1933 (No. II-1)
uy-December 1933 (No. II-2)
anuary- une 193 (No. III-1)
anuarv- une 193 (No. I -1)
anuary- une 1930 (No. -1)..
uy-December 1936 (No. -2)
anuary- une 1937 (1937-1)
uy-December 1937 (1937-2)
anuary- une 193 (193 -1)...
uy-December 193 (193 -2)
anuary- une 1939 (1939-1 part 1 and part 2).
uy-December 1939 (1939-2)
anuary- une 19 0 (19 0-1)
uy-December 19 0 (1910-2)
anuary- une 19 1 (19 1-1)
uy-December 19 1 (19 1-2)
anuary- une 19 2 (19 2-1)
uy-December 19 2 (19 2-2).
anuary-December 19 3 (12 months)
anuary-December 19 (12 mouths)
anuary-December 19 (12 months)
anuary- une 19 6 (19 6-1)
anuary- une 19 7 (19 7-1)
anuary- une 19 (19 -1)
uy-December 19 (19 -2)
anuary- une 19 9 (19 9-1)
anuary- une 19 0 (19 0-1).
anuary- uno 19 1 (1961-1)
anuary- une 19 2 (19 2-1)
uy-December 1962(19 2)
I- M
6 6-1033
103 -136
1369-1710
1711-19
1-112
113-26
266-3 6
1-3 3
3 -66
666-9 6
9 7-1276
1277-16 1
16 2-19 9
19 0 22 1
22 2-2 23
2 2 -2 13
2 1 -3026
3027-3291
3292-3 7
3 -37
37 - 0 2
0 3- 2
2 9- 7
- 6 3
.vt m
- 12
12 - 33
339- 31
32- 961
902-6262
6263-6 1
6 2-6 71
6 72-722
7226-7 63
7 6 -7
7 - 1 9
1 0- 9
60- 792
793-911
9119-9 2
9 2 -96
96 -9 96
9 97-10126
10127-1030
1030 -10
10 9-10761
10762-109 3
109 -1113
11139-11302
uaoa-usM
11 91-11916
11917-12200
12201-12332
12333-12 6
12 66-12 0
126 1-12721
12722-12 1
12 2-1299
12999-13119
13120-13266
13267-133
133 -13 0
13 09-1361
1361 -1373
13736-13 --0
13 61-1 001
vro
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T T COURT OF T UNIT D ST T S
CUMUL TI LIST OF NNOUNC M NTS R L TING TO
D CISIONS OF T T COURT OF T UNIT D ST T S
PU LIS D IN T INT RN L R NU ULL TIN S R -
IC FROM ULY 1, 19 2, TO D C M R 31, 19 2, INCLUSI
19 2-26-139
The Commssoner acquesces n the foowng decsons:
Ta payer
Docket No.
oume
bbett, mma Peabody, transferee
nderson, Davd G
shock, McCuey
I
auvet et u ., rnest .
radford-Martn, Margaret, admnstratr of estate
of Mertvn S. radford-Martn 1
radford-Martn, Mertyn S., estate of
romberg, Oscar
Chrstensen, arod
Cowe, Frank, estate of1
Coca-Coa ottng Co. of Sacramento, Ltd_
Coumba Rver Orchards, Inc
Consodated ppare Co
Danz Chartabe Trust, ohn
Danz, Fredrc
Danz, esse
Danz, ohn
Danz, Sema
Danz, Sema ane
Danz, Wam Frank
Davenport Machne Foundry Co
Desks, Inc
Dcknson, Martha Cowe, e ecutr of estate of Frank
Cowe 1
Doye osery Corporaton
Doye, ohn .. --
2202
32909
29 9
1023
29 99
29 99
29 01
271 7
26779
19 2
332
20107
2 9 0
26 0
33 29
2(1107
26 03
26 02
26 0
26 06
26 0
3031
31660
26779
220 7
2237
state ta decson.
1 Nonacquescence pubshed In Cumuatve uetn 19 , page , wthdrawn.
17
1
1
IS
IS
17
17
17
17
1
17
1
1
1
1
1
1
1
1
1
17
17
17
(1)
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2
cqufscences- Contnued
Ta payer
senmann et u ., Lous R
vans et u ., Samue S.1
F
Futon, Dae R
G
Gensnger, . D., transferee of Coumba Rver
Orchards, Inc
Godbert et u ., George
Gregg, on
Gregg, Lynne
Grenada Industres, Inc.1 -
Gutman, se, e ecutr of estate of and survvng
wfe of Theodore Gutman
Gutman, Theodore, estate of
ae, dward - -
ae, the F -
arrson et u ., M. D
arrson, Sarah een
I
Ings, Idus --.
Internatona Tac Co., Inc.
er, arry Fraser, e ecutor of estate of Lesey Dana

Worthngton
ng, Paune ., transferee
ng, Paune ., trustee n dssouton of Oahu
each and Country omes, Ltd
uchman et u ., arod --
Lemp rewng Co., Wm. .
Lovett et u ., Thomas
Magce, Genn
Magee, Phys M_.
Marsman, Mary .
M
N
Natona osery Ms, Inc.1.
Docket No.
23929
2 697
102
2113
332
269 0
263 0
263 9
2 71
269 9
269 9
3166
31667
2211
2 7
1 62
1 63
2 0 7
2 97
27 7
27 73
29 3
30136
3111
23221
23222
1 91
210 0
Nonacquesccnce pubshed In Cumuatve uetn 19 , pace , wthdrawn.
cquescence reates ony to aocaton of ncomo from bar partnershp.
Gft ta decson.
oume
1
cquescence reates ony to the ssue whether the term tac as used In secton 11 (b)( )( ), t. R. C.
refers to the product known Industray and commercay as tac, or to theoretcay or chemcay pure tac
state ta decson.
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3
cquescences Contnued
Ta payer
Docket No.
oume Page
o
Oahu each and Country omes, Ltd...
P
Pacfc Grape Products Co
Pam each ero Corporaton
Peabody, George, transferee 1
Peabody, Stephen, estate of1
Peabody, r., Stephen, transferee 1
Peabody, r., et a., Stephen, e ecutors of the w of
Stephen Peabody 1
Produce Reporter Co.
R
Rce, Chares C
Roth et u ., Lous M
Rowen, Ruth ae
Ruspyn Corporaton..
S
Saafed Pubshng Co., The
Sat, Mary D -
Sat, Wado
Seers, Gadys
s, N. M
et u ., Donad
, ate aker
nd Cothes, Inc
Suenger, . .
Suenger, Lea
T
TeLnde et u ., Rchard W -
ctory ousng No. 2, Inc

W
West Mssour Power Co
Whte, Car L
Worthngton, Lesey Dana, estate of1
27 73
1 96
2 7
2202
22026
22027
22026
2 0
2113
26112
31666
31 2
1 3
260
260 9
2 0 3
2 0 2
2 109
26 22
2 122
1 631
1 630
29712
30299
30230
2 9
2 97
state ta decson.
1 cquescence reates ony to the ssue whether honuses decared n December of the
r ad to empoyees n the foowng year are deductbe n the year of decaraton.
Nonacquescence pubshed n Cumuatve uetn 16 9-1, page 6, wthdrawn.
but
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The Commssoner does NOT acquesce n the foowng decsons:
Ta payer
mbrose, Frank .
twc, Laura urgher
twe, Webster --
radey, ane aston

C
Chdress, Staney edges
D
Darne, T. .
Dwght, rthur S., estate of
F
Frst Natona Corporaton of Portand, The
Fsher, Car G., estate of
G
Gary Theatre Corporaton (formery Young-Wof
Corporaton)
Gary Theatre Corporaton, transferee of Young-Wof
Corporaton
Gnn, Wam . R.
ambv et a., arbara Chapn, e ecutors of estate of

rthur S. Dwght 2
edges, Raph
obart, ohn ., e ecutor of estate of Raph .
obart
obart, Raph ., estate of
umpagc, F. R
umpage et a., F. R., e ecutors of estate of Car G.
Fsher
Report
27 96
2977
-
137
729
9
11
29 69
1
6 1
1 31
2 73
1
7
1317
10 22
1096 2
26 6

9
162
17
2 9
11
12 1
3 7
2 0
10 26
7
12 1
3 7
1
2 73
292
17
1
1317
6 1
27397
27397
26
1
1
17
70
70
162
26 6
17
162
2 0 7
1
9 1
Internatona Tac Co., Inc.
oard of Ta ppeas.
cquescence pubshed n Cumuatve uetn 19 9-2, page 1, nsofar as t reates to the ssue whether
amount1 e pended for ega servces n connecton wth the dssouton of the corporate ta payer consttuted
aowabe deductons as ordnary and necessary busness e penses, wthdrawn.
a state ta decson.
cquescence pubshed n Cumuatve uetn 19 3, page , Insofar as It reates to the ssue whether
91,000 e pended for ega servces n connecton wth the dssouton of The Frst Natona Corporaton of
Portand n 193 consttuted an aowabe deducton, wthdrawn.
Nonacquescenee reates ony to the ssue regardng ta abty of Increase n vaue of property, n the
hands of the sharehoders, where such property was dstrbuted by a corporaton as a dvdend n knd.
cquescence pubshed n Cumuatve uetns 19 2-2, page 9, and 19 3, page 9, wthdrawn wth respect
to the treatment of dstrbutons from a penson trust fund whch represents earnngs and accretons of the
fund as earned ncome, and nonacquescenee substtuted therefor, effectve on the dates set forth n IR-
Mmeograph 71, page 170, ths uetn.
Nonacquescenee reates ony to the ssue whether the processes of crushng and grndng crude tac ore
are ncudbe In the term mnng as that term s used n secton 11 (b)( )( ), I. It. O.
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Nonacquescknces Contnued
Ta payer Docket No.
oume
ng, r., Ws L., estate of 1

L
Laster, Caroyn Faust, transferee 1
Laster, . C, transferee 1 1
Laster, dward Carro, transferee
Laster, Inc., . C.1 --
M
McGav, onne
McGay, .
Meon Natona ank Trust Co., e ecutors of estate
of Ws L. ng, r.1
Moss Te Co.. T.
N
Natona ank of Commerce n Memphs, e ecutor
under the ast w and testament of ohn . Snow-
den, II --
Natona osery Ms, Inc.
Nchoson, G.
Nchoson, Oma M
Oates, ames F
Occdenta Lfe Insurance Co., transferee of The Frst
Natona Corporaton of Portand
Papneau, George
Produce Reporter Co. .
Ray, ua
Ray, Lous W
Rte-Way Products, Inc. .
Roberts et u ., ohn T
30907
9771
97716
97713
97 2
293 7
293 6
30907
32213
1 316
2 6 0
293
293
27396
10 367
1096
2 2 6
2 2 7
2 0
30910
3000 )
1 31
2 2

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1 state tu decson.
cquescence pubshed n Cumuatve uetn 1M1-1, page 7, nsofar as It reates to the ssue whether
amounts e |n|nded for ega servces n connecton wth the dssouton of the corporate ta payer consttuted
1 cquescence pubshed n Cumuatve uetn 19 9-2, page 3, nsofar as t reates to the ssue whether
amounts e pended for ega servces n connecton wth the dssouton of the corporate ta payer consttuted
Nonacquesoence reates ony to aocaton of ncome from osery partnershp.
cquescence pubshed n Cumuatve uetn 19 3, page 1 , nsofar as t reates to the ssue whether
Nonacquescence reates ony to the ssue wth respect to the deductbty of certan contrbutons made
by the ta payer to two trusts created for certan age-group empoyees.
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6
Nonacqotebcences Contnued
Ta payor
S
Saer, Patrca O Leary..
Saer, Wm. --
Schucker et u ., Pau F.1
Snowden, II, ohn ., estate of _
Starr rothers, Inc
T
Thompson, Trust, eremah W. -
Thompson, III, Trust , oe Cark
Thompson, ohn P
Transamerca Corporaton, transferee of The Frst
Natona Corporaton of Portand 1
W
Western States Corporaton, transferee of The Frst
Natona Corporaton of Portand
Western Transmsson Corporaton
Y
Young, . U.s
Docket No,
2977
32203
29777
32202
10 297
1 316
32916
297 1
297 0
29779
10 30
1096
10 306
1096 3
29 90
2
oume Page
oard of Ta ppeas.
1 cquescence pubshed n Cumuatve uetns 19 2-2, page 16, and 19 3, page 20, wthdrawn wth
respect to the treatment of dstrbutons from a penson trust fund whch represent earnngs and accretons
of the fund as earned ncome, and nonacquescence substtuted therefor, effectve on the dates set forth n
IR-Mmeogmph 71, page 170, ths uetn.
cquescence pubshed n Cumuatve uetn 19 9-2, pago 3, nsofar as It reates to the ssue whether
amounts e pended for ega servces n connecton wth the dssouton of the corporate ta payer consttuted
aowabe deductons as ordnary and necessary busness e penses, thdrawn.
1 cquescence pubshed n Cumuatve uetn 19 3, page 23. nsofar as ft reates to the ssue whether
cquescence pubshed n Cumuatve uetn 19 3, page 2 , nsofar as t reates to the ssue whether
1,000 e pended for ega servces h connecton wth the dssouton of The Frst Natona Corporaton of
Nonacquescence reates ony to the ssue regardng ta abty of Increase In vaue of property, n the
hands of the sharehoders, where such property was dstrbuted by a corporaton as a dvdend n knd.
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INCOM T RULINGS. P RT I
INT RN L R NU COD
C PT R 1. INCOM T
SU C PT R . G N R L PRO ISIONS
P RT I. R T S OF T
S CTION 11. NORM L T ON INDI IDU LS
Secton 29.11-1: Income ta on ndvduas. 19 2-2 -1397
( so Secton 12, Sectons 29.12-1, 29.12-2, T. D. 9
29.12-3, 29.12- ; Secton 00, Sectons
29. 00-1; Secton 01, 29. 01-1.)
TITL 26 INT RN L R NU C PT R I, SU C PT R , P RT 29.
INCOM T ; T L Y RS GINNING FT R D C M R 31, 19 1
Reguatons 111 amended to conform to sectons 101, 102, 103,
and 10 of the Revenue ct of 19 0 and sectons 101, 102, 10 , and
10 of the Revenue ct of 19 1.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton , D. C.
To Offcers and mpoyees of the Interna Revenue Servce and Others
Concerned:
On une 6, 19 2, notce of proposed rue makng, regardng amend-
ments to conform Reguatons 111 26 CFR, part 29 to sectons 101,
102, 103, and 10 of the Revenue ct of 19 0 (Pubc Law 1 , 1st
Cong.), approved September 23, 19 0, and to sectons 101, 102, 10 ,
and 10 of the Revenue ct of 19 1 (Pubc Law 1 3, 2d Cong.),
approved October 20, 19 1, was pubshed n the Federa Regster
(17 F. R. 1 3). No ob|ecton to the rues proposed havng been
receved, the amendments to Reguatons 111 set forth beow are hereby
adopted.
Paragraph 1. There s nserted mmedatey precedng secton
29.11-1 26 CFR 29.11-1 the foowng:
S C. 101. INCR S IN NORM L T ND SURT ON INDI-
IDU LS P RT I, TITL I. R NU CT OF 19 0, P-
PRO D S PT M R 23, 1900 .
(a) Norma Ta . Secton 11 (reatng to the norma ta on nd-
vduas) s hereby amended to read as foows:
(7)
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29.11-1.
S C. 11. NORM L T ON INDI IDU LS.

(a) Ta abe Years egnnng fteb September 30, 19 0. In the
case of ta abe years begnnng after September 0, 19 0, there sha be
eved, coected, and pad for each ta abe year upon the net ncome
of every Indvdua a norma ta of 3 per centum of the amount of the
net ncome n e cess of the credts aganst net ncome provded n sec-
ton 2 . For aternatve ta whch may be eected f ad|usted gross
ncome s ess than ,000, see suppement T.
(b) Ta abe Yeaks egnnng efore OcTO 1,19 0. In the case
of ta abe years begnnng before October 1, 19 0, there sha be eved,
coected, and pad for each ta abe year upon the net ncome of every
Indvdua a norma ta determned by computng a tentatve norma
ta of 3 per centum of the amount of the net ncome n e cess of the
credts aganst net ncome provded n secton 2 , and by reducng, such
tentatve norma ta as provded n secton 12(c). For aternatve ta
whch may be eected f ad|usted gross ncome s ess than ,000, see sup-
pement T. For computaton of ta n case the ta abe yenr (other than
the caendar year 19 0) euds after September 30, 19 0, see secton
10 (e).
(b)

(3) Secton 12(c) (reatng to reducton of tentatve norma
ta and tentatve surta ) s hereby amended to read as foows:
(c) Reducton of Tentatve Norma Ta and Tentatve Surta .
(1) Caendar year 19 0. In the case of a ta abe year begn-
nng on anuary 1, 19 0, and endng on December 1, 19 0, the com-
bned norma ta and surta under secton 11 and subsecton (b)
of ths secton sha be the aggregate of the tentatve norma ta
and tentatve surta , reduced as foows:
If the aggregate Is: The reducton sha be:
Not over 00 1 of the aggregate.
Over 00 but not over 100,000_. 2 pus 9 of e cess over 00.
Over 100,000 .01C pus 7.3 of e cess over
100,000.
In no event sha the combned norma ta and surta for such
ta abe year e ceed 0 per centum of the net ncome.
(2) Other ta abe tears begnnng before October , 19 0.
In the case of ta abe years (other than the caendar year 19 0, to
whch paragraph (1) appes) begnnng before October 1, 19 0,
the combned norma ta and surta under secton 11 and subsecton
(b) of ths secton sha be the aggregate of the tentatve norma ta
and tentatve surta , reduced as foows:
If the aggregate Is:
Not over 00
Over 00 but not over
100,000
Over 100,000
The reducton sha be:
17 of the aggregate.
6 pus 12 of e cess over
00.
12,020 pus 9.7 of e cess
over 100,000.
If combned norma ta and surta so computed e ceeds 77 per
centum of the net Income for the ta abe year, the combned ta
sha be reduced to 77 per centum of the net ncome. For compu-
taton of ta n case the ta abe year ends after September 30,19 0,
see secton 10 (e).
( ) ffectve wth respect to ta abe years begnnng after
September 30, 19 0, secton 12(f) s hereby amended to read as
foows:
(f) Lmtaton on Ta . In the case of a ta abe year begnnng
after September 30, 19 0, the combned norma ta and surta sha n
no event e ceed 7 per centum of the net ncome for the ta abe year.
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9
29.1 -L
S C. 103. COMPUT TION OF T IN C S OP C RT IN OINT
R TURNS P RT I, TITL I, R NU CT OF 19 0, P-
PRO D S PT M R 23, 19 0 .
If a |ont return of a husband and wfe Is fed under the provsons of
secton 1(b) (3) of the Interna Revenue Code In a case where the hus-
band and wfe have dfferent ta abe years because of the death of
ether spouse, and the ta abe year of the survvng spouse covered by
such |ont return began before October 1, 19 0, and ended after Sep-
tember 30, 19 0, the amendments made by ths part nc. sees. 101 and
102 sha be appcabe n respect of such |ont return as f the ta abe
years of both spouses covered by the |ont return ended on the date of
the cosng of the survvng spouse s ta abe year.
S C. 10 . FF CTI D T OF P RT I TITL I, R NU CT
OF 19 0, PPRO D S PT M R 23, 19 0 .
cept as provded n secton 103, the amendments made by ths part
nc. sees. 101 and 103 sha be appcabe ony wth respect to ta abe
years endng after December 31, 19 9. For treatment of ta abe years
(other than the caendar year 19 0) begnnng before October 1, 19 0,
and endng after September 30, 19 0, see secton 13L
S C. 101. INCR S IN SURT FOR 19 1, 19 2, ND 19 3 P RT
I, TITL I, R NU CT OF 19 1, PPRO D OCTO R 20,
19 1 .

(b) Lmtaton on Ta . Secton 12(f) (reatng to mtaton on ta )
s hereby amended to read as foows:
(f) Lmtaton on Ta .
(1) Caendar tear m. In the case of a ta abe year be-
gnnng on anuary 1,19 1, and endng December 31,19 1, the com-
bned norma ta and surta sha n no event e ceed 7.2 per centum
of the net ncome for the ta abe year.
(2) Ta abe years begnnng after October s, , and
before anuary , 11) . In the case of ta abe years begnnng
after October 31,19 1, and before anuary 1,19 , the combned nor-
ma ta and surta sha n no event e ceed per centum of the
net ncome of the ta abe year.
(3) Ta abe years begnnno after December s, 10 3. In the
case of ta abe years begnnng after December 31, 19 3, the com-
bned norma ta and surta sha n no event e ceed 7 per centum
of the net ncome for the ta abe year.
S C. 10 . COMPUT TION OF T IN C S OF C RT IN OINT
PRO D OCTO R 20, 19 1 .
If a ont return of a husband and wfe s fed under the provsons of
secton 1(b)(3) of the Interna Revenue Code n a case where the
husband and wfe have dfferent ta abe years because of the death of
such |ont return began before November 1, 19 1, and ended after
October 31, 19 1, the amendments made by ths part Inc. sees. 101, 102,
and 103 and secton 131 sha be appcabe n respect of such |ont
return as If the ta abe years of both spouses covered by the |ont return
ended on the date of the cosng of the survvng spouse s ta abe year.
S C. 10 . FF CTI D T OF P RT I TITL I, R NU
CT OF 19 1, PPRO D OCTO R 20, 19 1 .
cept as provded n secton 10 , the amendments made by ths part
years begnnng after October 31, 19 1, and to ta abe years begnnng
on anuary 1, 19 1, and endng on December 31, 19 1. For treatment
of ta abe years (other than the caendar year 1 ) 1) begnnng before
November 1, 19 1, and endng after October 31, 19 1, see secton 13L
2 21 0 2
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29.11-1.
10
Par. 2. Secton 29.11-1, as amended by Treasury Decson 6 7,
C. . 19 9-1, 9 , approved February 16, 19 9 26 CFR 29.11-1 ,
s further amended as foows:
( ) y nsertng n the headng of (6) thereof after Ta abe
years begnnng after December SI, 19 t the foowng: , and before
October /, 19 0 .
( ) y nsertng n the frst sentence of (6) thereof after For
ta abe years begnnng after December 31,19 3, the foowng: and
before October 1, 19 0, .
(C) y strkng out a of (b) after the fourth sentence thereof and
nsertng n eu thereof the foowng:
For ta abe years begnnng after December 31, 19 7, and before October 1,
19 0, the norma ta on ndvduas s determned by computng a tentatve
norma ta of 3 percent of the amount of the net ncome In e cess of the credts
aganst net ncome provded n secton 2 for such years and by reducng such
tentatve norma ta as foows:
(1) For ta abe years begnnng after December 31, 19 7, and endng
before anuary 1, 19 0, the reducton sha be made under the provsons
of secton 12(c) pror to ts amendment by the Revenue ct of 19 0;
(2) For ta abe years begnnug before October 1, 19 0, and endng after
December 31, 19 9 (other than the caendar year 19 0), the reducton sha
be made under the provsons of secton 12(c)(2), as amended by the
Revenue ct of 19 0;
(3) For a ta abe year whch s the caendar year 19 0, the reducton
sha he made under the provsons of secton 12(c)(1), as amended by
the Revenue ct of 19 0.
See secton 29.12-2. For computaton of ta n the case of a |ont return of
husband and wfe for a ta abe year begnnng after December 31, 19 7, and
before October 1, 19 0, see secton 29.12- .
For treatment of ta abe years begnnng n 19 and endng n 19 6. see sec-
ton 29.10 -2. For treatment of ta abe years begnnng n 19 7 and endng n
19 , see secton 29.10 -3.
(c) Ta abe years begnnng after September SO, 19 0. For ta abe years
begnnng after September SO. 19 0, chapter 1 of the Interna Revenue Code
mposes an Income ta on ndvduas consstng of a norma ta (secton 11)
and a surta (secton 12). For optona ta n the case of ta payers wth
ad|usted gross ncome of ess than ,000, see secton 00 and secton 29. 00-1 (6).
The norma ta on ndvduas for ta abe years begnnng after September 30,
19 0, s at the rate of 3 percent and s upon net ncome reduced by the amount
of the credts aganst net ncome provded n secton 2 for such years. For
computaton of ta n the case of a |ont return of husband and wfe for a ta abe
year begnnng after September 30, 19 0, see secton 29.12- . For treatment of
ta abe years begnnng before October 1, 19 0, and endng after September 30,
19 0 (other than the caendar year 19 0), see secton 29.10 - . For treatment
of ta abe years begnnng before November 1, 19 1, and endng after October 31,
19 1 (other than the caendar year 19 1), see secton 29.10 -7. For treatment
of ta abe years begnnng n 19 3 and endng n 19 , see secton 29.10 - .
Par. 3. There s nserted mmedatey precedng secton 29.12-1
26 CFR 29.12-1 the foowng:
S C. 101. INCR S IN NORM L T ND SURT ON INDI-
IDU LS P RT I, TITL I, R NU CT OF 19 0, P-
PRO D S PT M R 23, 19 0 .

(b) Surta .
(1) So much of secton 12(b) as precedes Not over 2000 Is
hereby amended to read as foows:
(b) Rates of Surta .
(1) Ta abe years begnnng after September 30, 19 0.
In the case of ta abe years begnnng after September 30, 19 0,
there sha be eved, coected, and pad for each ta abe year upon
the surta net ncome of every ndvdua the surta shown n the
foowng tabe:
If the surta net ncome s: The surta sha be:
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11
I 29.11-1.
(2) Secton 12(b) s hereby amended by addng at the end
thereof the foowng :
(2) Ta abe years begnnng before October 1, 19 0. In the
case of ta abe years begnnng before October 1, 19 0, there sha
be eved, coected, and pad for each ta abe year upon the surta
net Income of every Indvdua a surta determned by computng
a tentatve surta under the tabe n paragraph (1), and by re-
ducng such tentatve surta as provded n subsecton (c) of ths
secton.
(3) Secton 12(c) (reatng to reducton of tentatve norma ta
and tentatve surta ) s hereby amended to read as foows:
(c) Reducton of Tentatve Norma Ta and Tentatve Surta .
(1) Caendar year 19 0. In the case of a ta abe year begnnng
on anuary 1, 19 0, and endng on December 31, 19 0, the combned
norma ta and surta under secton 11 and subsecton (b) of ths
secton sha be the aggregate of the tentatve norma ta and ten-
tatve surta , reduced as foows:
If the aggregate s: The reducton sha be:
Over 00 but not over 100,000 2 pus 9 of e cess over 00.
Over 100,000 9,016 pus 7.3 of e cess over
100,000.
In no event sha the combned norma ta and surta for such ta -
abe year e ceed 0 per centum of the net ncome.
(2) Other ta abe years begnnng before October 1, 19 0.
In the case of ta abe years (other than the caendar year 19 0 to
whch paragraph (1) appes) begnnng before October 1, 19 0,
the combned norma ta and surta under secton 11 and subsecton
(b) of ths secton sha be the aggregate of the tentatve norma
ta and tentatve surta , reduced as foows:
If the aggregate Is: The reducton sha be:
Over 00 but not over 100,000... 6 pus 127 of e cess over 00.
Over 100,000 12,020 pus 9.7 of e cess over
100,000.
If combned norma ta and surta so computed e ceeds 77 per cen-
tum of the net ncome for the ta abe year, the combned ta sha
be reduced to 77 percentum of the net Income. For computaton of
ta In case the ta abe year ends after September 30, 19 0, see
secton 10 (e).
( ) ffectve wth respect to ta abe years begnnng after Sep-
tember 30, 19 0, secton 12(f) s hereby amended to read as foows:
(f) Lmtaton on Ta . In the case of a ta abe year begnnng
after September 30, 19 0, the combned norma ta and surta sha n
no event e ceed 7 per centum of the net ncome for the ta abe year.
S C. 103. COMPUT TION OF T IN C S OF C RT IN OINT
R TURNS P RT I, TITL I. R NU CT OF 19 0, P-
PRO D S PT M R 23, 19 0 .
If a ont return of a husband and wfe s fed under the provsons
of secton 1(b) (3) of the Interna Revenue Code n a case where the
husband and wfe have dfferent ta abe years because of the death
of ether spouse, and the ta abe year of the survvng spouse covered
by such ont return began before October 1, 19 0, and ended after
September 30, 19 0, the amendments made by ths part nc. sees. 101
and 102 sha be appcabe n respect of such |ont return as f the
ta abe years of both spouses covered by the |ont return ended on the
date of the cosng of the survvng spouse s ta abe year.
CT OF 10 0, PPRO D S PT M R 23, 19 0 .
cept as provded n secton 103. the amendments made by ths part
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29.11-1.
12
(other than the caendar year 19 0) begnnng before October 1,19 0, and
endng after September 30, 19 0, see secton 131.
S C. 101. INCR S IN SURT FOR 19 1, 19 2, ND 19 3 P RT
I. TITL I, NU CT OF 19 1, PPRO D OCTO R 20,
19 1 .
(a) Rates or Surta . Secton 12(b) (reatng to rates of surta )
(b) Rates of Surta .
(1) Caendar year . In the case of a ta abe year begn-
nng on anuary 1, 19 1, and endng on December 31, 19 1, there
sha be eved, coected, and pad for such ta abe year upon the
surta net ncome of every ndvdua the surta shown n the fo-
owng tabe:
The surta sha be:
17. of the surta net ncome.
If the surta net ncome s:
Not over 2,000
Over . 2,000 but not over ,000
Over ,000 but not over 6,000...
Over 6,000 but not over .000___
Over ,000 but not over 10,000..
Over 10,000 but not over 12,000.
Over 12,000 but not over 1 ,000.
Over 1 ,000 but not over 16,000.
Over 16,000 but not over 1 ,000.
Over 1 ,000 but not over 20,000.
Over 20,000 but not over 2 .t)00_
Over 26,000 hut not over 32,000.
Over 32,000 but not over 3S,000.
Over 3 ,000 but not over ,( 00_
Over ,000 but not over 0,000.
Over 60,000 but not over 70,( ).
Over 90,000 but not over
100,000.
Over 100,000 but not over
1 0,000.
Over 1 0,000 but not over
200,000.
Over 200,000
3 , pus 19. of e cess over
2,000.
736. pus 2 of e cess over
,000.
1,216, pus 27 of e cess over
6,000.
1,7 6, pus 32 of e cess over
,000.
10,000.
12,000.
3,916, pus of e cess over
1 ,000.
, 16. pus of e cess over
16,01 1.
,776, pus 1 of e cess over
1 ,000.
20,000.
7, 76, pus 7 of e cess over
22,000.
26,000.
13,7 6. pus 63 of e cess over
32,000.
3 ,000.
,000.
2 ,606, pus 72 of e cess over
0,000.
60,000.
0,31/6. pus 79 of e cess over
70,000.
0,000.
90,000.
100,000.
107,796, pus 77c of e cess over
1 0,000.
1 1,290, pus of e cess over
200,000.
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13
29.11-L
(2) Ta abe years begnnng after Octobeb 31, 19 1, re
before anuary 1, 19 . In the case of ta abe years begnnng
after October 31, 19 1, and before anuary 1, 19 , there sha be
eved, coected, and pad for each ta abe year upon the surtn net
ncome of every ndvdua (other than a head of a househod to
whom subsecton (c) appes) the surta shown n the foowng
tabe:
If the surta net ncome s:
Not over 2,000
Over 2,000 but
Over ,000 but
Over 6,000 but
Over ,000 but
Over 10,000
12,000.
Over 12,000
1 ,000.
Over 1 ,000
16,000.
Over 16,000
1 ,000.
Over 1 ,000
20,000.
Over 20,000
22/00.
Over 22,000
26,000.
Over 26,000
32,000.
Over 32,000
3 ,000.
Over 3 ,000
,000.
Over ,000
0,000.
Over 0,000
60,000.
Over 60,000
70,000.
Over 70,000
0,000.
Over 0,000
90,000.
Over 90,000
100,000.
Over 100,000
1 0,000.
Over 1 0,000
200,000.
Over 200,000
over
0 of e cess over
9
63
of
of
e cess over
e cess over
of e cess over
of e cess over
of e cess over
The surta sha be:
19.2 of the surta net ncome.
3 , pus 21.6 of e cess over 2,000.
16, pus 26 of e cess over ,000.
1,336, pus 31 of e cess over 6,000.
1,9 6, pus 3 of e cess over ,000.
10,000.
3, 36, pus of e cess
12,000.
,336, pus
1 ,000.
,336, pus 3 of e cess
16,000.
6,396, pus 6
1 ,000.
7, 16, pus
20,000.
,696, pus
22,000.
11,216, pus 6
26,000.
1 ,0 6, pus 6
32,000.
1 ,9 6, pus 69 of e cess over
3 ,000.
,000.
0,000.
3 , 16, pus 77 of e cess over
60,000.
70,000.
0,000.
,716, pus
90,000.
67,216, pus 7
100,000.
1 0,000.
200,000.
(3) Ta abe years begnnng after December 31,19 3. In the
case of ta abe years begnnng after December 31, 19 3, there sha
be eved, coected, and pad for each ta abe year ,pon the surta
net ncome of every ndvdua (other than a head of a househod to
whom subsecton (c) appes) the surta shown n the foowng
tabe:
If the surta net ncome s: The surta sha be:
Not over 2,000 17 of the surta net ncome.
Over 2,000 but not over ,000 3 0, pus 19 of e cess over
2,000.
Over ,000 but not over 6,000 720, pus 23 of e cess over
,000.
not over ,000
not over 6,000
not over ,000
not over 10,000.
but not over
but not over
but not over
but not over
but not over
bnt not over
but not over
but not over
but not over
but not over
but not over
but not over
but not over
but not over
but not over
but not over
but not over
but not over
of e cess over
of e cess over
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29.n-u 1
If the surta net Income s: The surta sha be:
Over 6,000 but not over ,000 1,1 0, pns 27 of e cess over
6,000.
Over ,000 but not over 10,000 1,720, pus 31 of e cess over
,000.
10,000.
12,000.
3, 0, pus of e cess over
1 ,000.
,720. pus 7 of e cess over
16,000.
1 ,000.
20,000.
22,000.
#26.000.
32,000.
3 ,000.
,000.
0,000.
60,000.
70,000.
0,000.
,920, pus of e cess over
90,000.
Over 100,000 but not over 6 ,320, pus 6 of e cess over
1 0,000 100,000.
Over 1 0,000 but not over 107,320, pus 7 of e cess over
200,000 1 0,000.
Over 200,000 1 0, 20, pus of e cess over
200,000.
(b) Lmtaton on Ta . Secton 12(f) (reatng to mtaton on
ta ) s hereby amendeo to read as foows:
(f) Lmtaton on Ta .
(1) Ca.kndab year 19 1. In the case of a ta abe year begn-
nng on anuary 1, 19 1, and endng December 31, 19 1, the com-
bned norma ta ant surta sha n no event e ceed 7.2 per
centum of the net ncome for the ta abe year.
(2) Ta abe years regnnng after October 31, 19 1, and be-
fore anuary 1, 19 . In the case of ta abe years begnnng after
October 31, 19 1, and before anuary 1, 19 , the combned norma
ta and surta sha n no event e ceed per centum of the net n-
come of the ta abe year.
(3) Ta abe years begnnng after December 31, 19 3. In
the case of ta abe years begnnng after December 31, 19 3, the
combned norma ta and surta sha n no event e ceed 7 per
centum of the net ncome for the ta abe year.
S C. 10 . COMPUT TION OF T IN C S OF C RT IN OINT
PRO D OCTO R 20, 19 1 .
If a |ont return of a husband and wfe s fed under the provsons
of secton 1(b) (3) of the Interna Revenue Code n a case where the
Over 10,000 but not over 12,000
Over 12,000 but not over 1 ,000
Over 1 ,000 but not over 16,000
Over 1 ,000 but not over 20,000
Over 3 ,000 but not over ,000
Over ,000 but not over 0,000
Over 0,000 but not over 60,000..
Over 90,000 but not over 100,000-
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20.11-1.
such |ont return began before November 1, 19 1, and ended after
ctober 31, 11) 1, the amendments made by ths part nc. sees. 101, 102,
and 103 and secton 131 sha be appcabe n respect of such |ont re-
turn as f the ta abe years of both spouses covered by the |ont return
S C. 10 . FF CTI D T OF T RT I TITL I, R NU
CT OF 19 1, PPRO D OCTO R 20, 19 1 .
years begnnng after October 31, 19.r), and to ta abe years begnnng
of ta abe years (other than the caendar year 19 1) begnnng before
November 1, 19 1, and endng after October 31, 19 1, see secton 131.
Par. . Secton 29.12-1, as amended by Treasury Decson 6 7
26 CFR 29.12-1 , s further amended by strkng out (d) and nsert-
ng n eu thereof the foowng:
(a ) Ta abe years begnnng after December 31, 19tf, and before October
1, 19 0. For ta abe years begnnng after December 31, 19 7, and before
October 1, 19 0, there s mposed, n addton to the norma ta , a surta de-
termned as specfed In secton 12 for such years upon the surta net ncome of
every ndvdua, resdent or nonresdent, e cept nonresdent aen ndvduas
sub|ect to the ta mposed by secton 211(a). The surta net ncome for such
years s the net ncome mnus the credts provded n secton 2 (b) pror to ts
amendment by the Revenue ct of 19 1. For such ta abe years, secton 12
provdes that the surta sha be determned by computng a tentatve surta
n accordance wth the tabe contaned n secton 12(b) for such ta abe years
and by reducng such tentatve surta as foows:
(1) For ta abe years begnnng after December 31, 19 7, and endng
before anuary 1, 19 0, the reduct n sha be made under the provsons of
secton 12(c) pror to ts amendment by the Revenue ct of 19 0:
(2) For ta abe years begnnng before October 1, 19 0, and endng after
December 31, 19 9 (other than the caendar year 10 0), the reducton sha
be made under the provsons of secton 12(c)(2), as amended by the
Revenue ct of 19 0;
(3) For a ta abe year whch s the caendar year 19 0, the reducton
shn be made under the provsons of secton 12(c)(1), as amended by
the Revenue ct of 19 0.
For treatment of ta abe years begnnng n 19 7 endng n 19 , see secton
29.10 -3.
(e) Ta abe years begnnng after September 30, 19 0, and before November
1,19 1 other than the caendar year 19 1). For ta abe years begnnng after
September 30. 10 0, and before November 1, 19 1 (other than the caendar year
11) 1), there s mposed, n addton to the norma ta , a surta determned as
specfed n secton 12 for such years upon the surta net ncome of every n-
dvdua, resdent or nonresdent, e cept nonresdent aen ndvduas sub|ect
to the ta mposed by secton 211 (a). For ta abe years begnnng pror to
anuary 1, 19 1, the surta net ncome for such yenrs s the net Income mnus
the credts provded n secton 2 (b) pror to ts amendment by the Revenue
ct of 10 1. For ta abe years begnnng after December 31, 19 0, the surta
net ncome for such years s the net ncome mnus the credts provded n secton
2 (b), as amended by the Revenue ct of 19 1. For ta abe years begnnng
after September 30, 19 0, and before November 1, 19 1 (other than the caendar
year 19 1), the surta sha be determned n accordance wth the surta tabe
contaned n secton 12(b)(1) pror to ts amendment by the Revenue ct of
10 1. For treatment of ta abe years begnnng before October 1, 19 0, and
endng after September 30,19 0 (other than the caendar year 19 0), see secton
29.10 - .
(/) Caendar year 19 1 and ta abe years begnnng after October 31, 19 1.
For a ta abe year whch s the caendar year 19 1 and for ta abe years begn-
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29.11-1.
16
nng after October 31, 19 1, there s mposed, n addton to the norma ta , a
surta determned as specfed n secton 12, as amended by the Revenue ct of
1901, upon the surta net ncome of every ndvdua, resdent or nonresdent,
e cept nonresdent aen Indvduas sub|ect to the ta mposed by secton 211 (a).
The surta net ncome Is the net ncome mnus the credts provded n secton
2 (b), as amended by the Revenue ct of 19 1. Secton 12 specfes that the
surta sha be determned n accordance wth the appcabe surta tabe con-
taned theren. For treatment of ta abe years begnnng before November 1,
19 1, and endng after October 31, 19 1 (other than the caendar year 19 1),
see secton 29.10 -7. For treatment of ta abe years begnnng n 19 3 and
endng n 19 , see secton 29.10S- .
Par. . Secton 29.12-2, as amended by Treasury Decson 6 7
26 CFR 29.12-2 , s further amended as foows:
( ) y nsertng n the frst sentence after ta abe years begnnng
after December 31, 19 , the foowng: and before October 1,
19 0, .
( ) y nsertng n the headng of the tentatve surta tabe after
Ta abe Years egnnng fter December 31, 19 the foowng:
and efore October 1,19 0 .
(C) y nsertng after For ta abe years begnnng after December
31, 19 7, n the frst sentence of the second paragraph foowng the
tentatve surta tabe, the foowng: and before October 1, 19 0
(other than the caendar year 19 0), .
(D) y strkng out the ast two paragraphs of the secton and
For a ta abe year whch s the caendar year 19 0, secton 12 provdes that
the combned norma ta and surta sha be determned by reducng the aggregate
of the tentatve norma ta and tentatve surta as provded n the foowng
tabe:
If the aggregate of the tentatve norma The reducton sha be:
ta and the tentatve surta s:
Not over 00 1.3 of the aggregate.
Over 00 but not over 100,000 2 pus 9 of the e cess over 00.
Over 100,000 9,01G pus 7.3 of the e cess over
100,000.
ccordngy, f the norma ta net ncome and the surta net ncome for the ca-
endar year 19 0 each amounts to 1 0,000 the combned norma ta and surta
w be 101,9 1.1 , computed as foows:
Tentatve norma ta :
3 percent of 1 0,000 , 00.00
Tentatve surta on 1 0,000 from tabe 107, 320.00
ggregate of tentatve norma ta and tentatve surta 111, 20. 00
Reducton of tentatve ta :
9,016 pus 7.3 percent of 11,S20 (e cess of the aggregate tentatve
ta over 100,000) 9, 7 . 6
Combned norma ta and surta 101, 9 1.1
Secton 12(f) pror to ts amendment by the Revenue ct of 19 0 provdes
that whenever t s necessary to ascertan the norma ta and the surta sepa-
ratey for a ta abe year begnnng after December 31, 19 7, and before Oc-
tober 1. 19 0, the surta sha be an amount whch s the same proporton of the
combned norma ta and surta as the tentatve surta s of the aggregate of
the tentatve norma ta and tentatve surta , and the norma ta sha be the
remander of such combned norma ta and surta . Such computaton, for
e ampe, Is necessary for the purpose of secton 10 , reatng to ta on the gan
from the sae of o or gas propertes, and for the purpose of secton 106, reatng
to ta on amounts receved wth respect to cams aganst the Unted States
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17
29.11-L
nvovng acquston of property. The surta on the net ncome of 1 0,000
nvoved n the above e ampe wth respect to the ta for the caendar year
19 0 woud under secton 12(f) be 101,9 1.1 (combned norma ta and surta )
, . _ . . 107320 (tentatve surta ) . ,noo . , .
mutped by oon / 1 t . . , or 97, 3 .70, and the norma ta
111, 20 (tentatve tota ta )
woud be 101,9 1.1 mnus 97, 3 .70, or ,102. .
Surta Tabe Ta abe Years egnnng fter September 30, 19 0, an
efore November 1, 19 1 (Other Than Caendar Year 19 1)
Surta net ncome
Percent
Tota
surta
0 to 2,000... --
2,000 to ,000
,000 to 6,000
6,000 to ,000
S ,000 to 10,000
10,000 to 12,000
12,000 to 1 ,000
1 ,000 to 16,000
16,000 to 1 ,000
1 ,000 to 20,000
20,000 to 22,000
22,000 to 26,000
26,000 to 32,000
32,000 to 3 ,000
3 ,000 to ,000
,000 to 0,000
0,000 to 60,000
60,000 to 70,000
70,000 to 0,000
0,000 to 90,000
90,000 to 100,000._.
MO0.0O0 to 1 0,000..
1 0,000 to 200,000..
200,000 up ---
17
3 0
19
720
23
1, 1 0
27
1,720
31
2,3 0
3
3,0 0
0
3, 0

, 720
7
, 660
0
6, 660
3
7,720
6
9, 960
9
13, 00
62
17, 220
66
21, 1 0
69
2 , 320
72
32, 20
7
0, 020
7
7, 20
1
, 920

6 , 320
6
107, 320
7
1 0, 20

The surta for any amount of surta net ncome not stated n round
fgures n the surta tabe s computed by addng to the surta for the
argest amount stated whch s ess than the surta net ncome, the
surta upon the e cess over that amount at the rate ndcated n the
tabe. ccordngy, the surta upon a surta net ncome of 63,12
woud be 3 , 66, computed as foows:
Surta on 60,000 from tabe 32, 20
Surta on 3,12 at 7 percent 2,3 6
Tota.
3 , 60
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129.11-1.1
1
Surta Tabe Ta abe Year Whch Is Caendar Year 19 1
Surta net ncome
Percent
Tota
surta
17.
3
19.
736
2
1.216
27
1, 7 6
32
2. 396
36
3, 116
0
3, 916

, 16

. 776
1
6, 796

7, 76
7
10, 1 6
60
13, 7 6
63
17, 36
66
21. 96
70
2 . 696
72
32. 96
7
0, 396
79
, 296
1
6, 396

6 , 796
6
107, 796
7
1 1,296

0 to 2,000
2,000 to ,000
,000 to 6,000
6,000 to ,000
,000 to 10,000
10,000 to 12,000
12,000 to 1 ,000
1 ,000 to 16,000
16,000 to 1 ,000
1 ,000 to 20,000
20,000 to 22,000
22,000 to 26,000
26,000 to 32,000
32,000 to 3 ,000
3 ,000 to ,000
,000 to 0,000
0,000 to 60,000
60,000 to 70,000
70,000 to 0,000
0,000 to 90,000
90,000 to 100,000.
100,000 to 1 0,000..
1 0,000 to 200,000..
200,000 up
Surta Tabe (For Others Than ead of ousehod) Ta abe Years
egnnng fter October 31. 19 1. and efore anuary 1, 19
Surta net ncome
Percent
0 to 2,000
2,000 to ,000
,000 to 6,000
6,000 to ,000
,000 to 10,000
10,000 to 12,000...
12,000 to 1 ,000...
1 ,000 to 16,000...
16,000 to 1 ,000...
1 ,000 to 20,000...
20,000 to 22,000...
22,000 to 26,000...
26,000 to 32,000...
32,000 to 3 ,000...
3 ,000 to ,000...
,000 to 0,000...
0,000 to 60,000...
60,000 to 70,000...
70,000 to 0,000...
0,000 to 90,000...
90,000 to 100,000..
100,000 to 1 0,000.
1 0,000 to 200,000.
200,000 up
19. 2
3
21. 6
16
26
1, 336
31
1, 9 6
3
2, 6 6
39
3, 36

,336
0
, 336
3
6, 396
6
7, 16
9
, 696
63
11, 216
6
1 , 0 6
6
1 , 9 6
69
23, 096
72
27, 16
7
3 , 16
77
2, 16
0
0, 16
2
, 716
6
67, 216
7
110, 716

9
1 , 716
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19
29.11-1.
Surta Tabe (For Others Than ead of ousehod) Ta abe Years
egnnng fter December 31, 19 3
Surta net ncome
Tota
surta
to 2,000..
2,000 to ,000
,000 to 6,000.
6,000 to ,000
,000 to 10,000.
10,000 to 12,000
12,000 to 1 ,000
1 ,000 to 16,000
16,000 to 1 ,000
SI .000 to 20,000
20,000 to 22,000
22,000 to 26,000
26,000 to 32,000
32,000 to 3 ,000
3 ,000 to ,000
,000 to 0,000
0,000 to 60,000
60,000 to 70,000
70,000 to 0,000
0,000 to 90,000
90,000 to 100,000
100,000 to 1 0,000..-
1 0,000 to 200,000...
I up
17
3 0
19
720
23
1, 1 0
27
1,720
31
2, 3 0
3
3, 0 0
0
3, 0

, 720
7
, 660
0
6, 660
3
7,720
6
9, 960
9
13, 00
62
17, 220
66
21, 1 0
69
2 , 320
72
32, 20
7
0, 020
7
7, 20
, 920
6 , 320
6
107, 320
7
1 0, 20

For computaton of ta In the case of a |ont return of husband and wfe for
a ta abe year begnnng after December 31, 19 7, see secton 29.12- .
Par. 6. Secton 29.12-3, as amended by Treasury Decson 6 7
26 CFR 29.12-3 , s further amended to read as foows:
Sec. 29.12-3. Lmtaton on mount of Ta . The combned norma ta and
surta for ta abe years begnnng after December 31, 19 3, computed before the
appcaton thereto of the credt provded n secton 31 (reatng to the credt
for foregn ncome ta ), secton 32 (reatng to the credt for ta wthhed at
the source under secton 1 3 or 1 ), and secton 3 (reatng to the credt for
ta wthhed on wages), sha not e ceed an amount equa to the foowng
percent of the ta payer s net Income for the ta abe year:
Percent
For ta abe years begnnng after December 31,19 3, and before anuary 1,
19 6 90
For ta abe years begnnng after December 31,19 , and before anuary 1,
19
For ta abe years begnnng after December 31,19 7, and before October 1,
19 0 (other than the caendar year 19 0) 77
For a ta abe year whch s the caendar year 19 0 0
For ta abe years begnnng after September 30, 19 0, and before Novem-
ber 1, 19 1 (other than the caendar year 19 1) 7
For a ta abe year whch s the caendar year 19 1 7. 2
For ta abe years begnnng after October 31, 19 1, and before anuary 1,
19
For ta abe years begnnng after December 31, 19 3 7
For treatment of ta abe years begnnng n 19 and endng n 19 , see secton
29.10 -2. For treatment of ta abe years begnnng n 19 7 and endng n 19 ,
see secton 29.10 -3. For treatment of ta abe years begnnng before October 1,
19 0, and endng after September 30, 19 0 (other than the caendar year 19 0),
see secton 29.10 - . For treatment of ta abe years begnnng before Novem-
ber 1,1901, and endng after October 31,19 1 (other than the caendar year 19 1),
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29.11-1.
20
ee secton 29.10 -7. For treatment of ta abe years begnnng n 19 3 and
endng n 19 , see secton 29.10 - .
Par. 7. Secton 29.12- , as added by Treasury Decson 6 7 26
CFR 29.12- , s amended as foows:
( ) y strkng out the perod n the headng and nsertng n eu
thereof the foowng: (a) In genera
( ) y strkng out the second paragraph (whch begns wth the
words The method of computng ) and the thrd paragraph (whch
begns wth the words The mtaton under secton 12(c) ), and
(6) Ta abe years begnnng after December 31, 19 7, and before October 1.
19 0. For a ta abe year begnnng after December 31, 19 7, and before October
1, 19 0, the method of computng, under secton 12(d), as added by the Revenue
ct of 19 , the ta of husband and wfe n the case of a |ont return s as foows :
Frst, the net ncome and appcabe credts aganst net ncome are reduced
by one-haf. Second, the tentatve norma ta and tentatve surta are de-
termned as provded n sectons 11 and 12(b) for such year, by usng the net
ncome and appcabe credts so reduced. Thrd, the tentatve norma ta
and tentatve surta so determned are aggregated and ths aggregate tentatve
ta s then reduced as provded n secton 12(c) for such year. See secton
29.12-2. Fourth, ths reduced aggregate, whch s the combned norma ta
and surta that woud be determned f the net ncome and the appcabe credts
aganst net ncome provded by secton 2 for such year were reduced by one-
haf, s then mutped by two, to produce the ta mposed n the case of the
|ont return.
The mtaton under secton 12(c) of the combned norma ta and surta
to an amount not n e cess of a specfed percent ( 0 percent for the caendar
year 19 0 and 77 percent for other ta abe years begnnng after December 31,
19 7, and before October 1, 19 0) of the net ncome for the ta abe year s to be
apped before the fourth step above, that s, the mtaton s to be apped upon
the combned norma ta and surta determned under secton 12(c) as the
specfed percent ( 0 percent or 77 percent, as the case may be) of one-haf of
the net ncome for the ta abe year (such one-haf of the net ncome beng the
actua aggregate net ncome of the spouses reduced by one-haf). fter such
mtaton s apped, then the combned norma ta and surta so mted are
mutped by two as provded n secton 12(d).
(C) y strkng out the ast two paragraphs and nsertng n eu
thereof the foowng:
If a |ont return of a husband and wfe s fed under the provsons of secton
1(b) (3), as added by the Revenue ct of 19 , f the husband and wfe have
dfferent ta abe years soey because of the death of ether spouse, and f the
ta abe year of the survvng spouse covered by such |ont return began before
October 1, 19 0, and ended after September 30, 19 0. the ta abe year of the
deceased spouse covered by the |ont return sha, for the purpose of the com-
putaton under secton 12(d) and ths secton of the combned norma ta and
surta n respect of such |ont return, be deemed to have ended on the date of
the cosng of the survvng spouse s ta abe year.
For computaton of tu under Suppement T n the case of a |ont return, see
sectons 29. 00-1 and 29. 01-1.
For treatment of ta abe years begnnng n 19 7 and endng n 19 , see sec-
ton 29.10 -3.
(c) Ta abe years bennnnn after September 30, 19 0. For a ta abe year
begnnng after September 30, 19 0, the method of computng, under secton
12(d). as added by the Revenue ct of 19 . the ta of husband and wfe n the
case of a |ont return s as foows:
Frst, the net ncome and appcabe credts aganst net ncome are reduced
by one-haf. Second, the norma tn and surta are determned as provded n
sectons 11 and 12(b) for such year, by usng the net ncome and appcabe
credts so reduced. Thrd, the norma tn and surta so determned are ag-
gregated. Fourth, ths aggregate, whch s the combned norma ta and sur-
ta that woud be determned f the net ncome and the appcabe credts aganst
net ncome provded by secton 2 for such year were reduced by one-haf, s then
mutped by two, to produce the t mposed n the case of the |ont return.
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21
29.11-1.
The mtaton under secton 12(f) of the combned norma ta and surta
to an amount not n e cess of a specfed percent of the net ncome for the ta -
abe year s to be apped before the fourth step above, that s, the mtaton to
be apped upon the combned norma ta and surta s determned under sec-
ton 12(f) as the appcabe specfed percent of one-haf of the net ncome for
the ta abe year (such one-haf of the net ncome beng the actua aggregate
net ncome of the spouses reduced by one-haf). For the percent appcabe n
determnng the mtaton under secton 12(f) of the combned norma ta and
surta , see secton 29.12-3. fter such mtaton s apped, then the com-
bned norma ta and surta so mted are mutped by two as provded n
secton 12(d).
The foowng computaton Iustrates the method of appcaton of secton
12(d) n the determnaton of the ta of a husband and wfe fng a |ont return
for the caendar year 19 1. If the |ont nat Income s ,200 and the ony aow-
abe credts under secton 2 are the two e emptons of the ta payers under sec-
ton 2 (b) (1) ( ), as amended by the Revenue ct of 19 , the ta on the |ont
return for 19 1 s 1, , determned as foows:
1. Net ncome , 200
2. Net ncome reduced by one-haf ,100
3. Credts aganst net ncome under secton 2 (2 e emptons under sec-
ton 2 (b) (1) ( )) 1,200
. Credts n tem 3 reduced by one-haf 600
. Net ncome reduced by one-huf (tem 2) mnus credts reduced by one-
haf (tem ) 3, 00
6. Norma ta computed under secton 11 on amount n tem (3 percent
of 3, 00) 10
7. Surta computed under secton 12(b) on amount n tem ( 3 pus
19. percent of e cess of 3, 00 over 2,000) 639
. Combned norma ta and surta computed on net ncome and credts
reduced by one-haf 7
9. Twce the combned norma ta and surta determned n tem 1,
If the aternatve ta for a ta abe year begnnng before October 20, 19 1,
s computed under secton 117(c) (2) pror to ts amendment by the Revenue ct
of 19 1, reatng to the aternatve ta where a ta payer (other than a corpora-
ton) has a net ong-term capta gan n e cess of a net short-term capta oss,
the parta ta sha be computed under sectons 11 and 12 as stated above but
wthout ncuson of such e cess n net ncome, and the tota ta sha be such
parta ta pus 0 percent of such e cess as provded n such secton 117(c) (2).
If the aternatve ta for a ta abe year begnnng after October 19, 19 1, Is
computed under secton 117(c)(2), as amended by the Revenue ct of 19 1,
reatng to the aternatve ta where a ta payer (other than a corporaton) has a
net ong-term capta gan n e cess of a net short-term capta oss, the parta
ta sha be computed under sectons 11 and 12 as stated above but wthout
ncuson of 0 percent of such e cess n net ncome, and the tota ta sha be
such parta ta pus a specfed percent of such e cess (26 percent for ta abe
years begnnng after October 31, 19 1, and before November 1, 19 3, and 2
percent for a other ta abe years) as provded n such secton 117(c) (2).
If a ont return of a husband and wfe s fed under the provsons of secton
1(b) (3), as added by the Revenue ct of 19 , f the husband and wfe have
dfferent ta abe years soey because of the death of ether spouse, and f the
ta abe year of the survvng spouse covered by such |ont return ether began
before November 1, 19 1, and ended after October 31, 19 1, or begns n 19 3
and ends n 19 , the ta abe year of the deceased spouse covered by the |ont
return sha, for the purpose of the computaton under secton 12(d) and ths
secton of the combned norma ta and surta In respect of such |ont return,
be deemed to have ended on the date of the cosng of the survvng spouse s
ta abe year.
For computaton of ta under Suppement T n the case of a |ont return, see
sectons 29. 00-1 and 29. 01-1.
For treatment of ta abe years begnnng before October 1, 19 0, and endng
after September 30,19 0 (other than the caendar year 19 0), see secton 29.10 .
For treatment of ta abe years begnnng before November 1, 19 1, and endng
after October 31, 19 1 (other than the caendar year 19 1), see secton 29.10 -7.
For treatment of ta abe years begnnng n 19 3 and endng n 19 , see secton
29.10 - .
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29.11-1.
22
Par. . There s nserted mmedatey precedng secton 29. 00-1
26 CFR 29. 00-1 the foowng:
S C. 102. INDI IDU LS WIT D UST D GROSS INCOM
OF L SS T N ,000 P RT I, TITL I, R NU CT OF
19 0, PPRO D S PT M R 23, 19 0 .
So much of secton 00 (reatng to optona ta on Indvduas wth
ad|usted gross ncomes of ess than ,000) as precedes the ta tabe
theren Is hereby amended to read as foows:
S C. 00. IMPOSITION OF T .
In eu of the ta es Imposed by sectons 11 and 12, there sha be
eved, coected, and pad for each ta abe year upon the net ncome of
each ndvdua whose ad|usted gross ncome for such year s ess than
,000, and who has eected to pay the ta mposed by ths suppement
for such yeur, a ta as foows:
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23 S 29.11 1.
, . v Tabe I
Ta abe years begnnng after September SO, 19 0
If ad|usted
gross-n-
come s
nd the num-
ber of e emp-
tons s
If ad|usted
gross n-
come s
nd the number of e emptons s
2
3
nd
nd
f
f
nd
f a
|ont
re-
turn
nd
f a
|ont
re-
turn
t
ut
ess
than
1
2
3
or
t
east
ut
ess
than
1
other
than
other
than
6
7
or
more
east
more
a
|ont
a
ont
re-
turn
re-
turn
s
fed
s
fed
Is
fed
s
fed
The ta sha be
The ta sha be
10
67
0
0
to
0
2,32
2,3 0
301
1 1 1 1
6 61
0
0
o 0
0
7
700
0
0
0
2,3 0
2.376
30
1
1
6
66 0
0
0
0
0
700
72
0
0
0
2,37
2, 00
310
190
190
70
70 0
0
0 0
U
7 0
13
0
0
0
2. 00
2. 2
31
19 . 19 7
7 1 0
0
0
0
0
7 C
77
17
0
0
0
2. 2
2. 0
319
199 199
79
79
0
0
0
1
0
77
00
22
0
0
0
2, 0
2, 7
323
203 203
3
3
0
0
II
0
0
00
2
26
0
0
0
2. 7
2. 00
32
20
20

0
0
0
0
0
2
0
31
0
0
0
2. 00
2, 2
332
212
212
92
92
0
0
0
1)
0
0
7
3
0
0
0
2, 2
2, 0
337
217
217
97
97
0
0
0
0
7
900
0
0
0
0
2, 0
2, 7
3 1
221
221
101
101
0
0
0
0
0
900
92

0
0
0
2. 7
2,600
3 6
226
226
106
106
0
0
0
0
0
92
9 0
9
0
0
0
2,000
2.62
3 0
230
230
110
no
0
0
0
0
0
9 0
97
3
0
0
0
2.62
2,6 0
3
23
23
11
11
0
0
0
0
0
7
1.000

0
0
0
2,6 0
2,67
3 9
239
239
119
119
0
0
0
0
0
1,000
1.02
62
0
0
0
2,67
2,700
36
2
2
12
12
0
0
0
0
1,02
1.0 0
67
0
0
0
2,700
2,726
36
2
2
12
12
0
0
0
0
1.0 0
1.07
71
0
0
0
2,72
2,7 0
373
2 3
2 3
133
133
13
0
0
0
0
1.07
moo
76
0
0
0
2,7 0
2,77
377
2 7
2 7
137
137
17
0
0
0
0
1,100
1,12
0
0
0
0
2,77
2, 00
3 2
262
2 2
1 2
1 2
22
0
0
0
0
1,12
1, ISO

0
0
0
2, 00
2, 2
3 6
266
266
1 6
1 6
26
0
0
0
0
1,1 0
L 17
9
0
0
0
2, 2
2, 0
391
271
271
1 1
1 1
31
0
0
0
0
1.17
1.200
9
0
)
0
2, 0
2, 7
39
27
27
1
1
3
0
0
0
0
1.3M
1.22
9
0
0
0
2, 7
2,900
00
2 0
2 0
160
160
0
0
0
0
0
1,22
1.2 0
103
0
0
0
2,1)00
2,926
0
2
2
16
16

0
0
0
0
1.2 0
1,27
107
0
0
0
2,92
2,960
10
2 9
2 9
169
169
9
0
0
0
0
1.27
1.300
112
0
0
0
2,9 0
2,97
1
293
293
173
173
63
0
0
0
0
1.300
32
116
0
0
0
2,97
3.000
20
29
29
17
17

0
0
0
0
1,32
1,3 0
121
1
0
0
3,000
3,0 0
27
30
30
1 6
1
6
0
0
0
0
1,3 0
1,37
12
s
0
0
3.0 0
3, 100
37
31
31
19
19
7
0
0
0
0
1,37
1. 00
130
10
0
0
3,100
3,1 0
117
323
323
203
203
3
0
0
0
0
1. 00
1, 2
13
1
0
0
3,1 0
3,200
7
332
332
212
212
92
0
0
0
0
1. 2
1, 0
139
19
0
0
3,200
3,2 0
67
3 1
3 1
221
221
101
0
0
0
0
1, 0
1. 7
1 3
23
0
0
3,2 0
3,300
170
3 0
3 0
230
230
110
0
0
0
0
1, 7
1. 00
1
2
0
0
3.300
3,3 0
6
3 9
3 9
239
239
119
0
0
0
0
1. 00
1, 2
1 2
32
0
0
3,3 0
3. 00
96
36
36
2
2
12
0
01
0
1, 2
1. 0
1 7
37
0
0
3, 00
3. 0
06
377
377
2 7
2 7
137
17
0
0
0
1, 60
1, 7
161
1
0
0
3, 0
3, 00
16
3 6
3 6
266
3 6
1 6
26
0
0
o
1, 7
.fOO
166
61
0
0
3, 00
3. 0
26
39
39
27
27
16
3
0
0
0
1.600
1.62
170
0
0
0
3. 0
3,600
36
0
0
2
2
16

0
0
(1
1,62
1.6 0
17
6
0
0
3,600
3,6 0
6
1
13
293
293
173
3
0
0
0
1.6 0
1.67
179

0
0
3.6 0
3,700
6
2
22
302
302
1 2
62
0
0
0
1, 7
1,700
1
6
0
0
3,700
3,7 0
66
3
31
311
311
191
71
0
0
0
1.700
1,72
1
6
0
0
3, 7 0
3, 00
7
3
0
320
320
200
0
0
0
0
1.72
1,7 0
193
73
0
0
3, 00
3, 0

3
9
329
329
209
1)
0
0
0
1.7 0
1,77
107
77
0
0
3,9 0
3,900
9
63

33
33
21
9
0
0
0
1.77
1, 00
202
2
0
0
3,900
3,9 0
60
73
7
3 7
3 7
227
107
0
0
0
1, 00
1, 2
206
6
0
0
3,9 0
,000
61
3
76
3 6
3 6
236
116
0
0
0
1, 2
1, 0
211
91
01
0
,000
,0 0
62
93

16
36
2
12
0
0
1, 0
1, 7
21
as
0
0
,0 0
, 100
63
03
9
37
37
2
13
1
0
0
1, 7
1,900
220
100
0
0
. 100
,1 0
6
13
03
3 3
3 3
263
1 3
23
0
0
1,900
1.92
22
10
0
0
,1 0
,200
6
23
12
392
392
272
1 2
32
0
0
1.92
1.0 0
229
109
0
0
.200
,2 0
66
33
21
01
01
2 1
161
1
0
0
1.9 0
1,97
233
113
0
0
,2 0
.300
071
2
30
110
10
290
170
0
0
o
1,97
2,000
23
11
0
0
,300
1.
6
62
39
20
19
200
179
9
0
0
2,000
2.02
2 2
122
2
0
.3 0
, 00
001
62

30
2
30s
1
6
0
0
2.02
2.0 0
2 7
127
7
0
, 00
, 0
70
72
7
0
37
17
197
77
0
0
2,060
2,07
2 1
131
11
0
, 0
, 00
71
2
66
0
6
120
206
6
0
0
2.07
2.100
2 6
136
16
0
, 00
, 0
72
92
7
60

33
21
9
0
0
2,100
2,12
260
1 0
20
0
. 0
.600
701
002

70
6
3
22
10
0
0
2.12
2,1 0
26
1
2
0
,600
.6 0
7
612
93
0
73
3 3
233
113
0
0
2.1 0
2,17
2 0
1 1)
20
0
.6 0
,700
7
622
002
90
2
362
2 2
122
2
0
2.176
2200
27
1
3
0
.700
,7 0
70,1
632
611
. 00
91
371
2 1
131
II
0
2.200
222
27
1
3
0
,7 0
, 00
773
6 1
620
09
00
3 0
260
111)
20
0
2,22
2.2 0
2 3
163
3
0
, 00
. 0
7 t
6 1
629
19
09
3 9
269
110
29
0
12 0
2.27
2 7
167
7
0
. 0
, . I0
793
661
63
29
1
39S
27
1
3
0
2.27
2,300
172
62
0
,900
1.11. 0
03
671
6 7
27
107
2 7
167
7
0
2.32.
66
0
,9 0
.000
13
OS1
6 6
36
110
296
176
6
0
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I 29.11-1. 2
Tabe II
Ta abe year begnnng anuary 1,19 0, and endng December 31, 19 0
If :u|use
nd the num-
I ad|usted
cross n-
ber of e emp-
gross n-
nd the number of
e em
pton
s-
come s
tons Is
come s
nd
2
nd
3
IT
nd
f
nd
other
f a
other
f a
t
ut
ess
than
1
2
3
or
more
t
ut
1
than
a
|ont
re-
than
a
|ont
re-
6
1
7
a
mor
east
east
than
|ont
re-
turn
turn
|ont
re-
turn
turn
s
ted
s
ed
s
fed
s
fed
The ta sha be
The ta sha be-
0
67
0
0
0
0
2,32
2,3 0
262
1 7
1 7
3
63
0
0
0
0
0
67
700
3
0
0
0
2,3 0
2,37
2,37
266
161
161
67
7
0
0
0
0
0
700
72
7
0
0
0
2, 00
269
16
166
61
61
0
0
0
0
0
72
7 0
11
0
0
0
2, 00
2, 2
273
169
169
6
66
0
0
0
0
0
7 0
77
1
0
0
0
2. 2
2, 0
277
173
173
69
69
0
0
0
0
0
77
W
19
0
0
0
2, 0
2, 7
2 1
177
177
72
72
0
0
0
0
0
00
2
23
0
0
0
2, 76
2, 00
2
1 1
1 1
7
76
0
0
0
0
0
2
60
27
0
0
0
2, 00
2, 2
2 9 1
1
0
0
0
0
0
0
0
0
7
31
0
0
0
2 2
2, 0
293
1 9
1 9

0
0
0
0
0
76
900
3
0
0
0
2 60
2, 76
297
192
192

0
0
0
0
0
900
92
3
0
0
0
2, 7
2,600
301
196
196
92
92
0
0
0
0
0
92
9 0
2
0
0
0
2,600
2,62
30
200
200
9
96
0
0
0
0
0
9 0
97
6
0
0
II
2,62
2.6 0
309
20
20
100
100
0
0
0
0
(1
97
1,000 60
0
0
0
2,6 0
2,67
313
20
20
10
10
0
0
0
0
0
1,000
1.02

. 0
0
0
2,676
2, 700
316
212
212
10
10
3
0
0
0
0
1.02
1,060

0
0
0
2,700
2,72
320
216
216
112
112
7
0
0
0
0
1.0 0
1.07
62
0
0
0
2,726
2,7 0
32
220
220
11
11
11
0
0
0
0
1,07
1,100
66
0
0
0
2.7 0
2,776
2, 00
32
22
22
119
119
1
0
0
0
0
1,100
1,12
70
0
0
0
2,77
332
22
22
123
123
19
0
f
0
0
1,12
1,160
7
0
0
0
2, 00
2, 26
336
232
232
127
127
23
0
0
0
0
1,1 0
1.17
7
0
0
0
2, 26
2, 0
3 0
236
236
131
131
27
0
0
0
0
1,17
1,200
2
0
0
II
2, 0
2, 7
3
239
239
13
13
31
0
0
0
0
1.200
1,22

0
0
II
2, 7
2.900
3
2 3
2 3
139
139
3
0
0
0
0
1,226
1,2 0
9
0
0
0
2.900
2,92
3 2
2 7
2 7
1 3
1 3
3
0
0
0
0
1,2 0
1,27
93
0
0
0
2,926
2.9 0
3 7
2 1
2 1
1 7
1 7
2
0
0
0
0
1,27
1,300
97
0
0
0
2,9 0
2,976
361
2 6
2
1 1
1 1
6
0
0
0
0
1,300
1,32
101
0
0
0
2,97
3,000
366
2 9
2 9
1 6
1 6
0
0
0
0
0
1,32
1,3 0
10
1
0
0
3,000
3,0 0
373
26
26
161
161
6
0
0
0

1,3 0
1,37
109
0
0
3,0 0
3,100
3 2
273
273
16
16
6
0
0
0

1,37
1, 00
113
0
0
3,100
3,1 0
391
2 1
2 1
176
176
72
0
0
0
1
1, 00
1, 2
117
12
0
0
3. 1 (1
3,200
00
2
2
1
1
0
0
0
0
0
1, 2
1, 0
121
16
0
0
3, 200
3,260
09
296
29
192
192
7
0
0
0
0
1, 0
1, 7
12
20
0
0
3, 260
3,300
1
30
30
200
200
9
0
0
II
0
1, 7
1. 011
129
2
0
(1
3,300
3,360
27
312
312
. 207
207
103
0
0
0
0
1, 00
1, 2
132
2
0
0
3.3 0
3, 00
36
320
320
21
21
111
7
0
0
0
1, 2
1, 0
136
32
0
0
3, 00
3, 0

32
32
223
223
119
1
0
0
1
1, 60
1, 7
1 0
36
0
0
3, 0
3, 00
6
33
33
231
231
127
22
0
0
1
1,67
1,600
1
0
0
0
3, 00
3, 0
63
3 3
3 3
239
239
13
30
0
0
0
1.600
1,62
1

0
0
3, 0
3,600
72
3 2
361
2 7
2 7
1 2
3
0
0
0
1,62
1,6 0
1 2

0
0
3,600
3,6 0
1
361
369
2
2
1 0
6
0
0
0
1,6 0
1,67
1 6
3
0
0
3,6 0
3,700
90
370
367
262
262
1

0
0
0
1,67
1,700
160
66
0
0
3,700
3,7 0
99
379
37
270
270
166
61
0
0
0
1,700
1,72
16
9
0
0
3,7 0
3, 00
0
3
3 2
27
27
17
69
0
0
0
1,72
1,7 0
16
63
0
0
3. 00
3, 0
17
397
390
2 6
2 6
1M
77
0
0
0
1,7 0
1,77
172
67
0
0
3. 0
3,900
26
0
39
29
29
1 9

0
0
I
1.77- .
1, 00
176
71
0
0
3.900
3,9 0
3
1
06
301
301
197
93
0
0
0
1, 00
1, 2
179
7
0
0
3,9 0
,000

2
1
309
309
20
100
0
0
0
1, 2
1, 0
1 3
79
0
0
.0( )
. aw
3
33
22
317
317
213
10
0
0
1, 60
1, 7
1 7
3
0
0
,0 0
. 100
662
2
29
32
32
221
116
12
0
0
1, 7
1,900
191
7
0
0
. 100
, 1 0
71
1
37
333
333
22
12
20
0
0
1,900
1,92
19
91
0
0
,1 0
.200
0
60

3 1
3 1
236
132
27
0
I
1,92
1.960
199
9
0
0
,200
,2 0
9
69
3
3 9
3
2
1 0
3
0
1
1,9 0
1,97
203
99
0
0
,260
,300
,3 0
9
7
61
3
366
2 2
1 7
3
0
0
1.976
2,000
207
102
0
0
,300
007
7
6
367
36
260
1 6
1
0
0
2,000
2.02
211
106
2
0
,3 0
, 00
616
96
76
376
372
2(
163
9
0
0
2,02
2,0 0
21
110
6
0
. 00
. 0
62
0

3
3 0
27
171
67
0
0
2,0 0
2.07
219
11
10
0
. 60
, 00
63
1
92
39
3
263
179
7
0
0
2.07
2,100
223
11
1
0
, 00
. 0
6 3
23
00
103
396
291
1S7
2
0
0
2,100
2,12
226
122
1
0
. 0
,600
6 2
632
60
12
03
299
19
90
0
0
Z126
2.1 0
230
126
22
0
,600
.6 0
661
1
1
21
11
307
202
9
0
0
2,1 0
2.17
23
130
2
0
,6 0
,700
670
0
23
30
19
31
210
10
1
1
2,17
2,200
23
13
29
0
.700
,760
679
6 9
31
39
27
322
21
11
9
0
2,200
2,22
2 2
13
33
0
,7 0
. 00
6
6
39

36
330
226
121
I 1
0
2.22
2.2 0
2 6 1 2
2 0 1 6
37
0
, 00
, 0
697
77
7
7
2
33
23
129
2
0
2.2 0
2,27
1
0
. 0
,900
706

6
6
0
3 6
2 1
137
33
0
2.27
2,300
2
1 9

0
,900
,9 0
. 9 0
71
9
62
76

66
3
2 9
1
s
0
2.300
2,32
266
163
9
II
000
72
60
70

361
2 71
. 3
0
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2
29.11-1.
Tabe III
Ta abe years (other than the caendar year 19 0) begnnng before October
1, 19 0
S C. 103. COMPUT TION OF T IN C S OF C RT IN OINT
PRO D S PT M R 23, 19 0 ,
If a |ont return of a husband and wfe Is fed under the provsons of
secton 1(b) ( ) of the Interna Revenue Code n a case where the hus-
band and wfe have dfferent ta abe years because of the death of ether
spouse, and the ta abe year of the survvng spouse covered by such
|ont return b. gan before October 1, 19 0, and ended after September
30, 19 0, the amendments made by ths part nc. sees. 101 and 102 sha
be appcabe n respect of such |ont return as f the ta abe years of
both spouses covered by the |ont return ended on the date of the cosng
of the survvng spouse s ta abe year.
S C. 101. FF CTI D T OF P RT I TITL I, R NU CT
OF 19 0, PPRO D S PT MR R 23, 19 0 .
cept as provded n secton 103, the amendments made by ths part
(other than the caendar year 19 0) begnnng before October 1, 19 0,
and endng after September 30, 19 0. see secton 131.
S C. 102. INDI IDU LS WIT D UST D GROSS INCOM OF
L SS T N ,000 P RT I, TITL I, R NU CT OF 19 1,
PPRO D OCTO R 20, 19 1 .
Secton 00 (reatng to optona ta on ndvduas wth ad|usted
gross ncomes of ess than ,000) s hereby amended by strkng out the
tabes contaned theren and nsertng n eu thereof the foowng:
2 2160
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29.11-1.
26
Tabe I
Ta abe year begnnng anuary 1,19 -1, and endng December 31,19 1
If ad|usted
prass n-
come Is
t
east
I
67
700
72
7 0
77
SOU
S2S
bf
7
OO
92
.ISO
67
1,000
1,02
,0 O
,07
1,100
1,12
1,1 0
1,17
1,200
1,22
1,2 0
1,27
1,300
1,32
1,3 0
1,37
1, 00
1, 2
1, 0:
1, 7
1, 001
1, 2
1, 0
1, 7
1,600
1,02
1,6 0
1,67
1,700
1,72
1,7 0
1,77
1, 00
1, 12
1, 0
1, 7
1,900
1,92
1,9 0
1,97
2,000
2,02
2,0 0
2,07
2, 100
2, 12
2, 1 0
2, 17
2,200
2,22
2,290
2,27
2,300
ut
ess
than
07.
700
72
7 0
77
00
2
0
7
1IO0
92
9 0
97
1,000
1.02
1,0 0
1,07
I. 100
1, 12
1,1 0
1,17
1,200
1,22
1,2 0
1,27
1,300
1,32
1,3 0
1,37
1, 00
1, 2
1, 0
1, 7
1, 00
1, 2
1, 0
1, 7
1,600
1,62
1,6 0
1,67
1,700
1,72
1,7 0
1,77
1, 0(1
1, 2
1, 0
1, 7
1,900
1,92
1,9 0
1,97 1
2,000
2,02
2, (1 0
2,07
2, 100
2, 12
2, 1. 0
2,17
2, 2001
2,22
2,2 01
2,27
2,3001
2,32
nd the number
of e emptons
1 -
or
more
The ta sha be-
t ad|usted
gross n-
eome s
t
east
2, 00
2, 2
2, 0
2, 7
2, 00
2, 2
2, 0
2, 7
2,600
2, 3S
2,6 0
2,07 .
2,700
2,72
2,7 0
2,77
2, 00
2, 2
2, 0
2, 7
2,9011
2.92
2,9 0
2,97
3,000
3,0 0
3. 100
3, 1 0
3,200
3, 2 0
3,300
3,3 0
3, 00
3, 0
3, 00
3, 0
3, 600
3,11 0
3,700
3,7 0
3, 00
3, (1
3,900
3,9 0
,000
,0 0
,100
, 1 01
,200
,2 0
,300
,3 0
, 00
, 0
, 00
, 0
,600
,6 0
,700
, 7 0
, 00
, 0
.900
,9 0
2,3 0
2,37 ,
2, 00
2, 2
2, 0
2, 76
2, 00
2, 2
2, 0
2, 7
2,600
2,62
2,6 0
2,67
2,700
2.72
2,7 0
2,77
2, 00
ut
ess
than
nd tho number of e emptons Is
2
3
nd
nd
ta -
ta -
1
payer
Is snge
or mar-
red
Mng
nd a
|ont
return
payer
s snge
or mar-
red
fng
nd a
|ont
return
s fed
6
7
or
more
sepa-
ratey
s Ded
sepa-
ratey
The ta sh
abe-
307
1
1
62
62
S)
SO
so
n
311
1 9
1 9
67
67
0
0

0
0
316
19
19
71
71
0
0
0
0
0
321
19
19
76
76
0
0
0
0
0
32
203
203
0
0
0
0

0
0
330
207
207

0
0
0
0
0
33
212
212
90
90
0
0
0
0
0
339
216
216
9
9
0
0
0
0
3 3
221
221
99
99
0
0
1
0
0
3
226
226
103
103
0
0
0
0
0
3 3
230
230
10
10s
0
0
0
0
0
3 7
23
23
112
112
D
0
0
0
0
362
239
239
117
117
0
0
0
o
0
366
2
2
122
122
0
0
0
0
0
371
2 9
2 9
126
126
0
0
0
0
376
2 3
2 3
131
131
0
0
0
0
3 0
2
2
13
13
13
r
0
0
0
3
262
262
1 0
1 0
1
0
o
0
0
3 9
267
267
1
1
22
0
0
0
0
39
272
272
1 9
1 9
27
0
0
0
0
399
276
276
1
1
31
0

o
0
03
2 1
2 1
1
1
3
0
0
0
0
Ms
2
2 6
1 3
163
1
0
0
0
0
113
290
290
16
16

0
0
0
0
IS
29
29
172
172
0
0
0
0
0
23
299
299
177
177
6
0
1
0
0
12s
30
30
1 1
1 1
9
0
1
0
0
3
311
311
1
1
6
0
0
0
0
6
320
320
197
197
7
0
0
0
0
6
329
329
207
207

0
0
0
0
66
33
33
216
216
93
0
0
0
0
76
3 7
3 7
22
22

0
0
0
0
6
3 6
3 6
23
23
112
0
0
0
0
96
366
366
2 3
2 3
121
0
0
0
0
011
37
37
2 2
2 2
130
0
0
0
1(1
3
3
262
262
139
17
0
0
0
2
393
393
271
271
1 s
2
0
0
0
36
02
02
2 0
2 0
1
3
0
0
0
6
12
12
2 9
2 9
107

o

0
6
22
21
29
29
170
R
0
0
0
06
32
30
30
30
1 1
63
0
0
0
77
2
39
317
317
19
72
0
0
0
7
2

326
326
203
s
0
0
0
97
62
7
33
33
213
n
0
o
0
607
72
67
3
3
222
99
0
0
0
.17
2
76
3 3
3 3
231
109
0
0
0
627
93

363
363
2 0
s
0
0
0
1137
03
9
372
372
2 9
127
0
0
6 7
13
03
3 1
3 1
2 0
136
11
0
0
0 7
23
13
390
390
26
1 1
23
0
0
667
33
22
399
399
277
1
32
0
0
177
3
31
09
09 v
16
1
0
0
6 7
3
0
19
1 29
173
n
0
0
Os
63
9
29
27 30
1 2
w
0
0
70
673

39
36 31
1911 69
0
0

no
7s
0
0
71
3
6
9
32;
72
93
77
9
332
210
s7
0
0
73
603
6
69
6 3 1 219 96
an
0
0
7
61
9
79
73
22 s
I,,
0
0
MO
0
7
62
00
9
Is2
237 11
2 0 2
0
76
63
61
99
91
369
2
0
77s
6
623
09
00
37s
2
131
II
0
20 112 20
7ss
6
632
19
09
;s7
0
70s
66
6 1
30
19396
27 ,1 1 29
0
Ms
67
0 0
M0
2s 0
2 3 161 3
0
ss
6
6 9
0
37 11
202 170
7
0
M
7
0
29
09
669
60
6
121
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1
.
b
3
2
9
6
9
2
1
P
u
b
c

D
o
m
a
n
,

G
o
o
g
e
-
d
z
e
d

/

h
t
t
p
:
/
/
w
w
w
.
h
a
t
h
t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g
e
27
29.11-1.
Tabe II
Ta abe yean begnnng after October 1,19 1, and before anuary 1, 19
Ifadusted
nd the num-
If ad|usted
moss
In-
ber of e emp-
gross n-
nd the numbor of e emptons s
come s
tons s
.
come
s
1
2
3
s sn- 1
d tng
a
II
O
eg
2
a
1
turn s
9
or
a-o
So

a
0
3
9
:
c
an
So
1
2
3
o
9
or
more
at
ess
more
ut
es
than
sr
T
S fc
L. S
C
a.
0
.

6
7
t
t

s
east
than
east
nd ta pa
ge or ma
separate)

-S
Sp

3
nd a on
f
nd ta pa

nd a on
M
3
f
3
3 0 S
C ;
- r
Z 7.
sat
a
a
S
a

be-
The ta sha be
to
7
0
tO 0
2,32
2,3 0
33
33
301
201
201
67
7
7
0
0
o o
to
67
TOO
0
0
11
2.3 0
2.37
339
339
206
206
206
72
72
72
0
0
0
0
0

72.

11
0
11
2.37
2. 00
3
3
211
211
211
77
77
77
0
0
0
0
0
72
7 0
1
0
0
0
2. 00
2. 2
3 9
3 9
216
216
216
2
2
2
0
0
0
0
0
7 (1
77
19
0
0
0
2. 2
2. 0
3
3
221
221
221
7
7
7
0
0
0
0
0
77
S00
2
0
0
0
2. 0
2. 7
3 9
3 9
226
226
226
92
92
92
0
0
0
II
0
mo
2
29
0
0
0
2. 7
2. 00
36
36
231
231
231
97
97
97
0
0
0
II
0
12
0
3
0
0
0
2. 00
2. 2
369
369
236
236
236
102
102
102
0
0
0
0
0
S7
39
0
0
0
2. 2
2. 0
37
37
2 1
2 1
2 1
107
107
107
0
0
0
0
a
17
900

0
I)
0
2, 0
2. 7
379
379
2 6
2 6
2 6
112
112
112
0
0
0
0
a
WO
92
19
0
0
0
2. 7
2,600
3
3
2 1
2 1
2 1
117
117
117
0
0
0
0
0
92
9 0
M
0
0
0
2.600
2.62
3 9
3 9
2 6
2 6
2 6
122
122
122
0
0
0
0
0
9.11
97
9
0
0
0
2.62
2.6 0
39
39
261
261
261
127
127
127
0
0
0
0
0
97
1.000
6
0
0
0
2.6 0
2. 7
399
399
266
266
26
132
132
132
0
0
0
0
0
I.Uf|
1.02
69
0
0
0
2.67
2,700
0
0
271
271
271
137
137
137
0
0
0
0
1.0 0
7
0
0
0
2,700
2,72
09
09
276
276
276
1 2
1 2
1 2
9
0
0
0
0
1.0.
1.07
70
0
n
0
2.72
2,7 0
1
2 1
2 1
2 1
1 7
1 7
1 7
1
0
0
II
0
1.07
1.100
-
0
0
0
2.7 0
2.77
19
19
2 6
2 6
2 6
1 2
162
1 2
19
0
0
0
0
1.1011
1.12,
9
n
0
0
2,77
2, 00
2
2
291
291
291
1 7
1 7
1 7
2
0
0
0
a
1,12;
1.1 0
9
O
0
0
2. 00
2. 2
29
29
29
296
296
162
162
162
29
0
0
0
0
1.1.1
1.17
9(1
0
0
0
2. 2
2. 0
3
3
301
301
301
167
167
167
3
0
0
0
0
1.17
1.200
U
0
0
0
2. 0
2, 7
39
39
306
306
306
172
172
172
39
0
0
0
0
1.21 1
1.22
109
0
0
0
2, 7
2,900

311
311
311
177
177
177

0
0
0
0
1.22.
1.2 0
11
0
0
0
2,900
2.92
9
9
316
316
316
1 2
1 2
1 2
9
0
0
II
a
1, 2.1
1.27
11 )
0
0
0
2.92
2.9 0
6

321
321
321
1 7
1 7
1 7

0
0
0
a
1. 27
1.300
12
(1
11
0
29 0
2.97
60
9
326
326
326
192
192
192
9
0
0
0
0
I..
1.32
129
0
11
0
2.97
3.000
66
6
331
331
331
197
197
197
6
0
0
0
0
1.32
1.3 0
13
1
0
0
3.000
3.0 0
7
73
33
33
33
20.
20
20
72
0
0
0
0
1.3,1
1.37
139
6
11
0
3.0 0
3.100

3
3
3
3
21
21
21
2
0
0
I)
0
,37,
1. 00
111
11
0
0
3. 100
3. 1 0
96
9
3
36
3
22
22
22
92
0
0
0
0
1. (1
1. 2
1 9
If
0
0
3.1 0
3,200
07
0
36
36
36
23
23
23
102
0
0
0
0
1. 12.
1. 0
1
21
0
0
3.200
3.2 0
1
1
37
37
37
2
2
2
112
0
0
0
0
1. 1,1
1. 7
1 9
26
0
0
3,2 0
3.300
29
2
3
3
3
2
2
2
122
0
0
0
(
1. 7
1. 00 16
31
0
0
3.300
3.3 0
1
3
39
39
39
26
26
26
132
0
0
0
0
1. U0
1. 2 169
36
0
0
3,3 (1
3, 00
2
6
0
0
0
27
27
27
112
0
0
11
1, 2
1. 0 17
1
0
0
3. 00
3. 0
63
7
1
1
1
2
2
2
1 2
1
0
II
0
1. ,1
1, 7 179
6
1)
0
3. 0
3, 00
7
67
2
2
2
29
29
29
162
2
0
0
0
1. 7.
1.600 1
1
1)
0
3. 00
3. 0

7
3
3
3
30
30
30
171
3
0
0
0
1.601
1.62 1 9
(
0
0
3. 0
3.600
96

31.
31
31
1 1

0
0
0
1.62.
1.6 0119
61
0
0
3.600
3.6 0
607
99
9 9

32
32
32
191
, .
II
11
0
1.6,1
1.67 1199
66
(1
0
3.6 0
3.700
61
610
70 69
6
33.
33
33 201
S
0
0
0
1,67
1.700 20
71
0
0
3.700
3. 7 0
629
620
2
0
7
3
3
3 211
7
0
0
0
1.701
1.72
209
76
1)
0
3,7 0
3. 00
6 0
631
93
190

3 .1
3
3
221

0
0
0
1.72
1. 7 0121
I
0
0
3. 00
3. 0
6 1
6 1
0
01
9
36
36
36
231
9
0
0
0
1,7.1
1. 77 1219
6
0
0
3, 0
3,900
662
6 2
1
n
0
37
37
37
2 1
u
0
0
a
1.77
1. 0
22
91
11
0
3.900
3,9 0
673
662
26
22
1
31
3
3 .
2 1
11
0
0
0
.S
1, 2
229
Uf
0
0
3.9 0
.000
6
673
37
32
2
39
39
39
2 1
12
0
(1
0
1. 2 1. . 0
m
1(11
0
0
.000
,0 0
696
6 3

3
3
10
0
0
271
13

0
a
1. MO 1. 7
1.90( 2
2.-(9 u ;
II
0
,0 0
,100
707
69
9
3

1
1
1 ,2 1
11
1
0
0
.h;r
111
1
0
, 100
.1. 0
71
70
70
6

2
2
2 291
1 1
2
0
0
1.901
1.92 1.2 9
116
0
0
. 1 0
,200
729
71
1
7
6
13
3
3 301 16
3
0
0
1.92
1.9 0:2
121
0
0
.200
.2 0
7 0
72
92

7

,311
17
.
0
0
1.1.1.1
1,97 12 9
126
0
0
,2 0
.3O0
761
736
603 96

6

1
321
1
. .
0
0
1.97;
2 OOo 26
131
II
0
,300
.3 0
762
7 6
61
606
9
67
66
6 1331
19
6
0
n
2.0m
2.02 ,269
136
2
0
.3 0
, 00
773
7 7
62
617
60
7
76
17
311
211
7
0
0
2,02. 2,O O 27
111
7
, 00
. 0
7
76
636
627
61
9
1 7
3 1 21
6
0
0
2,0 012.07 :279
n
12
0
, 0
, 00
79
77 6
63
62
1 I
197
9 36 22
9
0
0
2.07 2.100 2
1 1
17
0
. 00
. C
06
7 9
6 9
6
63
11
0
0 371
2)
10
0
0
2.1002. 12. 2 0
1. 6
22: 0
. . (1
,600
17
799
670
6 9
6
22
1
1 3 1
21
11
0
0
2.12 2.1 0 29 101
27
0
, 600
,6 0
2
10
6 1
669
6
33
29
2 1391 2
12.
0
0
2,1 0 2,17 1299 16f 32 0
.6 0 .700 39
20
692
6 0
66
1
39
3 01 26
13 2
1)
2.17 :2.2( ) 30 171 37
0
,700
.7 0 1
31
703
690
67

. 0
11 27
1 12
0
2.2O0 2.22, 309 176. 2
0
.7 0
, 00 62
1
71
701
6
, 66
60
21 2 11 22
0
2.2 0 3 1 1, 7
0
. 00
, 0
73
2
72
711
69
77
71
6 31 29 16 32
0
2 0,2,27 319,1 61 2
0
, 0
,900

62
736
722
70
9
1
7 1 30 ,17 1 2

2.27 2,300 32 191 7
0
,900
.9 0
9
73
7 7
732
71
000
92
, 1,31 ; 1 1 2
0
2.300 2,32 ,329.196,62
0
,9 0
,000
906
3
7
7 3
72
611
603
9 , 61,32 19 62
0
G
e
n
e
r
a
t
e
d

f
o
r

L
n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n
v
e
r
s
t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

G
M
T

/

h
t
t
p
:
/
/
h
d
.
h
a
n
d
e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
2
1
P
u
b
c

D
o
m
a
n
,

G
o
o
g
e
-
d
z
e
d

/

h
t
t
p
:
/
/
w
w
w
.
h
a
t
h
t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g
e
29.11-1.
2
Tabe III
Ta abe years begnnng after December SI, 19 3
If ad|usted
gross n-
come s
nd the num-
ber of e emp-
tons s
If ad|usted
gross n-
come s
1
nd the number of e emptons Is
2
3
nd ta paper s sn-
ge or marred fng
separatey
nd ta payer s head
of househod
nd ta payer s sn-
ge or marred fng
separatey
nd ta paper s head
of househod
nd a ont return Is
fed
nd ta payer s sn-
ge or marred fng
separatey
nd ta paper s head
of househod
nd a ont return Is
fed
t
ut
ess
than
1
2
3
or
more
t
east
ut
ess
than

7
or
east
The ta sha
be-
The ta sha be
to
67
t)
ton
to
2,32
2,3 0
301
301
1 1
1 1
1 1
61
61
61
0
0
0 0

67. ,
700
0
11
0
2,3 0
2,37
306
30
1
1
1 6
6
6
66
0
0
0
II
0
7(1(1
72
0
0
0
2,37
2, 00
310
310
190
190
190
70
70
70
0
0
0
0
0
72
7 0
13
0
0
0
2, 00
2, 2
31
31
19
19
19
7
7
M
0
0
0
0
II
7 0
77
17
0
0
0
2, 2
2, 0
319
319
199
199
199
79
79
79
0
0
0
0
0
77
00
22
0
0
0
2, 0
2, 7
323
323
203
203
203
3
3
S3
0
0
(1
0
0
00
2
26
0
2, 7
2, 00
32
32
20
20
20

t

0
0
0
0
0
2
0
31
0
0
0
2,600
2. 2
332
332
212
212
212
92
92
92
0
0
0
0
0
. 1
7
3
0
0
0
Z 2S
2, 60
337
337
217
217
217
97
97
97
0
0
0
(1
0
7
900
0
0
0
0
2, 0
2, 7
3 1
3 1
221
221
221
101
101
101
0
0
0
II
(1
S d
2

0
0
D
2,67
2,600
3 6
3 6
22
226
226
106
106
10
0
0
0
0
0
92
9 0
9
0
0
0
2,600
2,62
3 0
3 0
230
230
230
110
no
no
0
0
0
0
0
9 11
97
63
0
0
0
2,62
2,6 0
3 6
3
23
23
23
116
11
11
0
0
0
0
0
97
1,000

(1
e
0
2,6 0
2,67
3 9
3 9
239
239
239
119
119
119
0
0
0
0
(1
1.000
1.02
62
0
0
0
2,67
2,700
36
36
2
2
2
12
12
12
0
0
0
0
1,02
1.0 0
07
0
0
0
2,700
2,72
36
36
2
2
2
12
12
12
0
0
0
0
1,0 0
1.07
71
0
0
0
2,72
2,7 0
373
373
2 3
2 3
2 3
133
133
133
13
0
0
0

1,07
1.100
76
0
0
0
2,7 0
2,77
377
37
2 7
2 7
2 7
137
137
1 7
17
0
(1
0
0
1,100
1,12
so
0
0
0
2,77
2, 00
3 2
3 2
262
262
262
1 2
1 2
1 2
22
(1
0
0
e
1,12
1. 1 0

0
0
0
2, 00
2. 2
3 6
3 6
266
266
26
1 6
1 6
1 6
26
0
0
0
0
1,1 0
1.17
9
0
0
0
2, 2
2, 60
391
391
271
271
271
1 1
1 1
161
31
(1
0
0
0
1,17
1,200

0
0
0
2, 0
2, 76
39
39
27
27
27
1 6
1
1
3
0
0
0
0
1,200
1,22
(I
0
0
0
2, 7
2.900
00
00
2 0
2 0
2 0
160
160
160
0
0
0
0

1,22
1.2 0
1(0
0
0
0
2,900
2,926
06
0
2
2
2
1
16
1

0
0
0
0
1,2 0
1, 27
1117
0
0
0
2,92
2,9 0
10
09
2 9
2 9
2 9
169
169
169
9
0
0
0
0
1,27
1,300
112
0
0
0
2,9 0
2,97
16
1
293
293
293
173
173
173
3
0
0
0
0
1,300
1.32
110
0
0
0
2,97
3.000
20
19
29
29
29
17
17
17

0
0
0
0
1,32
1,3 0
121
1
0
0
3,000
3,0 0
27
26
30
30
30
1
1
1
0
0
0
0
0
1,3 0
1.37
12
0
0
3.0 0
3,100
37
3
31
31
31
19
19
19
7
0
0
0
0
1,37
1. 00
130
n
0
0
3,100
3,1 0
7

323
323
323
203
203
203
3
0
0
0
0
1. 00
1, 2
13
1
0
0
3.1 0
3,200
7

332
332
332
212
212
212
92
0
0
0
0
1, 2
1. 0
139
19
0
0
3.200
3,2 0
67
6
3 1
3 1
3 1
221
221
221
101
0
0
0
0
1, 0
1. 7
1 3
23
(1
0
3.2 0
3,300
7
73
3 0
3 0
3 0
230
230
230
110
0
0
0
0
1, 7
1.600
1
2S
0
0
3.300
3,3 0
6
2
3 9
3 9
3 9
239
239
239
119
0
0
0
0
1, 00
1, 2
1 2
.12
0
0
3.3 0
3, 00
96
92
36
36
3
2
2
2
12
0
0
0
1, 2
1, 0
1 7
37
0
0
3, 00
3. 0
06
01
377
377
377
2 7
267
2 7
137
17
0
0
0
1, 0
1. 7
161
1
0
0
3, 0
3, 00
16
11
3
3 6
3 6
2 6
266
266
1 0
26
0
0
0
1, 7
1.600
1611
6
0
0
3, 00
3, 0
26
20
39
39
39
27
27
27
1
3
0
0
0
.fOO
1, 2
170
0
0
0
3, 0
3,600
3
30
0
0
0
2
2
2
16

0
0
0
1.62
1,6 0
17

0
0
3,600
3,6 0
39
1
13
13
293
293
293
173
3
0
0
n
1,6 0
1.67
17(1
9
0
0
3,6 0
3,700

6 9
2
23
22
302
302
302
1 2
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0
0
0
1,67
1,700
1M
6
(1
0
3,700
3,7 0
6f|

3
32
31
311
311
311
191
71
0
0
0
1,700
1.72
1
6
(1
0
3, 7 0
3, 00
76
67
3
1
0
320
320
320
200
0
0
0
0
1,72
1.7 0
193
73
(1
0
3, 00
3, 60
6
77
3
1
9
329
329
329
209
9
0
0
0
1,7 0
1, 77
IT
77
0
0
3, 0
3,900
96
6
63
60

33
33
33
21
9
0
0
0
1,77
1, 00
21
2
(1
0
3,900
3,9 0
606
96
73
70
7
3 7
3 7
3 7
2-27
107
(1
0
0
.SOO
1. 2 206
6
I
0
3,9 0
,000
616
606
3
79
76
366
3 6
3 0
236
116
0
0
0
1, 2
1, 0,211
(11
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0
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,0 0
62
61
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9

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36
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6
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0
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1, 7 21
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0
0
,0 0
.100
636
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9
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37
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100
(
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,1 0
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3 3
2 3
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,1 0
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6
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612
392
392
392
272
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109
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,2 0
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67
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10
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19
299
179
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2, 02 2 2
122
2
0
,3 0
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69
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29
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0
0
0
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2, 0 012 7
127
7
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70
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72
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3
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11
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2
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0
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3
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2,12 260 1 0 20
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73
719
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93

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67

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0
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,6 0
7
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612
602
93
0
76
73
3 3
233
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0
0
2. 1 0
2. 17 269 1 9 29
0
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,700
7
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622
612
602
90
6
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2
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0
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,7 0
76
7 7
632
621
611
00
9
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131
11
0
2,200
2. 22 27 1 3
0
,7 0
, 00
773
7 6
6 1
630
620
609
0
00
3 0 260
1 0
20
0
2,22
2. 2 0 2 3 163 3
0
, 00
, 0
7 3
766
6 1
6 0
629
19
61
09 3 9 26 1 9
29
a
2,2 0
2, 27 2 7 167 7
0
, 0
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7 3
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6 9
6
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623
1 39
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2U2
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,9 0
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6 7
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2,32
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2
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6 1
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7
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0
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.
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29
29.11-1.
S C. 10 . COMPUT TION OP T IN C S OF C RT IN OINT
R TURNS P RT I. TITL I, R NU CT OF 19 1,
If a |ont return of a husband and wfe Is fed under the provsons
of secton 1(b)(3) of the Interna Revenue Code n a case where the
such |ont return began before November 1, 19 1, and ended after Octo-
ber 31, 19 1, the amendments made by ths part nc. sees. 101, 102, and
103) and secton 131 sha be appcabe n respect of such |ont return
as f the ta abe years of both spouses covered by the |ont return
CT OF 19 1, PPRO D OCTO R 20, 19 1 .
years begnnng after October 31, 19 1, and to ta abe years begnnng
of ta abe years (other than the caendar year 19 1) begnnng before
November 1, 19 1, and endng after October 31, 19 1, see secton 131.
Par. 9. Secton 29. 00-1(6), as amended by Treasury Decson 6 7
26 CFR 29. 00-1 (b) , s further amended by strkng out the ast
two paragraphs of the secton and nsertng n eu thereof the
foowng:
The ta tabes In secton 00 appcabe wth respect to ta abe years begn-
nng after December 31, 19 7, and before November 1, 19 1, contan, n certan
nstances, doube coumns, n one of whch s shown the ta f a separate return
s fed, and n the other of whch s shown the ta f a |ont return s fed.
The ta tabes n secton 00 appcabe wth respect to ta abe years begnnng
after October 31, 19 1, contan, n certan nstances, doube coumns, n one of
whch s shown the ta f the ta payer s snge (and not the head of a house-
hod) or marred and fes a separate return, and n the other of whch s shown
the ta f the ta payer s the head of a househod, and, n other nstances, trpe
coumns, n the frst of whch s shown the ta f the ta payer s snge (and
not the head of a househod) or marred and fes a separate return, n the
second of whch s shown the ta f the ta payer s the head of a househod, and
n the thrd of whch s shown the ta f a |ont return s fed. In the case of
doube or trpe coumns, the ta sha be determned by reference to the app-
cabe coumn. Snce the computatons of ta shown n the case of a |ont return
refect the ncome-spttng method provded n secton 12(d), as added by the
Revenue ct of 19 . the ta shown n the |ont return coumn may be ower
than that shown n the separate return coumn even though the amounts of
ad|usted gross ncome and the e emptons are the same. Thus, f . a marred
man, has ad|usted gross ncome of ,92 for the caendar year 19 1 and hs
wfe has no gross ncome for such year and hs ony e emptons under secton
2 (b) are the e emptons for hmsef and spouse under secton 2 (b)(1)( ),
the ta on a |ont return under Suppement T, as shown n the second coumn
appcabe to a person wth two e emptons, s . 6 9. If shoud fe a separate
return, hs ta , as shown n the frst coumn appcabe to an ndvdua wth
two e emptons, woud be 6 .
If a |ont return of a husband and wfe s fed under the provsons of sec-
ton 1(b)(3), as added by the Revenue ct of 19 , f the husband and wfe
have dfferent ta abe years soey because of the death of ether spouse, and f
the ta abe year of the survvng spouse covered by such |ont return began
before October 1, 19 0, and ended after September 30, 19 0, began before Novem-
ber 1, 19 1, and ended after October 31, 19 1, or begns n 19 3 and ends n
19 , the ta abe year of the deceased spouse covered by the |ont return sha,
for the purpose of determnng the ta under secton 00 and ths secton n
respect of such |ont return, he deemed to have ended on the date of the cosng
of the survvng spouse s ta abe year.
For ta abe years begnnng after December 31, 19 3, the fact that the ta abe
year s a perod of ess than 12 months resutng by reason of the death of the
ta payer does not prevent the appcaton of Suppement T n the determnaton
of the ta : for such perod.
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29.11-1.
30
For treatment of ta abe years begnnng In 19 7 and endng n 19 , see sec-
ton 29.10 - . For treatment of ta abe years begnnng before October 1, 19 0,
and endtg after September 30, 19 0 (otber than the caendar year 19 0), see
secton 29.10 - . For treatment of ta abe years begnnng before November 1,
19 1, and endng after October 31, 19 1 (other than the caendar year 19 1),
see secton 29.10 -7. For treatment of ta abe years begnnng n 19 3 and
endng n 19 , see secton 29.10 - .
Par. 10. Secton 29. 01-1, as amended by Treasury Decson 66S7
26 CF 29. 01-1 , s further amended as foows:
( ) y nsertng n the headng of (6) thereof after Ta abe
years begnnng after December 31, 19 3 the foowng: and before
anuary 1, 19 6 .
( ) y nsertng n the frst sentence of (b) thereof after The
term number of surta e emptons the foowng: , whch term
s used under Suppement T for ta abe years begnnng after Decem-
ber 31,13 3, and before anuary 1,19 6, .
(C) y strkng out a of the frst paragraph of (6) after the
thrd sentence thereof.
(D) y strkng out e ampe (3) at the end of such secton and
(c) Ta abe years begnnng after December SI, 191, . The term number
of e emptons , whch, for ta abe years begnnng after December 31, 19 ,
s used nstead of the term number of surta e emptons , means the number
of e emptons aowed under secton 2 (b) for such years as credts aganst net
ncome for the purpose of the norma ta and the surta Imposed by sectons
11 and 12. One e empton s aowed for the ta payer; one e empton for hs
spouse f a |ont return s made, or If a separate return Is made by the ta payer
and hs spouse has no gross Income for the caendar year In whch the ta abe
year of the ta payer begns and s not the dependent of another ta payer for
such caendar year; and one e empton for each dependent whose gross ncome
for the caendar year n whch the ta abe year of the ta payer begns s ess
than 00 In the case of a ta abe year begnnng before anuary 1, 19 1, or Is
ess than 600 n the case of a ta abe year begnnng after December 31, 19 0.
For ta abe years begnnng after December 31, 19 7, addtona e emptons are
aowed under secton 2 (b) (1) ( ) and (O) for a ta payer or spouse who has
attaned the age of 6 years and for a bnd ta payer or bnd spouse. See sec-
ton 29.2 - . fter the number of e emptons s ascertaned, the ta under
Suppement T for the ta abe year s determned by reference to the tabe con-
taned n secton 00 appcabe to such ta abe year and by reference to the
coumn of such tabe approprate to such number of e emptons and, n certan
cases, approprate to ether the status of the ta payer (whether snge, head of
househod, or marred) or knd of return (whether separate or |ont), or both.
The ta s the amount In such coumn shown on the ne approprate to the ta -
payer s ad|usted gross ncome.
ampe. D, a marred man wth no dependents, attans the age of 6 years
on September 1, 10 1. The aggregate ad|usted gross Income of D and hs wfe
for 19 1 s , 0. D and hs wfe fe a |ont return for 19 1 and are entted to
three e emptons, one for each ta payer and one addtona e empton for D
because of hs age. Snce the ad|usted gross ncome of D and hs wfe fas wthn
the ta bracket , 00- , 0, the ta on a ont return s 19.
(Ths Treasury Decson s ssued under the authorty contaned n
sectons 62 and 3791 of the Interna Revenue Code ( 3 Stat. 32, 67;
26 U.S. C. 62, 3791).)
ohn . Dt|nap,
Commssoner of Interna Revenue.
pproved November 10,19 2.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster November 1 ,1962, : a. m.)
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31
29.12-3.
S CTION 12. SURT ON INDI IDU LS
Secton 29.12-3: Lmtaton on amount of ta . 19 2-23-139 2
( so Secton 117, Secton 29.117-3.) L T. 103
INT RN L R NU COD
The mtaton on the combned norma ta and surta provded
under secton 12(f) of the Interna Revenue Code shoud be apped
to the statutory net ncome reduced by the e cess of net ong-term
capta gan over net short-term capta oss n computng the parta
ta under secton 117(c) (2) of the Code.
dvce s requested whether the mtaton prescrbed by secton
12(f) of the Interna Revenue Code wth respect to the combned
norma ta and surta mposed on ndvduas s appcabe to statu-
tory net ncome reduced by the e cess of net ong-term capta gan
over net short-term capta oss n computng the parta ta under
secton 117(c) (2) of the Code.
Secton 12 of the Code provdes n part as foows:
(f) Lmtaton on Ta .
(1) Caendar tear 19 1. In the case of a ta abe year begnnng on
anuary 1, 19 1, and endng December 31, 19 1, the combned norma ta
and surta sha In no event e ceed 7.2 per centum of the net ncome for
the ta abe year. ,
(2) Ta abe years begnnng after October 31, 19 1, and before anu-
ary 1, 19 . In the case of ta abe years begnnng after October 31, 19 1,
and before anuarr 1, 19 , the combned norma ta and surta sha n no
event e ceed per centum of the net ncome of the ta abe year.
(3) Ta abe years begnnng after December 31, 19 3. In the case of
ta abe years begnnng after December 31, 19 3, the combned norma ta
and surta sha n no event e ceed 7 per centum of the net ncome for the
ta abe year.
(g) Cross References.

(2) Ta n case of capta gans. For rate and computaton of aterna-
tve ta n eu of norma ta and surta n the case of capta gan from the
sae or e change of capta assets hed for more than 6 months, see secton
117(c).
Secton 117(c) (2) of the Code provdes as foows:
(c) ternatve Ta es.

(2) Other ta payers. If for any ta abe year the net ong-term capta
gan of any ta payer (other than a corporaton) e ceeds the net short-term
capta oss, there sha be eved, coected, and pad, n eu of the ta
mposed by sectons 11 and 12 a ta determned as foows, f and
ony f such ta s ess than the ta mposed by such sectons:
( ) parta ta sha frst be computed upon the net ncome re-
duced by an amount equa to 0 per centum of such e cess, at the rates
and n the manner as f ths subsecton had not been enacted.
( ) There sha then be ascertaned an amount equa to 2 per
centum of the e cess of the net ong-term capta san over the net short-
term capta oss. In the case of any ta abe year begnnng after
October 31,19 1, and before November 1,19 3, there sha be ascertaned,
n eu of the amount computed under the precedng sentence, an amount
equa to 20 per centum of the e cess of the net ong-term capta gan
over the net short-term capta oss.
(C) The tota ta sha be the parta ta computed under subpara-
graph ( ) pus the amount computed under subparagraph ( ).
In Chares . Merr v. Unted States (10 Fed. Supp. 379), t s
hed that the mtaton provson of secton 12(g) of the Interna
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29.13-1.
32
Revenue Code (whch at the tme the ssue was rased corresponds to
the present secton 12(f) of the Code) s appcabe ony to the ta
mposed by sectons 11 and 12 of the Code on ordnary net ncome,
e cusve of net capta gans, n computng the parta ta prescrbed
by secton 117(c) (2) of the Code.
In vew of the foregong, t s hed that the mtaton on the com-
bned norma ta and surta provded under secton 12 of the Interna
Revenue Code shoud be apped to the statutory net ncome reduced by
the e cess of net ong-term capta gan over net short-term capta
oss n computng the parta ta under secton 117(c) (2) of the Code.
S CTION 13. NORM L T ON CORPOR TIONS
Secton 29.13-1: Ta on corporatons n genera. 19 2-26-139 9
( so Secton 1 , Secton 29.1 -1, etc.; Secton T. D. 9 0
30, Secton 0. 30-2, Reguatons 130.)
TITL 26 INT RN L R NU . C PT R L SU C PT R , P RT 29 ND
P RT 0
Reguatons 111 amended to conform to sectons 121 (a), (b),
(c), (d), and (g) (1), (2), ( ), and ( ), 122, and 123 of the
Revenue ct of 19 0, sectons 201 (a), (b), and (e) and 202 of the
cess Profts Ta ct of 19 0, and sectons 121 (a), (c), (f) (other
than the addton of secton 1 (c) of the Interna Revenue Code),
and (g), 122,12 , 12 , 311, and 612 of the Revenue ct of 19 1; and
Reguatons 130 amended to conform to sectons 121(b) and 12 of
te Revenue ct of 19 1.
Washngton 2 , D. C.
Concerned:
On October 1, 19 2, notce of proposed rue makng, regardng
amendments to conform Reguatons 111 26 CFR, part 29 to sec-
tons 121 (a), (b), (c), (d), and (g) (1), (2), ( ), and ( ),122, and
123 of the Revenue ct of 19 0, approved September 23,19 0, sectons
201 (a), (b), and (e) and 202 of the cess Profts Ta ct of 19 0,
approved anuary 3, 19 1, and sectons 121 (a), (c), (f) (other than
the addton of secton 1 (c) of the Interna Revenue Code), and
(g), 122, 12 ,12 , 311, and 612 of the Revenue ct of 19 1, approved
October 20, 19 1, and to conform Reguatons 130 26 CFR, part 0
tc sectons 121(b) and 12 of the Revenue ct of 19 1, was pubshed
n the Federa Regster (17 F. R. 692). No ob|ecton to the rues
proposed havng been receved, the amendments to Reguatons 111
and 130 set forth beow are hereby adopted.
R GUL TIONS 111 26 CFR, P RT 29
29.13-1 26 CFR 29.13-1 the foowng:
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29 13-1.
S C. 121. INCR S IN R T OF CORPOR TION INCOM
T S P RT II, TITL I, R NU CT OF 19r 0. PPRO D
S PT M R 23, 19 0 .
(a) mendment of Secton 13. Secton 13 (reatng to the norma
ta on corporatons) s hereby amended to read as foows:
S C. 13. NORM L T ON CORPOR TIONS.
(a) Defntons. For the purposes of ths chapter
(1) d|usted net ncome. The term ad|usted net ncome
means the net ncome mnus the credt provded n secton 20(a),
reatng to nterest on certan obgatons of the Unted States and
Government corporatons.
(2) NO M L T N T INCOM .
( ) Caendar Year 19 0 and Ta abe Years egnnng
fter une 30, 19 0. In the case of a ta abe year begnnng
on anuary 1, 19 0, and endng on December 31, 19 0, and n
the case of ta abe years begnnng after une 30, 19 0. the
term norma-ta net Income means the ad|usted net ncome
mnus the sum of the foowng credts:
() The credt for dvdends receved provded n sec-
ton 26(b) :
() In the case of a pubc utty, the credt for
dvdends pad on ts preferred stock provded n secton
26(h) ; and
() In the case of a western hemsphere trade corpora-
ton (as defned n secton 109), the credt provded n
secton 26().
( ) Other Ta abe Years egnnng efore uy 1, 19 0.
In the case of ta abe years (other than the caendar year
19 0, to whch subparagraph ( ) appes) begnnng before
uy 1, 19 0, the term norma-ta net Income means the
ad|usted net ncome mnus the credt for dvdends receved
provded n secton 26(b).
(b) Imposton of Ta .
(1) Ta abe years begnnng after une 30. 19 0. In the case
of ta abe years begnnng after une 30, 19 0, there sha be eved,
coected, and pad for each ta abe year upon the norma-ta net
ncome of every corporaton (e cept a corporaton sub|ect to a
ta mposed by secton 231(a), Suppement G, or Suppement )
a ta of 2 per centum of the norma-ta net ncome.
nng on anuary 1, 19 0, and endng on December 31, 19 0. there
norma-ta net ncome of every corporaton (e cept a corporaton
sub|ect to a ta mposed by secton 231(a), Suppement G. or
Suppement ) a ta of 23 per centum of the norma-ta net ncome.
(3) Other ta abe years begnnng before uy 1, 19 0. In
the case of ta abe years (other th n the caendar year 19 0, to
whch paragraph (2) appes) begnnng before uy 1, 19 0, there
sha be eved, coected, and pad for each ta abe year upon the
norma-ta net ncome of every corporaton the norma-ta net
ncome of whch s more than 2 ,000 (e cept a corporaton sub|ect
to a ta mposed by secton 1 , secton 231(a), Suppement G, or
Suppement ) whchever of the foowng ta es s the esser:
( ) Genera Rue. ta of 2 per centum of the norma-
ta net ncome; or
( ) ternatve Ta (Corporatons Wth Norma-Ta Net
Income Over 2 ,000, ut Not Over 0,000). ta of ,2 0,
pus 31 per centum of the amount of the norma-ta net ncome
n e cess of 2 ,000.
For computaton of ta n case the ta abe year ends after une
30, 19 0, see secton 10 (f).
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29.13-1.
3
(c) empt Corpobatons. For corporatons e empt from ta es
under ths chapter, see secton 101.
(d) Ta on Persona odnq Companes. For surta on persona
hodng companes, see secton 00.
(e) Improper ccumuaton of Surpus. For surta on corpora-
tons whch accumuate surpus to avod surta on sharehoders, see
secton 102.

S C. 123. FF CTI D T OF P RT II TITL I, R NU
CT OF 10 0, PPRO D S PT M R 23, 19 0 .
The amendments made by ths part nc. see. 121(a) sha be appca-
be ony wth respect to ta abe years endng after December 31, 19 9.
For treatment of ta abe years (other than the caendar year 19 0)
begnnng before uy 1, 19 0, and endng after une 30, 19 0, see
secton 131.
S C. 121. INCR S IN R T OF CORPOR TION NORM L T
P RT II, TITL I, R NU CT OF 10 1, PPRO D
OCTO R 20, 19 1 .
(a) mendment of Secton 13. Subsectons (a) and (b) of secton
13 (reatng to norma ta on corporatons) are hereby amended to
read as foows:
(a) Defntons. For the purposes of ths chapter
(1) d|usted net ncome. The term ad|usted net ncome
means the net Income mnus the credt provded n secton 20(a),
reatng to Interest on certan obgatons of the Unted States and
Government corporatons.
(2) Norma-ta net ncome. The term norma-tn net ncome
means the ad|usted net ncome mnus the sum of the foowng
credts:
( ) The credt for dvdends receved provded n secton
26(b) ;
( ) In the case of a pubc utty, the credt for dvdends
pad on ts preferred stock provded In secton 26(h) ; and
(C) In the case of a western hemsphere trade corporaton
(as defned n secton 109), the credt provded n secton 26(1).
(b) Imposton of Ta . There sha be eved, coected, and pad
for each ta abe year upon the norma-ta net ncome of every corpora-
ton (e cept a corporaton sub|ect to a ta mposed by secton 231(a),
Suppement G, or Suppement )
nng on anuary 1, 19 1, and endng on December 31, 19 1, a ta of
2 per eontum of the norma-ta net Income.
(2) Ta abe years begnnng after March 31, 19 1, and before
pr 1, 19 . In the case of ta abe years begnnng after March
31, 19 1, and before pr 1, 19 , a ta of 30 per centum of the
norma-ta net ncome.
(3) Ta abe years begnnng after March 31, 19 . In the
case of ta abe years begnnng after March 31,10 , a ta of 2 per
centum of the norma-ta net ncome.

S C. 12 . FF CTI D T P RT II, TITL I, R NU CT
OF 19 1, PPRO D OCTO R 20, 19 1 .
The amendments made by ths part nc. sec. 121(a) sha be appca-
be ony wth respect to ta abe years begnnng after March 31, 19 1,
and to ta abe years begnnng on anuary 1, 19 1, and endng on De-
cember 31, 19 1, For treatment of ta abe years (other than
the caendar year 19 1) begnnng before pr 1, 19 1, and endng after
March 31, 19 1, see secton 131.
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29.13-1.
Par. 2. Secton 29.13-1, as amended by Treasury Decson 17
C. . 19 6-2, , approved une 12,19 6 26 CF 29.13-1 , s further
amended as foows:
( ) y strkng out the perod and dash n the headng of the
secton and the frst sentence of the secton and nsertng n eu thereof
the foowng: (a) Ta abe years begnnng before uy 1, 19 0
(other than the caendar year 19 0). For ta abe years begnnng
before uy 1, 19 0 (other than the caendar year 19 0), secton 13
mposes an ncome ta on corporatons n genera the norma-ta net
ncome of whch s more than 2 ,000.
( ) y strkng out the thrd, fourth, and ffth sentences of the
second paragraph of the secton and nsertng n eu thereof the
foowng:
For ta abe years begnnng after December 31, 19 , and before uy 1, 19 0
(other than the caendar year 19 0), the norma-ta net Income s the ad|usted
net ncome mnus the credt for dvdends receved provded n secton 26(b).
Secton 26(b) appcabe to such ta abe years reates to dvdends receved from
a domestc corporaton whch s sub|ect to ta aton under chapter 1 ( percent
of dvdends receved) For ta abe years begnnng n 19 and endng n 19 6,
see secton 29.10 -2. For ta abe years begnnng before uy 1, 19 0, and
pndng after une 30, 19 0 (other than the caendar year 19 0), see secton
29.10 - .
(C) y strkng out n the ffth paragraph of the secton Ths
secton may be ustrated by the foowng e ampes: and nsertng
n eu thereof The computaton of the ta under secton 13 may be
ustrated by the foowng e ampes: .
(D) y addng at the end of the secton the foowng:
(6) Caendar year 19 0 and ta abe years begnnng after une SO, 19 0. For
a ta abe year whch s the caendar year 19 0 and for ta abe years begnnng
after une 30, 19 0, secton 13 mposes an ncome ta on corporatons generay.
very corporaton s fnbe to the ta mposed by such secton, e cept (1) corpo-
ratons e pressy e empt from a ta aton under chapter 1 (see secton 101) ;
(2) corporatons sub|ect to ta under Suppement U (see secton 21) ; (3) for-
egn corporatons not engaged n trade or busness wthn the Unted States
(see secton 231 (a)); ( ) nsurance companes (see Suppement G) ; and
( ) reguated nvestment companes (see Suppement ).
It makes no dfference that a domestc corporaton suh|ect to any ta mposed
by secton 13 may derve no ncome from sources wthn the Unted States. The
ta mposed by secton 13 for a ta abe year s computed upon the norma-ta
net ncome for the ta abe year, that s, the ad|usted net Income for such year
mnus (I) the credt for dvdends receved provded n secton 26(b) for such
year, and (), n the case of a pubc utty, the credt for dvdends pad on
ts preferred stock provded n secton 26(h) for such year, and (), n the case
of a Western emsphere trade corporaton (see secton 109), the credt provded
n secton 26() for such year. For ta abe years begnnng after une 30. 19 0,
and before pr 1,19 1, and endng after March 31,19 1 (other than the caendar
year 19 1), see secton 29.10 -6. For ta abe years begnnng before pr 1,
19 . and endng after March 31, 19 , see secton 29.10 -9. The ad|usted net
ncome of a corporaton s the net ncome as defned n secton 21 mnus the
credt provded n secton 26(a), reatng to nterest on certan obgatons of the
Unted States and ts nstrumentates.
The ta mposed by secton 13 s payabe upon the bass of returns rendered by
the corporatons abe thereto, e cept that n some cases a ta s to be pad at
the source of the ncome (see aso sectons 7, 2. 3, 1 . and 23 ). For what
the term corporaton ncudes and for the dfference between domestc and
foregn corporatons, see secton 3797(a). For treatment of the ta mposed on
foregn corporatons engaged n trade or busness wthn the Unted States, see
secton 29.231-1(6). In the case of foregn corporatons not engaged n trade
or busness wthn the Unted States, the ta s as provded n secton 231 (a).
In the case of Insurance companes, the ta s as provded n Suppement O
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29.13-1.
36
(sectons 201 to 207, Incusve). In the case of reguated Investment companes,
the ta s as provded n Suppement (sectons 361 and 362). In the case of
corporatons sub|ect to ta under Suppement U, the ta s as provded n sectons
21 to 2 , ncusve. For surta on corporatons generay, see secton 29.1 -1.
For surta on persona hodng companes, see sectons 00 to 11, Incusve. For
surta on corporatons mpropery accumuatng surpus, see secton 102. For
treatment of capta gans and osses, see secton 117. For treatment of mutua
savngs banks conductng fe nsurance busness, see secton 110.
The ta mposed by secton 13 for a ta abe year whch s the caendar year
19 0 and for a ta abe year begnnng after une 30,19 0, Is computed by appyng
to the norma-ta net ncome the rate n effect for such ta abe year. The
rates of ta under secton 13 appcabe for the respectve ta abe years are as
foows:
Percent
For ta abe years begnnng after une 30, 19 0, and before pr 1, 19 1
(other than the caendar year 19 1) 2
For ta abe years begnnng after March 31,19 1, and before pr 1,19 30
For ta abe years begnnng after March 31, 19 2
The computaton of the ta under secton 13 may be ustrated by the foowng
e ampe:
ampe. The Corporaton, a domestc corporaton (whch s nether a
pubc utty referred to In secton 26(h) nor a Western emsphere trade corpo-
raton referred to n secton 26(1)), has for the caendar year 19 1 a net Income
of 130,000, ncudng nterest on Unted States obgatons (aowabe as a credt
under secton 26(a)) n the amount of 10,000 and cash dvdends receved
(aowabe as a credt under secton 26(b) (1)) n the amount of 10,000. The
corporaton s ta under secton 13 for the caendar year 19 1 s 32,0 6.2 , com-
puted as foows:
Net Income 130,000
Less credt for nterest on Unted States obgatons 10,000
d|usted net ncome 120,000
Less credt for dvdends receved ( percent of 10,000) , 00
Norma-ta net ncome 111, 00
Ta under secton 13(b) (1) (2 percent of 111 00) 32,0 6.2
Par. 3. There s nserted mmedatey precedng secton 29.1 -1
26 CFR 29.1 -1 the foowng:
S C. 121. INCR S IN R T OF CORPOR TION INCOM T S
P RT II, TITL I, R NU CT OF 19 0, PPRO D S P-
T M R 23, 19 0 .

(b) mendment or Secton 1 (a). So much of secton 1 (reat-
ng to norma ta on speca casses of corporatons) as precedes
subsecton (b) thereof s hereby amended to read as foows:
S C. 1 . T ON SP CI L CL SS S OF CORPOR TIONS IN
C S OF T L Y RS (OT R T N T C L ND R
Y R 19 0) GINNING FOR ULY 1,19 0.
(a) Imposton op Ta n Cases op Ta abe Yeaes (Other Than
the Caendar Year 19 0) konnnq efore uy 1, 19 0. In the case
of ta abe years begnnng before uy 1,19 0 (other than a ta abe year
begnnng on anuary 1, 19 0, and endng on December 31, 19 0), there
sha be eved, coected, and pad for each ta abe year upon the norma-
ta net ncome of the foowng corporatons (n eu of the ta mposed
by secton 13(b) (3)) the ta herenafter n ths secton specfed. For
computaton of ta n case the ta abe year ends after une 30, 19 0,
see secton 10 (f).

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37
29.13-1.
CT OF 10 0, PPRO D S PT M R 23, 10 0 .
The amendments made by ths part nc. sec. 121(b) sha be app-
cabe ony wth respect to ta abe years endng after December 31, 19 9.
begnnng before uy 1, 19 0, and endng after une 30, 19 0, see secton
131.
S C. 121. INCR S I R T OF CORPOR TION NORM L T
P RT II. TITL I, R NU CT OF 19 1, PPRO D OCTO-
R 20, 19 1 .

(g) Technca mendment. Secton 1 (reatng to norma ta on
speca casses of corporatons n the case of ta abe years begnnng
before uy 1. 19 0) s hereby repeaed.
S C. 12 . FF CTI D T P RT II. TITL I, R NU CT
OF 19 1, PPRO D OCTO R 20, 19 1 .
The amendments made by ths part nc. sec. 121(g) sha be app-
cabe ony wth respect to ta abe years begnnng after March 31, 19 1,
cember 31, 1 1,
Par. . Secton 29.1 -1 26 CF 29.1 -1 s amended as foows:
( ) y strkng out the headng and the frst sentence of the secton
and nsertng n eu thereof the foowng:
Sec. 29.1 -1. Ta on Speca Corporatons for Ta abe Years egnnng
efore uy 1, 19 0 (Other Than the Caendar Year 19 0). Secton 1 and
ths secton are appcabe wth respect to ta abe years begnnng after December
31, 19 1. and before uy 1, 19 0 (other than the caendar year 19 0).
( ) y addng after the thrd sentence of the thrd paragraph
of the secton the foowng:
For ta abe years begnnng n 19 and endng n 19 6, see secton 29.10 -2. For
ta abe years begnnng before uy 1,19 0, and endng after une 30, 19 0 (other
than the caendar year 19 0). see secton 29.10S- .
Par. . There s nserted mmedatey precedng secton 29.1 -1
P RT II. TITL I, R NU CT OF 19 0, PPRO D S P-
T M R 23, 19 0 .

(c) mendment of Secton 1 . Secton 1 (reatng to surta on
corporatons) s hereby amended to read as foows:
S C. 1 . SURT ON CORPOR TIONS.
(a) Corporaton Surta Net Income. For the purposes of ths
chapter
(1) Caendar year oso and ta abe years begnnng after
une 30, 19 0. In the case of a ta abe year begnnng on anuary
1, 19 0, and endng on December 31, 19 0, and n the case of ta abe
years begnnng after une 30, 19 0. the term corporaton surta net
ncome means the net ncome mnus the sum of the foowng credts:
( ) The credt for dvdends receved provded n secton
26(b) :
( ) In the case of a pubc utty, the credt for dvdends
pad on ts preferred stock provded n secton 26(h) ;
(C) In the case of a western hemsphere trade corporaton
(as defned n secton 109), the credt provded n secton 2(3().
(2) Other ta abe years begnnng before uy 1, 19 0. In
the case of ta abe years (other than the caendar year 19 0, to
whch paragraph (1) appes) begnnng before uy 1, 19 0, the
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29.13-1.
3S
term corporaton surta net Income means the net Income mnus
the credt for dvdends receved provded n secton 26(b) and
mnus, n the case of a pubc utty, the credt for dvdends pad
on ts preferred stock provded n secton 26(h). For the purposes
of ths paragraph, dvdends receved on the preferred stock of a
pubc utty sha be dsregarded n computng the credt for dv-
dends receved provded n secton 26(b).
(b) Imposton of Ta .
(1) Ta abe years begnnng after une 30. 19 0. In the case
of ta abe years begnnng after une 30, 19 0. there sha be eved,
coected, and pad for each ta abe year upon the corporaton sur-
ta net ncome of every corporaton (e cept a corporaton sub|ect to
a ta mposed by secton 231(a), Suppement G, or Suppement )
a surta of 20 per centum of the amount of the corporaton surta
net ncome n e cess of 2 ,000.
nng on anuary 1, 19 0, and endng on December 31, 19 0. there
corporaton surta net ncome of every corporaton (e cept a cor-
poraton sub|ect to a ta mposed by secton 231(a), Suppement G,
or Suppement ) a surta determned by computng a tentatve
surta of 19 per centum of the amount of the corporaton surta net
ncome n e cess of 2 ,000, and by reducng such tentatve surta
by an amount equa to 1 per centum of the ower of ( ) the amount
of the credt provded n secton 20(a), or ( ) the amount by whch
the corporaton surta net ncome e ceeds 2 ,000.
(3) Other ta abe years begnnng before uy 1. 19 0. In
the case of ta abe years (other than the caendar year 19 0, to
whch paragraph (2) appes) begnnng before uy 1, 19 0, there
sha be eved, coected, and pad for each ta abe year upon the
corporaton surta net ncome of every corporaton (e cept a west-
ern hemsphere trade corporaton as defned n secton 109. and e -
cept a corporaton sub|ect to a ta Imposed by secton 231(a),
Suppement G. or Suppement ) a surta as foows:
( ) Surta Net Incomes Not Over 2 ,000. Upon corpora-
ton surta net Incomes not over 2 ,000, 6 per centum of the
amount thereof.
( ) Surta Net Incomes Over 2 ,000 ut Not Over
0,000. Upon corporaton surta net ncomes over 2 ,000. but
not over 0,000, 1, 00 pus 22 per centum of the amount of the
corporaton surta net ncome over 2 ,000.
(C) Surta Net Incomes Over 0,000. Upon corporaton
surta net ncomes over 0,000, 1 per centum of the corpora-
ton surta net ncome.
For computaton of ta n case the ta abe year ends after une 30,
19 0, see secton 10 (f).

CT OF 19 0, PPRO D S PT M R 23, 19 0).
The amendments made by ths part nc. sec. 121(c) sha be app-
cabe ony wth respect to ta abe years endng after December 31, 19 9.
begnnng before uy 1, 19 0, and endng after une 30, 19 0, see secton
131.
S C. 201. SURT ON CORPOR TIONS TITL II. C SS
PROFITS T CT OF 19 0, PPRO D NU RY 3, 19 1 .
(a) Rate of Ta . Secton 1 (b)(1) of the Interna Revenue Code
(reatng to rate of surta n the case of ta abe years begnnng after
une 30, 19 0) s hereby amended by strkng out 20 per centum and
nsertng n eu thereof 22 per centum .
(e) ffectve Date. The amendments made by ths secton sha be
appcabe wth respect to ta abe years begnnng on or after uy 1,
19 0.
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39
29.13-1.
P RT II, TITL I, R NU CT OF 19 1, PPRO D OC-
TO R 20, 19 1 .

(f) mendment of Secton 1 . Secton 1 (reatng to surta on
corporatons) s hereby amended to read as foows:
S C. 1 . SURT ON CORPOR TIONS.
(a) Corporaton Surta Net Income. For the purposes of ths
chapter, the term corporaton surta net ncome means the net ncome
mnus the sum of the foowng credts:
(1) The credt for dvdends receved provded n secton 26(b) ;
(2) In the case of a pubc utty, the credt for dvdends pad
on ts preferred stock provded n secton 26(h) ;
(3) In the case of a western hemsphere trade corporaton (as
defned n secton 109), the credt provded n secton 26(1).
(b) Imposton of Ta . There sha be eved, coected, and pad
for each ta abe year upon the corporaton surta net ncome of every
corporaton (e cept a corporaton sub|ect to a ta mposed by secton
231(a), Suppement G, or Suppement ) a surta of 22 per centum of
the amount of the corporaton surta net ncome n e cess of 2 ,000.

S C. 12 . FF CTI D T P RT II. TITL I, R NU CT
OF 19 1, PPRO D OCTO R 20, 19 1 .
The amendments made by ths part ne. sec. 121(f) sha be app-
cabe ony wth respect to ta abe years begnnng after March 31, 19 1,
cember 31, 19 1. For treatment of ta abe years (other than
the caendar year 19 1) begnnng before pr 1, 19 1, and endng after
March 31, 19 1, see secton 131.
S C. 612. CR DIT IN PRIOR T L Y RS FOR DI ID NDS
R C I D ON PR F RR D STOC OF PU LIC UTILITY
TITL I, R NU CT OF 19 1, PPRO D OCTO R
20. 19 1 .
In the case of ta abe years begnnng before pr 1, 19 1, any refer-
ence n secton 1 (a) or 26(b) of the Interna Revenue Code to dvdends
receved on the preferred stock of a pubc utty sha be construed as
referrng ony to dvdends receved on the preferred stock of a pubc
utty wth respect to whch the credt provded n secton 26(h) of such
Code for dvdends pad was aowabe.
Par. 6. Secton 29.1 -1, as amended by Treasury Decson 17 26
CFR 29.1 -1 , s further amended as foows:
( ) y strkng out the perod and dash n the headng of the
secton and the frst sentence of the secton and nsertng n eu thereof
the foowng: (a) Ta abe years begnnng before uy 1, 10 0
(other than the caendar year 10 0). For ta abe years begnnng
before uy 1, 19 0 (other than the caendar year 19 0), secton 1
mposes a surta upon the corporaton surta net ncome of every cor-
poraton, e cept (1) corporatons e pressy e empt from ta aton
under chapter 1 (see secton 101), (2) Western emsphere trade cor-
poratons (see secton 109), (3) foregn corporatons ta abe under
secton 231(a), ( ) nsurance companes (see Suppement G), or ( )
reguated nvestment companes (see Suppement ).
( ) y strkng out the second sentence of the second paragraph
and the second sentence of the fourth paragraph of the secton and
nsertng n eu of each the foowng:
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29.13-1.
0
For the purposes of determnng the corporaton surta net Income, dvdends
receved on the preferred stock of a pubc utty wth respect to whch the credt
for dvdends pad Is aowabe under secton 26(h) must be dsregarded In
computng the credt provded In secton 26(b) for dvdends receved.
(C) y nsertng n the frst sentence of the fourth paragraph and
n the frst sentence of the ffth paragraph of the secton after For
ta abe years begnnng after December 31, 19 , the foowng:
and before uy 1, 19 0 (other than the caendar year 19 0), .
(D) y addng at the end of the seventh paragraph of the secton
the foowng:
For treatment of ta abe years begnnng before uy 1, 19 0, and endng after
une 30. 19 0 (other than the caendar year 19 0), see secton 29.10 - .
( ) y addng at the end of the secton the foowng:
(6) Caendar year 19 0 and ta abe years begnnng after une SO, 19 0. For a
ta abe year whch s the caendar year 19 0 and for ta abe years begnnng
after une 30, 19 0, secton 1 mposes a surta upon the corporaton surta net
ncome of every corporaton, e cept (1) corporatons e pressy e empt from a
ta aton under chapter 1 (see secton 101), (2) corporatons sub|ect to ta under
Suppement U (see secton 21), (3) foregn corporatons not engaged In trade
or busness wthn the Unted States (see secton 231(a)), ( ) Insurance
companes (see Suppement G), and ( ) reguated Investment companes (see
Suppement ). For surta on persona hodng companes, see sectons 00 to
11, Incusve. For surta on corporatons Impropery accumuatng surpus, see
secton 102. For treatment of capta gans and osses, see secton 117. For
treatment of mutua savngs banks conductng fe Insurance busness, see
secton 110.
For such ta abe years, the corporaton surta net ncome of a corporaton
Is ts net ncome for the ta abe year mnus (1) the credt for dvdends receved
provded In secton 26(b) for such year, and (). In the case of a pubc utty,
the credt for dvdends pad on ts preferred stock provded n secton 26(h)
for such year, and (), In the case of a Western emsphere trade corporaton
(see secton 109), the credt provded n secton 26(1) for such year. The credt
provded n secton 26(a) for nterest receved on obgatons of the Unted
States or ts nstrumentates s not aowabe n computng corporaton sur-
ta net ncome for any ta abe year.
Secton 1 Imposes a surta ony upon so much of the corp raton surta net
Income as s In e cess of 2 ,000. For a ta abe year whch s the caendar
year 19 0, the surta on corporatons s determned by computng a tentatve
surta of 19 percent of the amount of the corporaton surta net Income n
e cess of 2 ,000, and by reducng such tentatve surta by an amount equa to
1 percent of the ower of (a) the amount of the credt provded n secton 26(a),
reatng to nterest on certan obgatons of the Unted States and Us
nstrumentates, or (6) the amount by whch the corporaton surta net ncome
e ceeds 2 ,000. For ta abe years begnnng after une 30, 19 0, the surta
on corporatons Is at the rate of 22 percent and s upon corporaton surta net
Income In e cess of 2 ,000.
For treatment of ta abe years begnnng after une 30,19 0, and before pr
1, 19 1, and endng after March 31, 19 1 (other than the caendar year 19 1),
see secton 29.10 -6. For treatment of ta abe years begnnng before pr 1,
19 , and endng after March 31, 19 , see secton 29.10 -9.
The computaton of the surta on corporatons may be ustrated by the
foowng e ampes:
ampe (1). The Corporaton, a domestc corporaton (whch Is nether
a pubc utty referred to n secton 26(h) nor a Western emsphere trade
corporaton referred to n secton 26(1)), has for the caendar year 19 0 a net
ncome of 0,000. The net ncome Incudes cash dvdends receved from a cor-
poraton (aowabe as a credt under secton 26(b) (1)) n the amount of 10,000,
and Interest on Unted States obgatons (aowabe as a credt under secton
26(a) n determnng ad|usted net ncome for purposes of corporaton norma
ta ) n the amount of 10,000. The corporaton s surta for the caendar year
19 0 s 9, 7 , computed as foows:
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Net ncome 0,000
Less credt for dvdends receved ( percent of 10,000) , 00
Corporaton surta net ncome- , . ,. . , 77, 00
Tentatve surta (10 percent of 2, 00, the e cess of 77, 00 over
2 ,000) 9,97
Less the ower of:
1 percent of 10,000 (amount of the credt provded In secton
26(a)) 100
or
1 percent of 2, 00 (the e cess of 77, 00 (corporaton surta
net ncome) over 2 ,000) 2 100
ampe (2). The facts are the same as In e ampe (1), above, e cept that
the ta abe year s the caendar year 19 1 nstead of the caendar year 19 0.
The Corporaton s surta for the caendar year 19 1 s 11, 0, computed as
foows:
Net Income . 6,000
Less credt for dvdends receved ( percent of 10,000) ; , 00
Corporaton surta net ncome 77, 00
Surta (22 percent of 2, 00, the e cess of 77, 00 over 2 ,000) 11, 0
P RT II, TITL I. R NU CT OF 19 0, PPRO D
S PT M R 23, 19 0 .

(g) Technca mendments.
(1) Secton 26(h)(2) (reatng to defnton of pubc utty)
s hereby amended by strkng out s used n ths subsecton and
secton 1 (a) and Insertng n eu thereof s used n ths sub-
secton, subsecton (b), and sectons 13 and 16 .

S C. 122. CR DITS OF CORPOR TIONS P RT II, TITL I,
R Nt CT OF 19 0, PPRO D S PT M R 23, 19 0 .
(a) Dvdends Receved Credt. Secton 26(b) (reatng to credts
aowed corporatons wth respect to dvdends receved) Is hereby
amended to read as foows:
(b) Dvdends Receved. n amount equa to the sum of
(1) In genera. per centum of the amount receved as
dvdends (other than dvdends receved n ta abe years descrbed
n paragraph (2) on the preferred stock of a pubc utty) from a
domestc corporaton whch Is sub|ect to ta aton under ths chap-
ter ; and
(2) Certan preferred stock.
( ) Ta abe Years egnnng fter une 30, 19 0. In the
case of ta abe years begnnng after une 30, 19 0, 9 per
centum of the amount receved as dvdends on the preferred
stock of a pubc utty whch s sub|ect to ta aton under ths
chapter.
( ) Caendar Year 19 0. In the case of a ta abe year
begnnng on anuary 1,19 0, and endng on December 31,19 0,
7 per centum of the amount receved as dvdends on the pre-
ferred stock of a pubc utty whch s sub|ect to ta aton
under ths chapter.
2 2100 3
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2
For the purpose of ths subsecton (but not for the purposes of computng
ad|usted net ncome), f the whoe or any part of a dvdend s receved
after ugust 31, 19 0, n property other than money, then, wth respect
to such property, the sharehoder sha not be consdered to have re-
ceved as a dvdend an amount In e cess of the ad|usted bass of such
property n the hands of the dstrbutng corporaton at the tme of ds-
trbuton ncreased n the amount of gan or decreased n the amount of
oss recognzed to the dstrbutng corporaton by reason of such dstrbu-
ton. The credt aowed under ths subsecton sha not be aowed n
respect of dvdends receved from a corporaton organzed under the
Chna Trade ct, 1922, 2 Stat. 9 (U. S. C, tte 1 , c. ), or from a
corporaton whch under secton 2 1 s ta abe ony on ts gross ncome
from sources wthn the Unted States by reason of ts recevng a arge
percentage of ts gross ncome from sources wthn a possesson of the
Unted States. In no event sha the credt aowed by ths subsecton
e ceed per centum of the ad|usted net ncome computed wthout
regard to the deducton aowed by secton 23(s).
(b) Cbemt fob Dvdends Pad on Certan Preferred Stock. The
frst sentence of secton 26(h)(1) (reatng to amount of credt for
dvdends pad on certan preferred stock) s hereby amended to read as
foows: In the case of a pubc utty, the amount of dvdends pad
durng the ta abe year on ts preferred stock, e cept that ( ) n the
case of a ta abe year begnnng on anuary 1, 19 0, and endng on
December 31, 19 0, ony an amount equa to 33 per centum of the ower
of () the amount of dvdends pad durng such ta abe year on ts
preferred stock or () the ad|usted net Income for such ta abe year
mnus the credt for dvdends receved provded n subsecton (b) for
such year, and ( ) n the case of any ta abe year begnnng after
une 30, 19 0, ony an amount equa to 31 per centum of the ower of
() the amount of dvdends pad durng such ta abe year on ts pre-
ferred stock or () the ad|usted net ncome for such ta abe year mnus
the credt for dvdends receved provded n subsecton (b) for such
year. .
(c) Western emsphere Trade Corporatons. Secton 26 (reatng
to credts of corporatons) s hereby amended by addng at the end
thereof the foowng new subsecton:
() Western emsphere Trade Corporatons. In the case of a
western hemsphere trade corporaton (as defned n secton 109)
(1) Ta abe years begnnng after une 30, 19 0. In the case
of any ta abe year begnnng after une 30, 19 0, an amount equa
to 31 per centum of ts norma-ta net ncome computed wthout
regard to the credt provded n ths subsecton.
nng on anuary 1, 19 0, and endng on December 31, 19 0, an
amount equa to 33 per centum of ts norma-ta net ncome com-
puted wthout regard to the credt provded n ths subsecton.
CT OF 19 0, PPRO D S PT M R 23, 19 0 .
The amendments made by ths part Inc. sees. 121(g)(1) and 122
sha be appcabe ony wth respect to ta abe years endng after
December 31, 19 9. For treatment of ta abe years (other than the
caendar year 19 0) begnnng before uy 1, 19 0, and endng after
une 30, 19 0, see secton 131.
S C. 202. CR DITS OF CORPOR TIONS TITL II, C SS
PROFITS T CT OF 19 0, PPRO D NU RY 3, 19 1 .
(a) Credt for Dvdends Pad on Certan Preferred Stock. Secton
26(h)(1)( ) of the Interna Revenue Code (reatng to credt for
dvdends pad on certan preferred stock) s hereby amended by strkng
out 31 per centum and nsertng n eu thereof 30 per centum .
(b) Western emsphere Trade Corporatons. Secton 26() (1) of
such Code (reatng to credt of western hemsphere trade corporatons)
s hereby amended by strkng out 31 per centum and nsertng n eu
thereof 30 per centum .
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29.13-1.
(c) ffectve Date. The amendments made by ths secton sha
be appcabe wth respect to ta abe years begnnng on or after uy
1, 19 0.
S C. 122. CR DITS OF CORPOR TIONS P RT II, TITL I,
R NU CT OF 10 1, PPRO D OCTO R 20, 19 1 .
(a) Dvdends Receved Credt. Paragraphs (1) and (2) of secton
26(b) (reatng to credt for dvdends receved) are hereby amended to
read as foows:
(1) In oenera. per centum of the amount receved as
dvdends (other than dvdends descrbed n paragraph (2) on the
preferred stock of a pubc utty) from a domestc corporaton
whch s sub|ect to ta aton under ths chapter.
(2) Certan preferred stock.
( ) Caendar Year 10 1. In the case of a ta abe year be-
gnnng on anuary 1, 19 1, and endng on December 31, 19 1,
61 per centum of the amount receved as dvdends on the pre-
ferred stock of a pubc utty whch s sub|ect to ta aton
under ths chapter and wth respect to whch the credt provded
n secton 26(h) for dvdends pad s aowabe.
( ) Ta abe Years egnnng fter March 31, 10 1, and
efore pr 1, 19 . In the case of ta abe years begnnng
after March 31, 19 1, and before pr 1, 19 , ( 2 per centum
of the amount receved as dvdends on the preferred stock of a
pubc utty whch s sub|ect to ta aton under ths chapter
and wth respect to whch the credt provded n secton 26(h)
for dvdends pad s aowabe.
(C) Ta abe Years egnnng fter March 31, 19 In the
case of ta abe years begnnng after March 31, 19 , 9 per
centum of the amount receved as dvdends on the preferred
stock of a pubc utty whch s suh|ect to ta aton under ths
chapter and wth respect to whch the credt provded n secton
26(h) for dvdends pad s aowabe.
(b) Credt for Dvdends Pad on Certan Preferred Stock. The
frst sentence of secton 26(h)(1) (reatng to amount of credt for
dvdends pad on certan preferred stock) s hereby amended to read as
foows: In the case of a pubc utty. ( ) for a ta abe year be-
gnnng on anuary 1,19 1, and endng on December 31, 19 1, an amount
equa to 2 per centum of the esser of () the amount of dvdends pad
durng the ta abe year on ts preferred stock or () the ad|usted net
ncome for such ta abe year mnus the credt for dvdends receved
provded n subsecton (b) for such year, ( ) for a ta abe year be-
gnnng after March 31, 19 1, and before pr 1. 10 . an amount equa
to 27 er centum of the eNser of () the amount of dvdends pad durng
the ta abe year on ts preferred stock or () the ad|usted net ncome
for such ta abe year mnus the credt for dvdends receved provded
n subsecton (b) for such year, and (C) for a ta abe year begnnng
after March 31, 19 , an amount equa to 30 per centum of the ower of
() the amount of dvdends pad durng the ta abe year on ts preferred
stock or () the ad|usted net ncome for such ta abe year mnus the
credt for dvdends receved provded n subsecton (b) for such year.
(c) Western emsphere Trade Corporatons. Secton 26() (re-
atng to credt of a western hemsphere trade corporaton) s hereby
(1) Western emsphere Trade Corporatons. In the case of a
western hemsphere trade corporaton (as defned n secton 109)
(1) Caendar year 19 1. In the case of a ta abe year begnnng
on anuary 1, 19 1, and endng on December 31, 19 1, an amount
equa to 2S per centum of ts norma-ta net ncome computed wth-
out regard to the credt provded n ths subsecton.
(2) Ta abe teaks begnnng after March 31, 19 1, and before
pr 1, 19 . In the case of a ta abe year begnnng after March
31, 10 1, and before pr 1, 10 , an amount equa to 27 per centum
of Its norma-ta net ncome computed wthout regard to the credt
provded n ths subsecton.
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29.13-1.)

(3) Ta abe years begnnng after March s, 19 . In the
case of a ta abe year begnnng after March 31, 19 , an amount
equa to 30 per centum of ts norma-ta net Income computed
wthout regard to the credt provded n ths subsecton.
OF 19 1, PPRO D OCTO R 20, 19 1 .
The amendments made by ths part nc. sec. 122 sha be appcabe
ony wth respect to ta abe years begnnng after March 31, 19 1, and
to ta abe years begnnng on anuary 1, 19 1, and endng on December
31, 19 1, For treatment of ta abe years (other than the
caendar year 19 1) begnnng before pr 1, 19 1, and endng after
March 31.19 1. see secton 131.
S C. 311. CR DIT FOR DI ID NDS R C I D TITL III,
R NU CT OF 19 1. PPRO D OCTO R 20, 19 1 .
(a) Dvdends From Foregn Corporaton ngaged n Trade or
usness n the Unted States. Secton 26(b) (reatng to dvdends
receved credt) s hereby amended by nsertng after paragraph (2)
the foowng new paragraph :
(3) Dvdends receved from certan foregn corporatons.
In the ease of dvdends receved from a foregn corporaton (other
than a foregn persona hodng company) whch s sub|ect to
ta aton under ths chapter, f, for an unnterrupted perod of not
ess than 36 months endng wth the cose of such foregn corpo-
raton s ta abe year n whch such dvdends are pad (or, f the
corporaton has not been n e stence for 36 months at the cose of
such ta abe year, for the perod the foregn corporaton has been
n e stence as of the cose of such ta abe year) such foregn
corporaton has been engaged n trade or busness wthn the Unted
States and has derved 0 per centum or more of ts gross ncome
from sources wthn the Unted States
( ) an amount equa to per centum of the dvdends re-
ceved out of ts earnngs or profts specfed n cause (2) of the
frst sentence of secton 11 (a). but such amount sha not e -
ceed an amount whch bears the same rato to per centum of
such dvdends receved out of such earnngs or profts as the
gross ncome of such foregn corporaton for the ta abe year
from sources wthn the Unte ; States bears to ts gross ncome
from a sources for such ta abe year, and
( ) an amount equa to per centum of the dvdends re-
ceved out of that part of ts earnngs or profts specfed n
cause (1) of the frst sentence of secton 11 (a) accumuated
after the begnnng of such unnterrupted perod, but such
amount sha not e ceed an amount whch bears the same rato
to per centum of such dvdends receved out of such accumu-
ated earnngs or profts as the gross ncome of such foregn
corporaton from sources wthn the Unted States for the por-
ton of such unnterrupted perod endng at the begnnng of
such ta abe year bears to ts gross ncome from a sources for
such porton of such unnterrupted perod.
For determnaton of earnngs or profts dstrbuted n any ta abe
year, see secton 11 (b).

(c) ffectve Date. The amendments made by ths secton sha be
appcabe ony wth respect to ta abe years begnnng after December
31, 19 0.
S C. 612. CR DIT IN PRIOR T L T RS FOR DI ID NDS
R C I D ON PR F RR D STOC OF PU LIC UTILITY
TITL I, R NU CT OF 10 1, PPRO D OCTO R 20,
19 1 .
In the case of ta abe years begnnng before pr 1, 19 1, any refer-
ence n secton 1 (a) or 26(b) of the Interna Revenue Code to dvdends
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29.13-1.
receved on the preferred stock of a pubc utty sha be construed as re-
ferrng ony to dvdends receved on the preferred stock of a pubc utty
wth respect to whch the credt provded n secton 26(h) of such Code
for dvdends pad was aowabe.
Par. . Secton 29.26- , as amended by Treasury Decson 3 C. .
19 , 1 , approved une 30, 19 26 CF 29.26- , s further
amended as foows:
( ) y amendng the frst sentence of (a) of the secton to read as
foows:
credt s provded n secton 26(b) for dvdends pad durng the ta abe year
by certan pubc utty corporatons on certan preferred stock.
( ) y nsertng n the frst sentence of the second paragraph of
(a) of the secton after For the purposes of secton 26(h) : the fo-
owng : and ths secton .
(C) y strkng out the headng and the frst sentence of (6) of
the secton and nsertng n eu thereof the foowng:
(ft) mount of credt. For ta abe years begnnng before uy 1,19 0 (other
than the caendar year 19 0), the credt provded In secton 26(h) Is an amount
equa to the dvdends pad durng the ta abe year by a pubc utty on ts
preferred stock. For a ta abe year whch s the caendar year 19 0 and for
ta abe years begnnng after une 30, 19 0, the credt provded n secton 26(h)
Is an amount equa to a specfed percent of the esser of (1) the amount of the
dvdends pad durng the ta abe year by a pubc utty on ts preferred stock
or (2) the ad|usted net Income of the pubc utty for such ta abe year mnus
the credt for dvdends receved aowahe to such pubc utty for such ta abe
year under secton 26(b). The specfed percent appcabe for the respectve
ta abe years s as foows:
Percent
For ta abe year whch s the caendar year 19 1 2
For ta abe years begnnng after March 31,19 1, and before pr 1,19 27
For ta abe years begnnng before uy 1, 19 0, and endng after une 30, 19 0
(other than the caendar year 19 0), see secton 29.10 - . For ta abe years
begnnng after une 30,19 0, and before pr 1,19 1, and endng after March 31,
19 1 (other than the caendar year 19 1), see secton 29.10 -6. For ta abe
years begnnng before pr 1, 19 , and endng after March 31, 19 , see
secton 29.10 -9.
For ta abe years begnnng after December 31, 19 3, the amount of dvdends
pad n a gven ta abe year sha not ncude any amount dstrbuted n such
year wth respect to dvdends unpad and accumuated In any ta abe year
endng pror to October 1, 19 2.
(D) y strkng out n the second sentence of the second paragraph
of (c) of the secton the approprate aocabe porton of the tota
amount of dvdends pad on such stock w be aowabe as a credt
under such secton and nsertng n eu thereof the approprate
aocabe porton of the tota amount of dvdends pad on such stock
w be consdered as havng been pad on stock whch was ssued pror
to October 1,19 2 .
( ) y strkng out the fourth and s th sentences of the second
paragraph of (c) of the secton.
Par. 9. There s nserted mmedatey after secton 29.26- , as
amended by Treasury Decson 3 26 CFR 29.26- , the foowng
new sectons:
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29.13-1.)
6
Sec. 29.26-6. Credt for Dvdends Receved. (a) Dvdend on ttock of do-
mestc corporaton . credt Is provded In secton 26(b) for dvdends receved
from a domestc corporaton whch s sub|ect to ta aton under chapter 1 of
the Interna Revenue Code. Such credt of a corporaton for a ta abe year s.
e cept as provded n paragraph (d) of ths secton, an amount equa to per-
cent of such dvdends receved by the corporaton durng the ta abe year. For
the purpose of determnng the corporaton surta net ncome for ta abe years
begnnng before uy 1, 19 0 (other than the caendar year 19 0), dvdends
receved on the preferred stock of a pubc utty wth respect to whch the
credt for dvdends pad provded n secton 26(h) s aowabe to the dstrbutng
corporaton sha be dsregarded n determnng the credt under ths paragraph.
The credt under ths paragraph for a ta abe year whch s the caendar year
19 0 and for ta abe years begnnng after une 30. 19 0, sha be determned
wthout regard to dvdends receved on the preferred stock of a pubc utty
wth respect to whch the credt for dvdends pad provded n secton 26(h)
s aowabe to the dstrbutng corporaton. For ta abe years begnnng before
uy 1, 19 0, and endng after une 30, 19 0 (other than the caendar year 19 0),
see secton 29.10 - . For credt for such dvdends receved on the preferred
stock of a pubc utty, see paragraph (6) of ths secton. If a credt for dv-
dends pad s not aowabe to the dstrbutng corporaton under secton 20(h)
wth respect to the dvdends on ts preferred stock, such dvdends receved
from a domestc pubc utty corporaton sub|ect to ta aton under chapter 1
are Incudbe n determnng the credt under ths paragraph.
(6) Dvdend on certan preferred stock of puhc uttes. For a ta abe
year whch s the caendar year 19 0 and for ta abe years begnnng after une
30,19 0, a credt s provded n secton 26(b) (2) for dvdends receved on certan
preferred stock of certan pubc utty corporatons sub|ect to ta aton under
chapter 1 of the Interna Revenue Code. Such credt s aowabe ony for
dvdends receved on the preferred stock of a pubc utty wth respect to
whch the credt for dvdends pad provded n secton 26(h) s aowabe to
the dstrbutng corporaton. The credt of a corporaton under secton 26(b) (2)
for a ta abe year s, e cept as provded n paragraph ( f) of ths secton, an
amount equa to the foowng percent of such-dvdends receved by the corpo-
raton durng the ta abe year:
Percent
For ta abe years begnnng after March 31, 19 1, and before pr 1, 19 ._ 62
begnnng after une 30. 19 0, and before |r 1, 19 1, and endng after March
31, 19 1 (other than the caendar year 19 1), see secton 29.10 -6. For ta abe
secton 29.10 -9.
(c) Dvdends on stock of certan foregn corporatons. For ta abe years
begnnng after December 31, 19 0, a credt s provded n secton 26(b)(3)
for dvdends receved from a foregn corporaton (other than a foregn persona
hodng company as denned n secton 331) whch s sub|ect to ta aton under
chapter 1 of the Interna Revenue Code f, for an unnterrupted perod of not
ess than 36 months endng wth the cose of the foregn corporaton s ta abe
year n whch the dvdends are pad, such foregn corporaton has been engaged
n trade or busness wthn the Unted States and has derved 0 percent or
more of ts gross ncome from sources wthn the Unted States. If the foregn
cor )oraton has been n e stence ess than 36 months as of the cose of the
ta abe year n whch the dvdends are pad, then the appcabe unnterrupted
perod to be taken Into consderaton n eu of the unnterrupted perod of
30 fr more months s the entre perod such corporaton has been n e stence
as of the cose of such ta abe year n unnterrupted perod whch satsf s the
twofod requrement wth respect to busness actvty and gross ncome may start
at a date ater than the (ate on whch the foregn corporaton frst commenced
an unnterrupted perod of engagng n trade or busness wthn the Unted States,
but the appcabe unnterrupted perod s n any event the ongest unnterrupted
perod whch satsfes such twofod requrement.
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7
( 29.13-1.
Tne credt of a corporaton under secton 26(b)(3) for a ta abe year s,
e cept as provded n paragrpnh (d) of ths secton, an amount equa to percent
of such dvdends
(1) receved out of the foregn corporaton s earnngs or profts for
Its ta abe year n whch the dvdends are pad (computed as of the cose
of such ta abe year wthout dmnuton by reason of any dstrbutons
made durng such ta abe year) wthout regard to the amount of the earn-
ngs and profts at the tme the dstrbuton was made, but not n e cess of
an amount whch bears the same rato to percent of such dvdends
receved as the gross ncome of the foregn corporaton for such ta abe year
from sources wthn the Unted States bears to ts gross ncome from a
sources for such year, and
(2) receved out of that part of the foregn corporaton s earnngs or
profts accumuated after February 2 , 1913, whch has accumuated after
the begnnng of the appcabe unnterrupted perod, but not n e cess of an
amount whch bears the same rato to percent of such dvdends receved
as the gross ncome of the foregn corporaton from sources wthn the
Unted States for that porton of the appcabe unnterrupted perod whch
ends at the begnnng of Its ta abe year n whch the dvdends are pad
bears to ts gross Income from a sources for the same porton of such
appcabe unnterrupted perod.
The determnaton of earnngs or profts dstrbuted n any ta abe year sha
be made n accordance wth the prncpes of secton 11 (b) of the Interna Rev-
enue Code. For the determnaton of the source of ncome, see secton 119 and
the reguatons thereunder.
The appcaton of secton 26(b)(3) may be Iustrated by the foowng
e ampes:
ampe (f). Corporaton (a foregn corporaton fng ts ncome ta
return on a caendar year bnss) whose stock s 100 ercent owned by Corpora-
ton (a domestc corporaton fng ts ncome ta return on a caendar year
bass) for the frst tme engaged In trade or busness wthn the Unted States on
anuary 1, 19 0, and qufes under secton 26(b)(3) for the entre perod
begnnng on that date and endng on December 31, 19 1. Corporaton had
accumuated earnngs or profts of 0,000 mmedatey pror to anuary 1, 19 0,
and had earnngs or profts of 10,000 for each ta abe year durng the unnter-
rupted perod from anuary 1, 10 0, through December 31, 19 1. It derved for
the perod from anuary 1, 10 0, through December 31, 19 0, 90 percent of ts
gross ncome from sources wthn the Unted States, and n 19 1 derved 9
percent of ts gross ncome from sources wthn the Unted States. Durng the
caendar years 19 0, 10 1, 19 2, 19 3, and 19 Corporaton dstrbuted n each
year 1 ,000; durng the caendar years 19 , 19 C, 19 7, 19 S, 19 9, and 19 0
t dstrbuted n each year ,000; and durng the year 19 1, 0,000. For 19 1
a dvdends receved credt of 31,02 s aowabe to Corporaton wth respect
to the 0,000 receved from Corporaton , computed as foows:
(I) ,07 whch s , 00 ( percent of the 10,000 of earnngs or profts
of the ta abe year) mutped by 9 percent (the porton of the gross ncome
of Corporaton derved durng the ta abe year from sources wthn the
Unted States), pus
() 22,9 0 whch Is 2 , 00 ( percent of 30,000 (that part of the
earnngs or profts accumuated after the begnnng of the unnterrupted
perod)) mutped by 90 percent (the porton of the gross ncome of
Corporaton derved from sources wthn the Unted States durng that
porton of the unnterrupted perod endng at the begnnng of the ta abe
year).
ampe (2). If n e ampe (1) Corporaton for the ta abe year 19 1 had
ncurred a defct of 10,000 (shown to have been ncurred pror to December
31), and f t had dstrbuted 0,000 on December 31,19 1, the dvdends receved
credt aowabe to Corporaton woud be 1 ,300, computed by mutpyng
17,000 ( percent of 20,000 earnngs or profts accumuated after the begnnng
of the unnterrupted perod) by 90 percent (the porton of the gross ncome of
Corporaton derved from Unted States sources durng that porton of the
unnterrupted perod endng at the begnnng of the ta abe year).
For ta abe years begnnng before uy 1, 19 0, and endng after une 30,
19 0 (other than the caendar year 19 0), see secton 29.10 - . For ta abe
years begnnng after une 30, 19 0. and before pr 1, 19 1, and endng after
March 31,19 1 (other than the caendar year 19 1), see secton 29.10 -6.
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29.13-1.
S
(d) Lmtatons on credt. No credt s aowabe under secton 26(b) In
respect of dvdends receved from a corporaton organzed under the Chna
Trade ct, 1922, 2 Stat. 9 (U. S. C, tte 1 , c. ), or from a corporaton whch
under secton 2 1 s ta abe ony on ts gross ncome from sources wthn the
Unted States by reason of ts recevng a arge percentage of ts gross ncome
from sources wthn a possesson of the Unted States. For ta abe years be-
gnnng before anuary 1, 19 6, the credt under secton 26(b) s mted to
percent of the corporaton s ad|usted net ncome reduced by the credt provded
n secton 26(e) for ncome sub|ect to the e cess profts ta mposed by sub-
chapter of chapter 2 of the Interna Revenue Code. For ta abe years
begnnng after December 31, 19 , and endng before anuary 1, 19 0, the
credt under secton 26(b) Is mted to percent of the corporaton s ad|usted
net ncome. For ta abe years endng after December 31, 19 9, the credt
under secton 26(b) (that s, the sum of the credts determned under para-
graphs (a), (b), and (c) of ths secton) s mted to percent of the cor-
poraton s ad|usted net ncome computed wthout regard to the deducton for
net operatng oss aowed by secton 23(s). For the purpose of secton 26(b)
and ths secton (but not for the purpose of computng ad|usted net ncome),
f the whoe or any part of a dvdend s receved after ugust 31, 19 0, n
property other than money, the amount of such dvdend n such property
sha not be consdered to be n e cess of the ad|usted bass of such property
In the hands of the dstrbutng corporaton at the tme of dstrbuton ncreased
In the amount of gan or decreased n the amount of oss recogn Z3d to the ds-
trbutng corporaton by reason of such dstrbuton. In no event sha the
amount of the dvdend n property other than money be treated as an amount
greater than the far market vaue of such property receved by the share-
hoder. For defnton of the term ad|usted net ncome , see secton 13(a) (1)
and secton 29.13-1. For ta abe years begnnng n 19 and endng n 19 6,
see secton 29.10 -2.
Sec. 29.26-7. Credt of Western emsphere Trade Corporatons. For a
ta abe year whch s the caendar year 19 0 and for ta abe years begnnng after
une 30, 19 0, a credt s provded n secton 26() for Western emsphere
trade corporatons as defned n secton 109. The credt under secton 26()
of a Western emsphere trade corporaton for a ta abe year s an amount
equa to the foowng percent of ts norma-ta net ncome for such ta abe
year computed wthout regard to such credt:
Percent
For ta abe years begnnng after .Tune 30, 19 0, and before pr 1, 19 1
For ta abe years begnnng after March 31, 19 1, and before pr 1, 19 __ 27
begnnng after une 30, 19 0, and before pr 1, 19 1, and endng after March
31, 19 1 (other than the caendar year 19 1), see secton 29.10 -6. For ta abe
secton 29.10S-9.
Par. 10. There s nserted mmedatey precedng secton 29. 1-1
2G CFR 29. 2-1 the foowng:
S C 12 . FIUIN OF CORPOR TION R TURNS FOR T L
Y RS NDING FT R M RC 31, 19 1, ND FOR
OCTO R 1, 19 1 R NU CT OF 19 1, PPRO D OCTO-
R 20, 19 1 .
In (he case of a corporaton sub|ect to a ta mposed by chapter 1
of the Interna Revenue Code for a ta abe year endng after March 31,
19 1, but pror to October 1, 19 1, such corporaton sha after the date
of the enactment of ths ct and on or before anuary 1 , 19 2, make a
return for such ta abe year wth respect to the ta mposed by chapter
1 of the Interna Revenue Code for such ta abe year. The return re-
qured by ths secton for such ta abe year sha consttute the return for
such ta abe year for a purposes of the Interna Revenue Code; and no
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29.13-L
return for such ta abe year, wth respect to any ta mposed by chapter 1
of such Code, fed on or before the date of the enactment of ths ct sha
be consdered for any of such purposes as a return for such year. The
ta es mposed by chapter 1 of such Code determned wth the amend-
ments made by ths ct) for such ta abe year sha be pad on anuary
1 , 19 2, In eu of the tme prescrbed n secton 6(a) of such Code.
payments wth respect to any ta for such ta abe year mposed
by chapter 1 of such Code under the aw In effect pror to the enactment
of ths ct, to the e tent that such payments have not been credted or
refunded, sha be deemed payments made at the tme of the fng of
the return requred by ths secton on account of the ta for such ta abe
year under chapter 1 determned wth the amendments made by ths ct.
Pah. 11. There s nserted mmedatey after secton 29. 2-3, as
added by Treasury Decson 61 C. . 19 1-2, 1 , approved October
1 ,19 1 26 CFR 29. 2-3 , the foowng new secton:
Sec. 29. 2- . Certan Corporate Returns for Ta abe Years ndng fter
March 31,19 1, and efore October 1,19 1. The return of a corporaton sub|ect
to a ta mposed by chapter 1 of the Interna Revenue Code for a ta abe yea
endng after March 31, 19 1, and before October 1, 19 1, sha be fed afte
October 20, 19 1 (the date of enactment of the Revenue ct of 19 1), and on
or before anuary 1 , 19 2. Such return sha consttute the return for such
ta abe year, and no return for such ta abe year fed on or before October 20,
19 1, sha be consdered as a return for s h ta abe year. The ta es for such
ta abe year sha be pad on or before anuary 1 , 19 2. payments of ta
(ncudng nterest, penates, and addtons to the ta ) fo- such ta abe year
made on or before October 20, 1961, sha be deemed to be payments of ta made
at the tme of the fng of the return requred by ths secton to be fed on or
before anuary 1 , 19 2, e cept to the e tent any such payments are credted
or refunded pror to the tme such return s fed. The provsons of secton
29. 6-1 (6) (3) () and (v) sha appy wth respect to the payment of such
ta by Instament payments, and for such purpose, the date prescrbed for
the payment of the ta as a snge payment Is anuary 1 , 19 2.
Pah. 12. Secton 29. 3-1, as amended by Treasury Decson 93
C. . 19 2-1, 126 , approved pr , 19 2 26 CFR 29. 3-1 , s
further amended by addng at the end of the secton the foowng:
For provsons reatng to the tme for fng certan corporaton returns for
ta abe years endng after March 31, 19 1, and before October 1, 19 1, see
secton 29. 2- .
Par. 13. Secton 29.10 -1 26 CFR 29.10 -1 s amended to read
as foows:
Sec. 29.10 -1. Ta on anks. For ta abe years begnnng before uy 1,
19 0 (other than the caendar year 19 0), a bank, as defned In secton 10 (a),
s, under secton 10 (b), sub|ect to the ta mposed by secton 13 f t has a
norma-ta net ncome of more than 2 ,000 (see secton 29.13-1), or to the ta
provded by secton 1 (b) f It has a norma-ta net ncome of not more than
2 ,000 (see secton 29.1 -1). For a ta abe year whch s the caendar year
19 0 and for ta abe years begnnng after une 30, 19 0, a bank, as defned n
secton 10 (a), s, under secton 10 (b), sub|ect to the norma ta on corpora-
tons mposed by secton 13 (see secton 29.13-1). Such a bank s aso sub|ect to
the surta mposed by secton 1 (see secton 29.1 -1). For treatment of mutua
savngs banks conductng fe nsurance busness, see secton 110.
Par. 1 . Secton 29.109-1 26 CFR 29.109-1 s amended as foows:
( ) y strkng out the frst sentence and so much of the second
sentence as precedes the coon and nsertng n eu thereof the foow-
ng: The term Western emsphere trade corporaton for the pur-
poses of chapter 1 of the Interna Revenue Code means a domestc
corporaton whch meets the foowng tests .
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29.13-1.
0
( ) y strkng out n the ast sentence of the frst paragraph of
the secton domestc corporaton s not e cuded from the e emp-
ton and nsertng n eu thereof domestc corporaton s not
e cuded from the defnton .
(C) y strkng out n the frst sentence of the second paragraph
of the secton corporaton whch cams e empton as a Western
emsphere trade corporaton and nsertng n eu thereof cor-
poraton whch cams to quafy as a Western emsphere trade
corporaton .
Par. 1 . There s nserted mmedatey precedng secton 29.119-1
S C. 311. CR DIT FOR DI ID NDS R C I D TITL III,

(b) Technca mendment. Secton 119(a)(2)( ) (reatng to
rues as to source of ncome n the case of dvdends) Is hereby amended
by nsertng before the semcoon at the end thereof the foowng:
to the e tent e ceedng the amount whch s 100/ ths of the amount
of the credt aowabe under secton 26(b) n respect of such dvdends .
be appcabe ony wth respect to ta abe years begnnng after Decem-
ber 31, 19 0.
Par. 16. Secton 29.119-3 26 CFR 29.119-3 s amended as foows:
( ) y changng the ast sentence of (b) of the secton to read as
foows:
owever, for the purpose of secton 131, reatng to credts for ta es of foregn
countres and possessons of the Unted States, dvdends from a foregn cor-
poraton sha, for ta abe years begnnng before anuary 1, 19 1, be treated
as ncome from sources wthout the Unted States; and. for ta abe years be-
gnnng after December 31, 19 0, as ncome from such sources to the e tent
e ceedng the amount whch s 100/ ths of the amount of the credt, f any,
aowabe under secton 26(b) In respect of such dvdends.
( ) y strkng out n the ast paragraph of the secton (e cept
for the purposes of secton 131) and nsertng n eu thereof the
foowng: (e cept for the purpose of secton 131 to the e tent n-
dcated n paragraph (b)) .
P RT II, TITL I, R NU CT OF 19 0, PPRO D
S PT M R 23, 19 0 .


(2) Secton 122(c) (reatng to amount of net operatng oss
deducton) s hereby amended by strkng out wthout the credt
provded n secton 26(e) and nsertng n eu thereof wthout the
credts provded n secton 26 (h) and () .

CT OF 19 0, PPRO D S PT M R 23, 19 0 .
The amendments made by ths part nc. sec. 121(g) (2) sha be ap-
pcabe ony wth respect to ta abe years endng after December 31,
19 9.
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29.13-1.
Par. 1 . Secton 29.122- 26 CFR 29.122- s amended by strkng
out at the end of the frst sentence the credt provded n secton 26(e)
for ncome sub|ect to the e cess profts ta sna not be aowed and
by nsertng n eu thereof the foowng: the credts provded n
secton 26(e) for ncome sub|ect to the e cess profts ta , secton 26(h)
for dvdends pad by a pubc utty on ts preferred stock, and
secton 26 () n the case of a Western emsphere trade corporaton,
sha not be aowed .
P RT II, TITL I, R NU CT OP 19 0, PPRO D
S PT M R 23, 1930 .


( ) ffectve wth respect to ta abe years begnnng after une
SO, 19 0, and wth respect to ta abe years begnnng on anuary 1,
19 0, and endng on December 31, 19 0, secton 20 (a) (1) (reatng
to nsurance companes other than fe or mutua) Is hereby amended
by strkng out at the rates specfed n secton 13 or secton 1 (b)
and n secton 1 (b) and nsertng n eu thereof computed as
provded n secton 13(b) and n secton 1 (b) .

Par. 20. Secton 29.20 -1, as amended by Treasury Decson 369
C. . 19 , 333 , approved May 11, 19 26 CFR 29.20 -1 , s
further amended by strkng out the ast paragraph and nsertng n
eu thereof the foowng:
Insurance companes are sub|ect to both norma ta and surta . For ta abe
years begnnng before uy 1, 19 0 (other than the caendar year 19 0), the nor-
ma ta sha be at the rate specfed n secton 13(b) for such years f the com-
pany has a norma-ta net ncome of more than 2 ,000, or at the rate specfed n
secton 1 (b) for such years f t has a norma-ta net ncome of not more than
2 ,000. For a ta abe year whch s the caendar year 19 0 and for ta abe
years begnnng after une 30, 19 0, the norma ta sha be computed as pro-
vded n secton 13(b) for such years. For what consttutes norma-ta net n-
come for the respectve ta abe years, see secton 29.13-1. For ta abe years
begnnng before uy 1,19 0 (other than the caendar year 19 0), the surta sha
be at the rate specfed n secton 1 (b) for such years. For a ta abe year whch
Is the caendar year 19 0 and for ta abe years begnnng after une 30, 19 0, the
surta sha be computed as provded n secton 1 (b) for such years. For what
consttutes corporaton surta net ncome for the respectve ta abe years, see
secton 29.1 -1. For aternatve ta where the net ong-term capta gan for
any ta abe year e ceeds the net short-term capta oss, see secton 117(e) and
the reguatons thereunder.
P RT II, TITL I, R NU CT OF 19 0, PPRO D S P-
T M R 23, 19 0 .

(d) Mutua Insurance Companes Other Than Lfe or Marne,
(1) Secton 207(a)(1) (reatng to norma ta and surta on
mutua nsurance companes, other than fe or marne) s hereby
amended by strkng out subparagraphs ( ) and ( ) and nsertng
n eu thereof the foowng:
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29.13-1.1
2
case of ta abe years begnnng after une 30,19 0.
( Norma ta . norma ta on the norma-ta net
Income, computed at the rate provded n secton 13(b) (1),
or 0 per centum of the amount by whch the norma-ta net
ncome e ceeds 3,000, whchever s the esser; pus
() Surta . surta on the corporaton surta net
ncome, computed ns provded n secton 1 (b) (1).
( ) Caendar Year 19 0. In the case of a ta abe year
begnnng on anuary 1,19 0, and endng on December 31,19 0
() Norma ta . norma ta on the norma-ta net
ncome, computed at the rate provded n secton 13(b) (2),
or 6 per centum of the amount by whch the norma-ta net
ncome e ceeds 3,000, whchever s the esser; pus
Income, computed as provded n secton 1 (b) (2).
nternsurers or recproca underwrters) s hereby amended by strk-
ng out subparagraphs ( ) and ( ) and nsertng n eu thereof
the foowng:
case of ta abe years begnnng after une 30,19 0
(I) Norma Ta . norma ta on the norma-ta net
or 0 per centum of the amount by whc the norma-ta
net ncome e ceeds 0,000, whchever s the esser; pus
ncome, computed as provded n secton 1 (b) (1), or 30 per
centum of the amount by whch the corporaton surta net
ncome e ceeds 0,000, whchever s the esser.
( ) Caendar Year 19 0. In the case of a ta abe year be-
gnnng on anuary 1, 19 0, and endng on December 31, 19 0
(1) Norma ta . norma ta on the norma-ta net
or 6 per centum of the amount by whch the norma-ta
net ncome e ceeds 0,000, whchever s the esser; pus
ncome, n an amount computed as provded n secton
1 (b) (2), or n an amount equa to one and one-haf tmes
the surta whch woud be computed under secton 1 (b) (2)
f the corporaton surta net ncome were reduced by 2 ,000,
whchever amount s the esser.
(3) The amendments made by ths subsecton sha appy ony
wt respect to ta abe years begnnng after une 30, 19 0, and to
ta abe years begnnng on anuary 1,19 0, and endng on December
31, 19 0.

S C. 201. SURT ON CORPOR TIONS TITL II. C SS PROF-
ITS T CT OF 19 0, PPRO D NU RY 3,19 1 ,

(b) Mutua Insurance Compantfs Other Than Lfe or Marne.
Secton 207(a) (3) ( ) () of such Code (reatng to surta on nter-
nsurers or recproca underwrters) s hereby amended by strkng out
30 per centum and nsertng n eu thereof 33 per centum .

(e) ffectve Datk. The amendments made by ths secton sha be
appcabe wth respect to ta abe years begnnng on or after uy 1,19 0.
P RT II. TITL I, R NU CT OF 19 1, PPRO D
OCTO R 20, 19 1 .

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3
29.13-1.
(c) Mutua Insurance Companes Othek Than Lfe oh Marne.
mntua Insurance companes, other than fe or marne) s hereby
amended by strkng out subparagraphs ( ) and ( ) and nsertng
Id eu thereof the foowng:
( ) Ta abe Years egnnng fter December 31, 19 0, and
efore pr 1, 19 1. In the case of ta abe years begnnng
after December 31, 19 0, and before pr 1, 19 1, and endng
after March 31, 19 1
(1) Norma ta . norma ta of 2 per centum of
the norma-ta net Income, or 7 per centum of the amount
by whch the norma-ta net Income e ceeds 3,000, whch-
ever s the esser; pus
(II) Surta . surta of 22 per centum of the corpo-
raton surta net Income In e cess of 2 ,000.
after March 31,19 1, and before pr 1,19
(1) Norma ta . norma ta of 30 per centum of the
norma-ta net ncome, or 60 per centum of the amount by
whch the norma-ta net ncome e ceeds 3,000, whch-
ever s the esser: pus
(11) Surta . surta of 22 per centum of the corpora-
ton surta net Income n e cess of 2 ,000.
(C) Ta abe Years egnnng fter March 31, 19 . In the
case of a ta abe year begnnng after Mnrch 31, 19
(I) Norma ta . norma ta of 2 per centum of the
norma-ta net Income, or 0 per centum of the amount by
whch the norma-ta net Income e ceeds 3,000, whchever
Is the esser; pus
() Surta . surta of 22 per centum of the corpo-
raton surta net ncome n e cess of 2 ,000.
(2) Secton 207(a)(3) (reatng to a norma ta nnd surta on
Internsurers and recproca underwrters) Is hereby amended by
strkng out subparagraphs ( ) and ( ) and nsertng In eu
thereof the foowng:
( ) Ta abe Years egnnng fter December 31, 19 0, and
before pr 1, 19 1. In the case of ta abe years begnnng
after December 31. 19 0, and before pr 1, 19 1, and endng
after March 31, 19 1
(I) Norma ta . norma ta of 2 per centum of
the norma-ta net Income, or 7 per centum of the amount
by whch the norma-ta net Income e ceeds 0,000, whch-
() Surta . surta of 22 per centum of the corpora-
ton surta net ncome n e cess of 2 ,000, or 33 per centum
of the amount by whch the corporaton surta net Income
e ceeds 0,000, whchever s the esser.
after March 31, 19 1, and before pr 1, 19
(I) Norma ta . norma ta of 30 per centum of
the norma-ta net ncome, or 60 per centum of the amount
by whch the norma-ta net ncome e ceeds 0,000, whch-
() Surta . surta of 22 per centum of the corpora-
of the amount by whch the corporaton surta net ncome
(C) Ta abe Years egnnng fter March 31, 19 . In
the case of a ta abe year begnnng after March 31, 19
(1) Norma ta . norma ta of 2 per centum of
the norma-ta net ncome, or 0 percentum of the amount
by whch the norma-ta net ncome e ceeds 0,000, whch-
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S 29.13-1.

( ) Surta . surta of 22 per centum of the corpora-
of the amount by whch the corporaton surta net ncome

OF 19 1, PPRO D OCTO R 20, 19 1 .
The amendments made by ths part nc. sec. 121(c) sha be appca-
cember 31, 19 1, e cept that the amendments made to sectons 207
of the Interna Revenue Code sha be appcabe to ta abe
years begnnng after December 31, 19 0, and endng after March 31,
19 1. In the case of an nsurance company sub|ect to the ta mposed
by secton 207, the provsons of secton 26(b) of such code appcabe
to the caendar year 19 1 sha be appcabe to a ta abe year begnnng
after December 31, 19 0, and before pr 1, 19 1, and endng after
March 31,19 1.
C. . 19 -1, , approved February 2, 19 26 C R 29.207-1 , s
furter amended as foows:
( ) y addng after the thrd sentence n the second paragraph
of (a) of the secton the foowng:
Wth respect to the credt for dvdends receved provded n secton 26(b) for
ta abe years begnnng after December 31, 19 0, and before pr 1, 19 1, and
endng after March 31, 19 1, the provsons of secton 26(b) appcabe to the
caendar year 19 1 sha, n the case of such companes, be appcabe to such
ta abe years.
( ) y nsertng n the headng of (c) of the secton after Ta abe
years begnnng after December 31,19 6 the foowng: , and before
uy 1,19 0 (other than the caendar year 10o0) .
(C) y nsertng n the frst sentence of (c) of the secton after
For any ta abe year begnnng after December 31, 19 , the fo-
owng: and before uy 1, 19 0 (other than the caendar year
19 0), .
(D) y addng at the end of the secton the foowng:
(d) Caendar pear 19 0; ta abe years begnnng after une 30, 19 0, and
before anuary 1, 19 1; and ta abe years begnnng after December 31, 19 0,
and endng before pr 1, 19 1. For a ta abe year whch s the caendar year
19 0, for any ta abe year begnnng after une 30, 19 0, and before anuary
1, 19 1. and for any ta abe year begnnng after December 31. 19 0, and endng
before pr 1, 19 1, the ta under secton 207(a)(1) and 207(a)(3), e cept
as herenafter ndcated, s computed upon norma-ta net ncome at the rate
provded n secton 13(b) appcabe to such year and upon corporaton surta
net ncome as provded n secton 1 (b) appcabe to such year. The ta under
secton 207(a)(2), e cept as herenafter ndcated, s 1 percent of the gross
amount of ncome from nterest, dvdends, rents, and net premums, mnus
dvdends to pocyhoders ;nd mnus whoy ta -e empt nterest.
Under secton 207(a)(1) companes wth norma-ta net ncomes of over
. ,000 and not over 0,000 pay a norma ta . at a specfed rate, on that porton
of the norma-ta net ncome n e cess of 3,000. The rates appcabe for the
respectve ta abe years n computng the norma ta of such companes are as
foows:
Percent
For ta abe years begnnng after une : 0.19 0. and before anuary 1,19 1 0
For ta abe years begnnng after December 31, 19 0, and endng before
pr 1, 19 1 0
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29.13-1.
Under secton 207(a) (2) companes wth gross amounts of ncome from nterest,
dvdends, rents, and net premums, mnus dvdends to pocyhoders and mnus
whoy ta -e empt nterest, of over 7 ,000 and not over 1 0,000 pay a ta
equa to 2 percent of that porton n e cess of 7 ,000. Under secton 207(a) (3)
nternsurers and recproca underwrters wth norma-ta net ncomes of over
0,000 and not over 100,000 pay a norma ta , at a specfed rate, on that porton
respectve ta abe years n computng the norma ta of such nternsurers and
recproca underwrters are as foows:
Percent
For ta abe years begnnng after une 30,10 0, and before anuary 1,19 1 0
For ta abe years begnnng after December 31, 19 0, and endng before
pr 1, 19 1 0
For a ta abe year whch Is the caendar year 19 0, the surta under secton
207(a) (3) of an nternsurer or recproca underwrter wth corporaton surta
net ncome of over 0,000 and not over 100,000 s an amount equa to one and
one-haf tmes the surta whch woud be computed under secton 1 (b)(2)
appcabe to such ta abe year f the corporaton surta net ncome of such
nternsurer or recproca underwrter were reduced by 2 ,000. If, for a ta abe
year whch s the caendar year 19 0, an nternsurer or recproca underwrter
has any partay ta -e empt nterest for whch a credt s provded n secton
26(a) and has corporaton surta net ncome of over 100,000 and not over
102,777.72, the surta under secton 207(a) (3) of such nternsurer or recpro-
ca underwrter s the esser of (1) the amount of the surta computed as pro-
vded n secton 1 (b)(2) appcabe to such ta abe year, or (2) an amount
equa to one and one-haf tmes the surta whch woud be computed under
secton 1 (b)(2) appcabe to such ta abe year f the corporaton surta net
ncome were reduced by 2 ,000. For a ta abe year begnnng after une 30,
19 0, and before anuary 1, 19 1, or a ta abe year begnnng after December 31,
19 0, and endng before pr 1, 19 1, the surta under secton 207(a) (3) of an
nternsurer or recproca underwrter wth corporaton surta net ncome of
over 0,000 and not over 100,000 s an amount equa to 33 percent of that por-
ton of ts corporaton surta net ncome n e cess of 0,000.
Secton 207(a) ( ) provdes for an ad|ustment of the amount computed under
secton 207(a) (1), secton 207(a) (2) ( ), and secton 207(a) (3; where the gross
amount receved durng the ta abe year from nterest, dvdends, rents, and
premums (ncudng deposts and assessments) s over 7 ,000 and ess than
12 ,000. The ad|ustment reduces the ta otherwse computed under those sec-
tons to an amount whch bears the same proporton to such ta as the e cess
over 7 ,000 bears to 0,000.
The appcaton of secton 207(a) (1), (2), (3), and ( ) may be Iustrated
by the foowng e ampes:
ampe (1). The Company, a mutua casuaty nsurance company, for
the caendar year 19 0 has corporaton surta net ncome of 3 ,000 and, due to
partay ta -e empt nterest of ,000, norma-ta net ncome of 30,000. The
gross amount receved from nterest, dvdends, rents, and premums (ncudng
deposts and assessments) s 120,000, and the gross amount of ncome from
nterest, dvdends, rents, and net premums, mnus dvdends to pocyhoders
and whoy ta -e empt nterest, s 100,000. Under secton 207(a)(1), wth-
out appcaton of secton 207(a)( ), the norma ta woud be 23 percent of
30,000, or 6,900, snce ths s ess than 12, 20, 6 percent of 27,000 (e cess of
norma-ta net ncome of 30,000 over 3,000) ; and the surta computed as pro-
vded n secton 1 (b)(2) woud be 1, 0, tentatve surta of 19 percent of
10,000 (e cess of corporaton surta net Income of 3 ,000 over 2 ,000), or
1,900. reduced by 0, 1 percent of ,000 (the ower of ,000, amount of
partay ta -e empt nterest, or 10,000. e cess of corporaton surta net ncome
of 3 ,000 over 2 ,000). The combned ta of ,7 0 ( 6,900 pus 1, 0) woud
then be reduced by appyng secton 207(a)( ), snce the frross recepts are
between 7 ,000 and 12 ,000. The ta under secton 207(a)(1), as thus
ad|usted, woud be 90 percent of ,7 0, or 7, 7 , snce -1 ,000 (e cess of
120,000 over 7 ,000) s 90 percent of 0,000. Under secton 207(a)(2)( ),
wthout reference to secton 207(a) ( ), the ta s 2 percent of 2 ,000 (e cess of
100,000 over 7 ,000), or 00, snce ths s ess than 1,000,1 percent of 100,000.
ppyng secton 207(a) ( ) reduces ths to 0, or 90 percent of 00. Snce
7, 7 , the ta under secton 207(a)(1), as ad|usted, e ceeds 0, the ta
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29.13-1.1
6
under secton 207(a)(2). as ad|usted, the ta under secton 207(a)(1), as
ad|usted, s appcabe. The Company woud accordngy pay a combned
norma ta and surta of 7, 7 .
ampe (2). The Y change, an Internsurer for the caendar year 10 0
has corporaton surta net ncome of 100,000 and, due to partay ta -e empt
Interest of 20,000. norma-ta net ncome of 0,000. The gross amount re-
ceved from nterest, dvdends, rents, and premums (ncudng deposts and
assessments) s 3,000,000. Under secton 207(a)(3) the norma ta of the
Y change for the ta abe year s 6 percent of 30,000 (e cess of norma-
ta net ncome of 0,000 over 0,000), or 13, 00, snce ths Is ess than 1 , 00.
20 percent of 0,000. The surta under secton 207(a) (3) of the Y change
for the ta abe year s 13,9 0, one and one-haf tmes 9,300, the surta whch
woud be computed under secton 1 (b) (2) f the corporaton surta net ncome
were reduced by 2 ,000 ( 9, 00 (19 percent of 0,000, e cess of 7 ,000. cor-
poraton surta net ncome of 100,000 reduced by 2 ,000, over 2 ,000)
reduced by 200 (1 percent of 20,000, the ower of 20,000, amount of partay
ta -e empt nterest, or 0,000, e cess of 7 ,000, corporaton surta net ncome
of 100,000 reduced by 2 ,000, over 2 ,000)), snce ths s ess than the surta
on corporaton surta net ncome of 100,000 computed as provded n secton
1 (b)(2). The surta computed as provded n secton 1 (b)(2) woud be
1 ,0 0, tentatve surta of 1 ,2 0 (19 percent of 7 ,000, e cess of corporaton
surta net ncome of 100,000 over 2 ,000) reduced by 200 (1 percent of
20,000, the ower of 20,000, amount of partay ta -e empt nterest, or
7 ,000. e cess of corporaton surta net Income over 2 ,000). Snce the Y
change s not sub|ect to the ta mposed by secton 207(a)(2) and s not
entted to the ad|ustment provded n secton 207(a)( ), as ts gross recepts
are not ess than 12 ,000, ts tota ta under secton 207(a) s 27,7 0 ( 13,S00
pus 13,9 0).
ampe (S). The Z change, an nternsurer, for the caendar year 19 0
nterest of 2,700, norma-ta net ncome of 0,000. The gross amount re-
ceved from nterest, dvdends, rents, and premums (ncudng deposts and
assessments) s 2, 00,000. The Z change s not sub|ect to norma ta
under secton 207(a) (3) for the ta abe year as ts norma-ta net ncome does
not e ceed 0,000. The surta under secton 207(a)(3) of the Z change
for the ta abe year s 1 ,229, one and one-haf tmes 9, 6, the surta whch
woud be computed under secton 1 (b) (2) f the corporaton surta net ncome
were reduced by 2 ,000 ( 10,013 (19 percent of 2,700, e cess of 77,700. cor-
poraton surta net ncome of 102,700 reduced by 2 ,000, over 2 ,000) reduced
by 27 (1 percent of 2,700. the ower of 2,700, amount of partay ta -
e empt nterest, or 2,700, e cess of 77,700, corporaton surta net ncome of
102,700 reduced by 2 ,000, over 2 ,000)), snce ths s ess than the surta
on corporaton surta net ncome of 102,700 computed as provded n secton
1 (b)(2). The surta computed as provded n secton 1 (b)(2) woud be
1 ,236. tentatve surta of 1 ,763 (19 percent of 77,700, e cess of corporaton
surta net ncome of 102,700 over 2 ,000) reduced by 27 (1 percent of
2,700, the ower ot 2,700, amount of partay ta -e empt nterest, or 77,700.
e cess of corporaton surta net ncome over 2 ,000). Snce the Z change
has no norma ta , s not sub|ect to the ta mposed by secton 207(a) (2), and
Is not entted to the ad|ustment provded n secton 207(a)( ), as ts gross
recepts are not ess than 12 ,000, ts tota ta under secton 207(a) Is 1 ,229.
ampe ( ). If n the above e ampe the partay ta -e empt nterest were
3, 00. the surta under secton 207(a) (3) of the Z change for the caendar
year 19 0, computed as provded n secton 1 (b) (2), woud be 1 ,22 (tentatve
surta of 1 ,763, 19 percent of 77,700, reduced by 3 , 1 percent of 3, 00),
snce t s ess than 1 ,229, one and one-haf tmes 9, 6, the surta whch
woud be computed under secton 1 (b) (2) f the corporaton surta net Income
were reduced by 2 ,000.
(e) Ta abe years begnnng after December 31, 19 0, and endng after March
SI, 19 1. For any ta abe year begnnng after December 31, 19 0, and endng
after March 31. 19 1, the norma ta under secton 207(a)(1) and 207(a)(3),
e cept as herenafter ndcated, s computed upon norma-ta net ncome at the
foowng rates:
Percent
For ta abe years begnnng after December 31, 19 0, and before pr 1,
19 1, and endng after March 31, 19 1 2
For ta abe years begnnng after March 31. 19 1, and before pr 1, 19 30
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7
29.13-1.
For any ta abe year begnnng after December 31, 19 0, and endng after
March 31, 19 1, the surta under secton 207(a)(1) and 207(a)(3), e cept as
herenafter ndcated, s computed on that porton of the corporaton surta net
ncome n e cess of 2 ,000 at the rate of 22 percent. The ta under secton
207(a)(2), e cept as herenafter ndcated, s 1 percent of the gross amount
of ncome from nterest, dvdends, rents, and net premums, mnus dvdends
to pocyhoders and mnus whoy ta -e empt Interest.
Under secton 207(a)(1) companes wth norma-ta net ncomes of over
3,000 and not over 0,000 pay a norma ta . at a specfed rate, on that porton
respectve ta abe years In computng the norma ta of such companes are
as foows:
Percent
For ta abe years begnnng after December 31, 19 0, and before pr
1,19 1. and endng after March 31, 19 1 7
For t nbe years begnnng after March 31,19 1, and before pr 1,19 __ 60
Under secton 207(a) (2) companes wth gross amounts of ncome from nterest,
dvdends, rents, and net premums, mnus dvdends to pocyhoders and mnus
whoy ta -e empt Interest, of over 7 ,000 and not over 1 0,000 pay a ta
equa to 2 percent of that porton n e cess of 7 ,000. Under secton 207(a) (3)
nternsurera and recproca underwrters wth norma-ta net ncomes of over
0,000 and not over 100,000 pay a norma ta computed on that porton of the
norma-ta net Income n e cess of 0,000 at the foowng rates:
Percent
For ta abe years begnnng after December 31, 19 0, and before pr 1,
1 1, and endng after March 31. 19 1 7
For t nbe years begnnng after March 31.19 1. and before pr 1,19 60
For ta abe years begnnng after March 31. 19 0
Under secton 207(a)(3) Internsurers and recproca underwrters wth corpo-
raton surta net ncomes of over 0,000 and not over 100,000 pay a surta , at
the rate of 33 percent, on that porton of the corporaton surta net ncome n
e cess of 0,000.
Secton 207(a) ( ) provdes for an ad|ustment of the amount computed under
secton 207(a)(1), secton 207(a)(2)( ), and secton 207(a)(3) where the
gross amount receved durng the ta abe year from nterest, dvdends, rents,
and premums (ncudng deposts and assessments) s over 7 ,000 and ess
than 12 ,000. The ad|ustment reduces the ta otherwse computed under those
sectons to an amount whch bears the same proporton to such ta as the
e cess over 7 ,000 bears to 0,000.
The appcaton of secton 207(a) (1), (2), (3), and ( ) may be ustrated
by the foowng e ampes:
ampe (1). The W Company, a mutua casuaty nsurance company, for
the caendar year 19 2 has corporaton surta net ncome of , 00 and, due
to partay ta -e empt nterest of 00, norma-ta net ncome of ,700. The
gross amount of ncome of the W Company from nterest, dvdends, rents, and
net premums, mnus dvdends to pocyhoders and whoy ta -e empt nterest,
s 1 0,000. Its norma ta under secton 207(a)(1) for the caendar year
19 2 s 60 percent of 1,700 ( ,700- 3,000), or 1,020, snce ts norma-ta
net ncome s not over 6,000. It s not abe for surta for the caendar year
19 2 as ts surta net ncome does not e ceed 2 ,000. It has no surta and,
therefore, ts tota ta under secton 207(a)(1) s the norma ta of 1,020.
The ta under secton 207(a)(2) s 2 percent of 7 ,000 ( 1 0.000- 7 ,000), or
1, 00. Snce the ta under secton 207(a)(2) e ceeds the ta under secton
207(a)(1). the ta under secton 207(a) s 1, 00, namey, that mposed by
secton 207(a) (2).
ampe (2). If n the above e ampe the norma-ta net ncome were not
over 3,000. the corporaton surta net ncome were not over 2 ,000, the gross
amount receved from nterest, dvdends, rents, and premums (ncudng de-
posts and assessments) were 90.0: ). and the gross amount of ncome from
nterest, dvdends, rents, and net premums, mnus dvdends to pocyhoders
and whoy ta -e empt nterest, were 70,000. the W Company woud be requred
to fe an ncome ta return but due to secton 207(a) no ncome ta woud be
mposed.
2 2160 6
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29.13-1.
S
ampe (3). The Compnny, a mutua casuaty nsurance company, for
the caendar year 19 2 has corporaton surta net ncome of 2 ,000 and, due to
partay ta -e empt nterest of ,000, norma-ta net ncome of 23,000. The
gross amount of ncome of the Company from Interest, dvdends, rents, and
net premums, mnus dvdends to pocyhoders and whoy ta -e empt nterest,
s 1,200,000. Under secton 207(a)(1) ts norma ta for the caendar year
10 2 s 30 percent of 23,000, or 0,900, and the surta s 22 percent of 3,000
( 2 ,000- 2 ,000), or 660. The combned ta under secton 207(a) (1) s 7, 60
( 6,900 pus 600). The ta under secton 207(a) (2) s 1 percent of 1,200,000,
or 12,000. Snce the ta under secton 207(a) (2) e ceeds the ta under secton
207(a)(1), the ta under secton 207(a) s 12,000, namey, that mposed by
secton 207(a) (2).
ampe (). The Y Company, a mutua re nsurance compnny sub|ect to
the ta Imposed by secton 207, for the caendnr year 19 2 has corporaton
surta net ncome of 3 ,000 and, due to partay ta -e empt nterest of ,000
norma-ta net ncome of 30,000. The gross amount receved from nterest,
dvdends, rents, and premums (ncudng deposts and assessments) s 120,000,
and the gross amount of ncome from nterest, dvdends, rents, and net premums,
mnus dvdends to pocyhoders and whoy ta -e empt nterest, s 100,000.
Under secton 207(a)(1), wthout appcaton of secton 207(a)( ), the norma
ta woud be 30 percent of 30,000, or 9,000, snce ths Is ess than 16 00.
60 percent of 27,000 (e cess of norma-ta net ncome of 30,000 over 3,000) ;
and the surta woud be 22 percent of 10,000 (e cess of corporaton surta net
ncome of 3 ,000 over 2 ,000), or 2,200. The combned ta of 11,200 ( 9,000
pus 2,200) woud then be reduced by appyng secton 207(a) ( ), snce the gross
recepts are between 7 ,000 and 12 ,000. The ta under secton 207(a)(1).
as thus ad|usted, woud be 00 percent of 11,200. or 10,0 0, snce ,000 (e cess
of 120,000 over 7 ,000) s 90 percent of 0,000. Under secton 207(a) (2) ( ),
wthout reference to secton 207(a) ( ). the ta s 2 percent of 2 ,000 (e cess of
100,000 over 7 ,000), or 00 snce ths s ess th|n 1.000.1 percent of 100,000.
ppyng secton 207(a)( ) reduces ths to 0, or 00 percent of 00. Snce
10,0 0, the ta under secton 207(a)(1), as ad|usted, e ceeds 0. the ta
under secton 207(a)(2), as ad|usted, the ta under secton 207(a)(1), as ad-
|usted, s appcabe. The Y Compnny woud accordngy pay a combned norma
ta and surta of 10,0 0.
ampe ( ). The 7, change, an nternsurer, for the caendar year 19 2
Interest of 12,000, norma-ta net Income of ,000. The gross amount receved
from nterest, dvdends, rents, and premums (ncudng deposts and assess-
ments) s 2,700,000. The Z change s not abe for norma tn under secton
207(a)(3) for the caendar year 19 2 as Ur norma-ta net Income does not
e ceed 0,000. Its surta s 33 percent of 10,000 ( 00,000- 0.000), or 3,300,
snce that amount s ess than 7,700, 22 percent of 3 ,000 (e cess of corporaton
surta net ncome of 00,000 over 2 ,000). Snce the 7. change has no norma
ta , s not sub|ect to the ta Imposed by secton 207(a) (2). and Is not entted
to the adustment provded n secton 207(a)( ), Its totn ta under secton
207(a) s 3,300.
P RT II, TITL I. R NU CT OF 10 0, PPRO D
S PT M R 23, 19 0 .


( ) ffectve wth respect to ta abe years begnnng after une
0, 19 0, and wth res oet to ta abe years begnnng on anuary 1,
19 0, and endng on December 31, 10 0, secton 231 (b) (reatng to
foregn corporatons engaged n trade or busness wthn the Unted
States) Is hereby amended by strkng out secton 1 (c)(1) and
Insertng In eu thereof secton 13 .
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9
1 29.13-1.
Par. 2 . Secton 29.231-1, as amended by Treasury Decson 709
C. . 19 9-2, 6 , approved une 27,19 9 26 CFR 29.231-1 , s fur-
ther amended by strkng out a of (b) of such secton other than the
ast paragraph thereof and nsertng n eu thereof the foowng:
(6) Resdent foregn corporatons. resdent foregn corporaton Is not ta -
abe upon the Items of f ed or determnabe annua or perodca ncome enumer-
ated n secton 231(a) at the rate specfed n that secton. For ta abe years
begnnng before uy 1, 1 ) 0 (other than the caendar year 19 0), a resdent
foregn corporaton s, under secton 1 (c) (1), abe to a ta of 2 percent of
ts norma-ta net ncome (regardess of the amount thereof). For a ta abe
year whch s the caendar year 19 0 and for ta abe years begnnng after
une 30, 19 0, a resdent foregn corporaton s, under secton 13, abe to a ta
n an amount equa to a specfed percent of ts norma-ta net ncome. The
rates of ta under secton 13 appcabe for the respectve ta abe years are as
foows:
Percent
For ta abe years begnnng after March 31, 19 1, and before pr 1, 19 _ 30
The norma-ta net ncome of a resdent foregn corporaton s Its net ncome
from sources wthn the Unted States (gross Income from sources wthn the
Unted States mnus the statutory deductons provded n sectons 23 and 232)
ess, for ta abe years begnnng before anuary 1, 19 6, the credts provded n
secton 26 (a), (b), and (e) for such years, and ess, for ta abe years begnnng
after December 31, 19 , the credts provded n secton 26 (a) and (b) for
such years.
resdent foregn corporaton s aso abe to the corporaton surta Imposed
by secton 1 . For ta abe years begnnng before anuary 1, 19 6, the rates of
corporaton surta are as foows:
(11 I pon corporaton surta net ncomes of 2 ,000 or ess, 10 percent
of the amount thereof.
(2) Upon corporaton surta net ncomes over 2 ,000 but not over 0,000,
2, 00 pus 22 percent of the amount of such ncome n e cess of 2 ,000.
(3) Upon corporaton surta net ncomes of more than 0,000, 16 percent
of the entre amount thereof.
For a ta abe year begnnng after December 31, 19 , and before uy 1, 19 0
(other than the caendar year 19 0), the rates of corporaton surta are as
foows:
() Upon corporaton surta net ncomes of 2 ,000 or ess. 6 percent of
the amount thereof.
() Upon corporaton surta net ncomes over 2 ,000 but not over
0,000, 1, 00 pus 22 percent of the amount of such ncome n e cess of
2 ,000.
() Upon corporaton surta net ncomes of more than 0,000, 1 per-
cent of the entre amount thereof.
For a ta abe year whch s the caendar year 19 0, the surta s determned by
computng a tentatve surta of 19 percent of the amount of the corporaton
surta net ncome n e cess of 2 ,000, and by reducng such tentatve surta by
an amount equa to 1 percent of the ower of
(a) the amount of the credt provded n secton 26(a), or
(6) the amount by whch the corporaton surta net ncome e ceeds
2 ,000.
For ta abe years begnnng after une 30, 19 0, the surta s at the rate of 22
percent and s upon corporaton surta net ncome n e cess of 2 ,000.
The corporaton surta net ncome of a resdent foregn corporaton s ts net
ncome from sources wthn the Unted States (gross ncome from sources
wthn the Unted States mnus the statutory deductons provded n sectons 23
and 232) ess, for ta abe years begnnng before anuary 1, 19 G, the credts pro-
vded In secton 26 (b) and (e) for such years, and ess, for ta abe years
begnnng after December 31, 19 , the credt provded n secton 26(h) for such
years. For the purpose of determnng the corporaton surta net ncome of a
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29.13-1.
GO
resdent foregn corporaton, the credt provded n secton 26(b) s mted, for
a ta abe year begnnng before anuary 1. 19 6, to percent of ts net ncome
from sources wthn the Unted States reduced by the credt provded n secton
20(e) for such year, and, for a ta abe year begnnng after December 31, 19 ,
and endng before anuary 1, 19 0, to percent of ts ad|usted net ncome from
sources wthn the Unted States, and, for a ta abe year endng after December
31, 19 9, to S percent of ts ad|usted net ncome from sources wthn the Unted
States computed wthout regard to the deducton for net operatng oss aowed
by secton 23(s).
For ta abe years begnnng n 19 and endng n 19 0, see secton 20.10 -2.
for ta abe years begnnng before uy 1, 19 0, and endng after une 30. 1 ) 0
(other than the caendar year 19 0), see secton 29.10 - . For ta abe years be-
gnnng after une 30. 19 0, and before pr 1, 19 1, and endng after March 31,
19 1 (other than the caendar year 19 1), see secton 29.10S-6. For ta abe
years begnnng before pr 1,19 , and endng after March 31, 19 , see secton
29.rS-9.
Par. 2 . Secton 29.2 1-3 26 CFR 29.2 1-3 s amended by strkng
out the frst sentence of the secton and nsertng n eu thereof the
foowng:
For ta abe years begnnng before uy 1, 19 0 (other than the caendar year
19 0), a domestc corporaton entted to the benefts of secton 2 1 s. under
secton 2 1(c)(1), sub|ect to the ta mposed by secton 13 f t has a norma-
ta net ncome of -nore than 2 ,000 (see secton 29.13-1), or to the ta provded
by secton 1 (b) f t has a norma-ta net ncome of not more than 2 ,000 (see
secton 29.1 -1). For a ta abe year whch s the caendar year 19 0 and for ta -
abe years begnnng after une 30, 19 0. a domestc corporaton entted to the
benefts of secton 2 1 s, under secton 2 1(c) (1), sub|ect to the norma ta on
corporatons mposed by secton 13 (see secton 29.13-1).
Par. 26. Secton 29.261-1 26 CFR 29.261-1 s amended by strk-
ng out the frst sentence of the secton and nsertng n eu thereof
the foowng:
For ta abe years begnnng before uy 1, 19 0 (other than the caendar year
19 0), a Chna Trade ct corporaton s, under secton 2G(a), sub|ect to the ta
mposed by secton 13(b) f t has a norma-ta net ncome of more than 2 ,000
(see secton 29.13-1), or to the ta provded by secton 1 (b) f t has a norma-
ta net ncome of not more than 2 ,000 (see secton 29.1 -1). For a ta abe
year whch s the caendar year 19 0 and for ta abe years begnnng after une
30, 19 0. a Chna Trade ct corporaton s, under secton 201(a), sub|ect to t e
norma ta on corporatons mposed by secton 13 (see secton 29.13-1).
R GUL TIONS 130 2G CFR, P RT 0
P RT II, TITL I, R NU CT OF 19 1, PPRO D OCTO-
R 20, 19 1 .

(b) Ma mum Ta . Secton 30(a)(2) (reatng to the mtaton
on te rate of the e cess profts ta ) s hereby amended as foows:
(1) y Insertng after (2) the foowng: ( ) n the case of
ta abe years endng before pr 1, 19 1, .
(2) y strkng out the perod at the end of paragraph (2) and
nsertng , or and by addng after paragraph (2) the foowng:
() n the case of ta abe years begnnng on anuary 1,
19 1, and endng on December 31, 19 1, an amount equa to
17 per centum of the e cess profts net ncome for the ta abe
year, e ce|t that n the case of an affated group of ncudbe
corporatons makng or requred to make a consodated re-
turn for the ta abe year under secton 1 1, such amount sha
be reduced by an amount whch bears the same rato (but not In
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CI
29.13-1.
e cess of 100 per centum) to the ncrease of 2 per centum n
the surta mposed by reason of secton 1 1(e) as the amount
of the consodated e cess profts net ncome bears to the amount
of the consodated corporaton surta net ncome, or
(C) n the case of ta abe years begnnng after March 31,
19 1, an amount equa to 1 per centum of the e cess profts
net ncome for the ta abe year, e cept that n the case of an
affated group of ncudbe corporatons makng or requred
to make a consodated return for the ta abe year under sec-
ton 1 1, such amount sha be reduced by an amount whch
bears the same rato (but not n e cess of 100 per centum) to
the ncrease of 2 per centum n the surta mposed by reason
of secton 1 1(c) as the amount of the consodated e cess
profts net ncome bears to the amount ot the consodated cor-
poraton surta net ncome, or .

OF 19 1, PPRO D OCTO R 20, 19 1 .
The amendments made by ths part nc. sec. 121(b) sha be appca-
cember 31, 19 1, For treatment of ta abe years (other
than the caendar year 19 1) begnnng before pr 1, 19 1, and endng
after March 31, 19 1, see secton 131.
Par. 2 . Secton 0. 30-2 26 CFR 0. 30-2 s amended as foows:
( ) y nsertng n (a) (1) after () the foowng: n the case
of ta abe years endng before pr 1, 19 1, .
( ) y strkng out the perod at the end of () of (a) (1) of the
secton and nsertng n eu thereof a comma and or and by nsertng
after such () us so amended the foowng:
() n the case of a ta abe year whch s the caendar year 19 1, an amount
equa to 17 percent of the e cess profts net ncome for the ta abe year, e -
cept that n the case of an affated group of ncudbe corporatons makng or
requred to make a consodated return for the ta abe year under secton 1 1,
such amount sha be reduced by an amount whch bears the same rato (but
not n e cess of 100 percent) to the ncrease of 2 percent n the surta mposed
by reason of secton 1 1(c) as the amount of the consodated e cess profts net
ncome bears to the amount of the consodated corporaton surta net ncome, or
(Iv) n the case of ta abe years begnnng after March 31, 19 1, an amount
equa to 1 percent of the e cess profts net ncome for the ta abe year, e cept
that n the case of an affated group of ncudbe corporatons makng or re-
qured to make a consodated return for the ta abe year under secton 1 1,
such amount sha be reduced by an amount whch bears the same rato (but not
n e cess of 100 percent) to the ncrease of 2 percent n the surta mposed by
reason of secton 111(c) as the amount of the consodated e cess profts net
Income bears to the amount of the consodated corporaton surta net ncome.
(C) y strkng out n (2) of (a) of the secton secton 30(a) (2)
wherever appearng theren and nsertng n eu thereof secton
30(a)(2)( ) .
sectons 62 and 3791 of the Interna Revenue Code ( 3 Stat. 32, 67:
26 U. S. C. 62, 3791).)
ustn F. Wnke,
ctng Commssoner of Interna Revenue.
pproved December 2, 19 2.
Thomas . Lynch,
(Fed wth the Dvson of the Federa Regster December , 19 2, : 9 a. m.)
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29.22(a)- .
62
P RT II. COMPUT TION OF N T INCOM
S CTION 22(a). GROSS INCOM : G N R L
D FINITION
Secton 29.22 (a)-1: What ncuded n gross 19 2-19-13917
ncome. G. C. M. 27322
( so Secton 117, Secton 29.117-1.)
INT RN L R NU COD
ump-sum payment receved by a ta payer purportedy for fee
smpe tte to a mneras n and under certan and owned by hm,
but n con|uncton wth whch he reserved a royaty nterest In any
mneras produced from the and, consttutes ordnary ncome under
secton 22(a) of the Interna Revenue Code and does not represent
the proceeds from the sae of a capta asset.
n opnon s requested, n vew of the decsons n Wesey W. West
et a. v. Commssoner (3 T. C. 31, affrmed, 1 0 Fed. (2d) 723, cer-
torar dened, 320 U. S. 79 ) and rthur N. Trembey et a. v. Com-
mssoner (Ta Court memorandum opnon, decson entered Decem-
ber 29, 19 ) as to the proper treatment, for Federa ncome ta
purposes, of a ump-sum payment receved by a ta payer purportedy
for the sae of fee smpe tte to a mneras n and under certan
and owned by hm, but n con|uncton wth whch he reserved a roy-
aty nterest n any mneras produced from the hnd.
In the West case, the grantors entered nto a transacton whereby
they purported to se and convey to the grantee, for a ump-sum
myment and a royaty nterest n the usua form, certan surface
ands, eases, and mneras. The grantee aso obgated tsef to dr,
deveop, and operate the propertes for mneras. The courts hed, n
effect, wth respect to the mneras that the transacton effected a eas-
ng arrangement and that the part of the cash payment aocabe to
such mneras represented an advance royaty or bonus ta abe as
ordnary ncome. owever, the poston thus taken was based, not on
the ob|ectve ega et ect of the transacton as such, but on the ground
that the sub|ectve ntent of the partes controed and the factors
ndcatng an ntent to effectuate a ease predomnated over those nd-
catng an ntent to effectuate a sae. mong the facts nfuencng the
decsons n ths case were those showng the grantor s predomnatng
purpose to secure the deveopment and operaton of the property and
the obgatons assumed by the grantee to undertake such deveopment
and operaton. The facts that the transacton was n form a sae, that
a substanta cash payment was made to the grantor at the tme of the
transacton, and that no provson was made for forfeture or reverson
were hed not to contro.
The Trembey case aso nvoved a purported sae of mnera n pace
n consderaton of a ump-sum payment and retenton of a royaty
nterest n the usua form. In that case, however, t was e pressy
stpuated that the grantee woud never be under any obgaton, ether
e press or mped, to dr for, mne, produce, contnue to produce, or
attempt to produce the mnera (suphur) from the property nvoved,
e cept to the e tent of affordng reasonabe protecton aganst dran-
age of the mnera or compensatng the grantor for oss therefrom. It
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( 29 22(a)- .
was there hed that the cash payments receved by the grantors were
not advance royates (bonuses) ta abe as ordnary ncome, but pay-
ments for the sae of suphur n pace, the profts therefrom beng ta -
abe as capta gans under secton 117 of the Interna Revenue Code.
The T Court stated n the Trembey case, supra, that the prncpa
reason for concudng that the transacton n the West case was not
a sae, but a ease, was that the movng consderaton and predomnat-
ng purpose was to secure the mmedate and compete deveopment of
the and for o. The Ta Court further stated that n the Trembey
case the grantee dd not propose to engage n the e tracton of su-
phur and the grantors dd not e pect t, the grantee, nstead of beng
obgated to dr for suphur, beng e pressy e empted from so dong.
Notce was aso taken of the arge cash consderaton of appro matey
2,000 an acre pad for suphur under and n a wdcat or unproven
suphur producng area. It was stated that the acquston of tte to
mneras s obvousy of far greater vaue and w brng a arger con-
sderaton than a mere easehod rght to deveop; that conveyances
of mneras are frequenty actuated by a motve of nvestment on
the part of the grantee and the cash consderaton or other down pay-
ment (rather than a desre to secure deveopment of the property) s
the movng cause for the conveyance by the grantor; and that such was
ceary the purpose and ntenton of the partes nvoved n the
Trembey case. The court further stated that the reservaton of a
royaty nterest, whe an attrbute of a ease, was not controng where
deveopment of the and for mneras was not the predomnatng pur-
pose of the transacton nvoved; that a or a fractona part of the
mneras under a tract of and may be sod; and that the reservaton
of a royaty nterest, when consdered wth other anguage of the
nstruments nvoved and the crcumstances surroundng ther e ecu-
ton, ndcates that such royaty nterest was a retenton to that e tent
of the mneras sod.
In the Trembey case the Ta Court stated that urnet v. arme
(2 7 U. S. 103, Ct. D. 611, C. . I-2, 210 (1932)), s ceary ds-
tngushabe, snce there admttedy the transactons nvoved were
eases, not saes. The Ta Court aso stated that the decson n
Pamer v. ender (2 7 U. S. 1, Ct. D. 6 1, C. . II-1, 23 (1933)),
s not appcabe because n that case the transacton was based, not
on the sae of mneras, but an assgnment of o and gas eases, whch
eases e pressy requred the deveopment of the o and gas under the
and on whch o had been dscovered and on whch operatons were
then beng carred on.
It s the opnon of ths offce that the theory of the Ta Court n
both the West and Trembey decsons, as we as the resut reached
by t n the Trembey case, s at varance wth controng decsons
of the Supreme Court of the Unted States nvovng recept of ump-
sum payments by grantors wth concdent retenton of royaty n-
terests n the usua form n consderaton of grants of mnera rghts.
The Supreme Court has repeatedy taken the poston that where, n
consderaton of a ump-sum payment and stpuated royates payabe
out of producton, a grantor e tends to a grantee a rght to enter
upon and for purposes of e potaton of the mneras theren, the
ump-sum payment consttutes an advance royaty, ta abe as ordnary
ncome, and not proceeds from a sae of a capta asset. (See urnet v.
arme, supra; ankers Pocahontas Coa Co. v. urnet, 2 7 U. S.
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6
30 , Ct. D. 61 , C. . II-1, 272 (1933); Murphy O Co. v. urnet,
2 7 U. S. 299, Ct D. 619, C. . II-1,231 (1933) ; Wam . errng
et a. v. Commssoner, 293 U. S. 322, Ct. D. 90 , C. . I -1, 303
(193 ); and Pamer v. ender, supra.)
The cases cted show that the character of the cash payment as
ordnary ncome s not dependent upon retenton by the grantor of
ownershp of, or any other partcuar form of ega nterest n, the
mnera content of the and; and s not affected by the facts that
the grant may be cast n the form of a sae, that under oca aw
tte to the mnera n pace passes mmedatey to the grantee upon
e ecuton of the nstrument, that there s no e stng producton of
mnera or practca assurance thereof n the future, or that the
grantor had no rght to compe the drng of wes. In such trans-
actons the grantor merey e tends to the grantee e cusve e pota-
ton prveges, retanng as hs (the grantor s) share of the whoe
reservor of mnera, a rght, upon producton, to that porton of the
mnera whch, freed of the burdens of deveopment and operatng
costs, has a vaue equvaent to the vaue of the entre nterest sub|ect
to such burdens of deveopment and operaton. So consdered, the
vew that a grantor parts wth no capta nterest n the mnera,
though the grantee acqures one, presents no ogca dffcutes, snce,
though potentay hghy vauabe, the grantee s nterest ordnary
acheves such vaue as the resut of the nvestment ncdent to e pota-
ton or by reason of dscovery. (See G. C. M. 22730, C. . 19 1-1,21 .)
It s beeved that the decsons of the Supreme Court do not afford
a bass for the vew e pressed n the West and Trembey decsons
that the presence of a domnatng purpose to secure deveopment s
the controng factor n determnng whether a ump-sum payment
receved by a grantor of mnera rghts n con|uncton wth retenton
of a royaty nterest n the usua form s ordnary ncome. Ths offce
s of the opnon that the Ta Court was n error n concudng that
the decson n urnet v. arme, supra, s dstngushabe from the
Trembey case. The Supreme Court stated the ssue n urnet v.
arrne as foows:
The ony queston presented here s whether the bonus payments to the respond-
ent, after aowed deductons, f any, are pan from the sae or e change of
capta assets wthn the meanng of the ta ng ct.
Concernng that fundamenta ssue, whch s aso the basc queston
nvoved n the Trembey case, the Supreme Court sad:
It s an ncdent of every o and gas ease, where producton operatons are
curred on by the essee, that the ownershp of the o and gus passes from the
essor to the essee at some tme and the essor s compensated by the payments
made by the essee for the rghts and prveges whch he acqures under the
ease. ut notwthstandng ths ncdenta transfer of ownershp, t s evdent
that the ta aton of the recepts of the essor ns ncome does not ordnary
produce the knd of hardshp amed at by the capta gans provson of the
ta ng ct. O and gas may or may not be present n the eased premses, and
may or may not be found by the essee. If found, ther abstracton from the so
s a tme-consumng operaton and the payments made by the essee to the essor
do not normay become payabe as the resut of a snge transacton wthn the
ta abe year, as n the case of a sae of property. The payment of an nta
bonus aters the character of the transacton no more than an unusuay arge
renta for the frst year aters the character of any other ease, and the ta aton
of the one as ordnary ncome does not act as a deterrent upon converson of
capta assets, any more than the ta aton of the other.

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29.22(a)- .
The court beow thought that the bonus payments, as dstngushed from the
royates, shoud be treated as capta gan, apparenty because t assumed that
the stature authorzes a depeton aowance upon the royates aone.
ut bonus payments to the essor have been deemed to be sub|ect to depeton
aowances under secton 21 (a)9, Revenue ct of 192 , by artce 216, Treasury
Reguat ons 6 , as we as under earer cts. onus and royates are
both consderaton for the ease and are ncome of the essor. We can not say
that such payments by the essee to the essor, to be retaned by hm regardess
of the producton of any o or gas, are any more to be ta ed as capta gans than
royates whch are measured by the actua producton.
In the opnon of ths offce the Ta Court smary erred n con-
cudng that the decson n Pamer v. ender, supra, s nappcabe
to the Trembey case. The reason assgned by the Ta Court for such
concuson s that n Pamer v. ender the grant nvoved an assgn-
ment of eases whch e pressy requred the deveopment of the o
and gas under the and on whch o had been dscovered and on whch
operatons were then beng carred on. y whatever name caed,
there was nvoved n Pamer v. ender, as n Trembey, a grant of
mnera rghts, a ump-sum cash payment, and royates n the usua
form. Moreover, there s nothng n ether the Pamer v. ender
decson, or any of the other decsons of the Supreme Court mentoned
above, to show that n treatng as ordnary (depetabe) ncome a
ump-sum payment receved by a grantor of mnera rghts n con|unc-
ton wth retenton of a royaty nterest n the usua form, the poston
taken by the Court was the resut of, or controed by, provsons n the
agreements between the partes requrng deveopment and operaton
of the propertes by the grantee. In ths respect t may aso be noted
that n urnet v. arme, quoted above, there s no menton of the
e stence of such a requrement, and n errng v. Commssoner,
supra, n whch a ump-sum payment receved by a grantor was agan
treated as ordnary (depetabe) ncome, t s e pressy stated that
The essors had no rght to compe the drng of wes .
In the atter case, there was no producton at the tme of the grant
and no practca assurance of producton n the future. s a matter
of fact n the great ma|orty of nstances, grants of mnera rghts n-
vovng ump-sum payments and retenton of royates or other eco-
nomc nterests by grantors do not contan any provson whch
compes deveopment and operaton by the grantees.
ccordngy, t s beeved that rrespectve of the presence or ab-
sence of a domnatng purpose of the partes to secure deveopment
and operaton of the property, the controng decsons of the S.preme
Court requre a ump-sum payment receved by a grantor of mnera
rghts n con|uncton wth retenton by hm of a royaty nterest to
be treated as ordnary ncome and not as proceeds from the sae of a
capta asset.
Mason . Lemng,
ctng Chef Counse, ureau of Interna Revenue.
Secton 29.22(a)-1: What ncuded n gross 19 2-23-139 3
ncome. IR-Mm. 1
Incuson n gross ncome of ta payer of Federa ncome ta es pad
to or for the account of such ta payer under a contract provdng for
a stpuated payment pus any Federa ncome ta es thereon.
Mmeograph 6779 (C. . 19 2-1, ) suppemented.
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29.22(a)-2.
C6
Washngton 2 , D. C, October U, 19 2.
Offcers and mpoyees of the Interna Revenue Servce and Others
Concerned:
Mmeograph 6779 (C. . 19 2-1, ), dated March 12, 19 2, reatng
to essor-essee cases, s hereby suppemented by addng the foowng
after paragraph 2 thereof:
3. The rue set forth heren s appcabe to a types of ncome payments
ncudng, but not confned to, payments for persona servces, amony, and
the purchase or renta of property.
. Under authorty contaned n secton 3791(b) of the Interna Revenue
Code, the provsons of ths mmeograph w not be apped for ta abe years
begnnng pror to anuary 1, 19 2, n determnng the amount of gross ncome
of the recpent of an ncome tem on account of the ta es pad by the payor
other than the nta ta computed on the stpuated amount, e cept that any
Federa ncome or e cess profts ta es whch have been pad on account of the
ncuson n gross ncome of the ta es pad by the payor w not be refunded.
ohn . Dunap,
Commssoner.
Secton 29.22(a)-2: Compensaton for persona 19 2-1 -13 62
servces. Ct. D. 17 6
( so Secton 22(b), Secton 29.22(b) (3)-;
Secton 107, Secton 29.107-2.)
INCOM T INT RN L R NU COD D CISION OF SUPR M COURT
1. Gross Income cusons Property cqured by Gft Com-
pensaton for Servces Rendered for Perod of 36 Months or
More.
prze awarded to a composer n 19 7 for a symphony whch he
had composed between the years 1930 and 1939 dd not consttute a
nonta abe gft under secton 22(b)(3) of the Interna Revenue
Code; the amount of the award shoud be ta ed rataby over the 3G
caendar months from 19 through 19 7 rather than for the perod
from 1937 through 1939, under the provsons of secton 107(b) of the
Interna Revenue Code.
2. Dfcson ffrmed.
Decson of the Unted States Court of ppeas for the Tenth
Crcut, 190 Fed. (2d) 6 0 (19 1) affrmed.
Supreme Court of the Unted States
Leroy . Robertson, pettoner, v. Te Unted States of merca
On wrt of certorar to the Unted States Court of ppeas for the Tenth Crcut
une 2, 19 2
OPINION
Mr. ustce Doror. S devered the opnon of the Court.
Pettoner s a muscan and composer who between the years 1936 and 1939
composed a symphony. In 19 enry . Rechbod, a phanthropst, estabshed
a musc awnrd offerng 2 ,000, ,000, and 2, 00 for the three best symphonc
works wrtten by natve-born composers of ths hemsphere. The terms of the
offer provded that none of the compostons coud be pubshed or pubcy per-
formed pror to entry n the contest and that each composton recevng an award
woud reman the property of the composer e cept that he woud grant the Detrot
Orchestra, Inc., (1) a synchronzaton rghts as apped to moton pctures, (2)
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( 29.22(a)-2.
a mechanca rghts as apped to phonograph recordngs, eectrca transcrp-
tons am musc ros, and (3) the e cusve rght to authorze the frst perform-
ance of the composton n each of the countres whose ctzens were egbe to
enter the contest and to desgnate the pubsher of the composton.
I ettouer submtted hs symphony and on December 1 , 19 7, won the 2 ,000
award. e ncuded that amount n bs 19 7 ncome ta return as gross ncome,
camed the benefts of secton 107(b) of the Interna Revenue Code1 (26 U. S. C.
(19 6 ed.) secton 107(b), 3 Stat. 7 , as amended), and computed the ta as
though the 2 ,000 hud been receved rataby durng the years 1937, 193 , and
1939. Thereafter he fed a cam for refund on the ground that the award
consttuted a nonta abe gft. The Commssoner dd not aow the cam but
determned a defcency on the ground that the ta shoud have been computed
under secton 107(b) as though the award had been rataby receved over the
3-year perod endng wth 19 7. Pettoner pad the defcency, fed a suppe-
menta cam for refund, and-brought ths sut to obtan t. The dstrct court
hed that the award was a gft and not ta abe by reason of secton 22(b) (3) of
the Interna Revenue Code. The court of appeas reversed. 190 Fed. (2d) 6S0.
The cose s here on certorar because of the confct between that decson and
McDcrmott v. Commssoner, 1 0 Fed. (2d) , decded by the Court of ppeas
for te Dstrct of Coumba. nd see Wams v. Unted States, Fed. Supp.
302.
I
In the ega sense payment of a prze to a wnner of a contest s the dscharge
of a contractua obgaton. The acceptance by the contestants of the offer
tendered hy the sponsor of the contest creates an enforceabe contract. See 6
Corbn on Contracts secton 1 9; Restatement, Contracts, secton 21. The
dscharge of ega obgatons the payment for servces rendered or consdera-
ton pad pursuant to a contract s n no sense a gft. The case woud he
dfferent f an award were made n recognton of past achevements or present
abtes, nr f payment was gven not for servces (see Od Coony Trust Co. v.
Commssoner, 279 U. S. 716, 730 Ct. D. 0, C. . III-2, 222 (1929) ), but out of
affecton, respect, admraton, charty or ke mpuses. Where the payment s n
return for servces rendered, t s Irreevant that the donor derves no economc
beneft from t.
II
Secton 107(b) defnes artstc work as the musca or artstc compos-
ton of an ndvdua, the work on whch covered a perod of
thrty-s caendar months or more from the begnnng to the competon of
the composton. In case the gross ncome from a partcuar artstc work n
the ta abe year Is not ess than a partcuar percentage (not matera here),
the ta attrbutabe to the Income of the ta abe year may he computed as though
t had been receved rataby over that part of the perod precedng the cose
of the ta abe year but not more than thrty-s caendar months. The queston
s whether the amount of the prze shoud be ta ed rataby over the 36 months
endng wth the cose of 19 7 (the ta abe year In whch t was receved) or over
the ast 36 months of the perod (1937 to 1939) when pettoner wrote the
symphony
Secton 107(b) provdes: For the purposes of ts subsecton, the term artstc work
or nventon , n the case of an Indvdua, means a terary, musca, or artstc compos-
ton of such ndvdua or a patent or copyrght coverng an nventon of or a terary,
musca, or artstc composton of such ndvdua, the work on whch by such Indvdua
covered a perod of thrty-s caendar months or more from the he nnng to the com-
peton of such composton or nventon. If, In the ta abe year, the gross Income of
any ndvdua from a partcuar artstc work or Inventon by hm s not ess than 0
per centum of the gross ncome In respect of such artstc work or Inventon In the ta abe
year pus the gross ncome therefrom In prevous ta abe years and the tweve months
mmedatey succeedng the cose of the tn abp year, the ta attrbutabe to the part of
such gross Income of the ta abe year whch s not ta abe as a gan from the sae or
e change of a capta asset hed for more than 6 months sha not be greater than the
aggregate of the ta es attrbutabe to such part had It been receved rataby over that part
of the perod precedng the cose of the ta abe year but not more than thrty-s caendar
months.
Secton 22(b) (31 of the Interna Revenue Code provdes :
The foowng Items sha not bo ncuded In gross Income and sha be e empt from
ta aton under ths chapter :
The vaue of property acqured by gft, bequest, devse, or nhertance.
See note 1, supra.
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29.22(a)-2.
G
The phrase In queston, as It orgnated ( . R. 737 , 77th Cong., 2d sess., sec-
ton 12 ) read rataby over the perod of thrty-s caendar months endng
wth the cose of the ta abe year. In that form the present ta woud have
been computed ns the Commssoner contended, va the ta woud be ad over
a perod of 36 months e tendng back from the cose of the ta abe year. The
change n wordng does not seem to us to have made a change n meanng. The
present words rataby over that part of the perod precedng the cose of the
ta abe year but not more than thrty-s caendar months woud on ther face
seem to refer to a perod endng wth the cose of the ta abe year and e tendng
back a ma mum of 36 months. That wordng was adopted n order to treat the
ncome as though t had been receved rataby over (1) the part of the perod
of the work whch preceded the cose of the ta abe year, or (2) a perod of 36
caendar months, whchever of such perods s the shorter. See S. ept. No.
1631, 77th Cong., 2d sess., page 10 ). The ouse Conferees, n agreeng to the
change, stated that t cartes the anguage of the ouse b. . R. Conf.
Rept. No. 2 S( , 77th Cong., 2d sess., page 3. That hstory strongy suggests that
the purpose was not to change the aowabe perod of aocaton from one endng
wth the cose of the ta abe year to one coverng any 36 months n the past
when the work was done, but to prevent ta reducton by proraton of ncome
over a perod of work greater than the duraton of the work precedng the cose
of the ta abe year. That s the constructon gven by Treasury Reguatons 111.
secton 29.107-2; and whe much more coud be sad, t seems to us that
thnt constructon fts the statutory scheme.
ffrmed.
Mr. ustce Frankfurter, not havng heard the argument owng to ness,
took no part n the dsposton of ths case.
Mr. ustce ackson dssents.
Secton 29.22(a)-2: Compensaton for persona 19 2-2 -1306
servces. Ct. D. 17 0
( so Sf.cton 22(b).)
ncome ta nterna revenue code decson of court
1. Gross Income Deductons Compensaton fob In|ures or
Sckness Retrement Pay of Dstrct of Coumba Freman.
Payments made to ta payer as the resut of an order of the oard
of Commssoners of the Dstrct of Coumba retrng hm for
age are not e empt from ta under secton 22(b) ( ) of the Inter-
na Revenue Code as an amount receved under workmen s com-
pensaton acts, as compensaton for persona n|ures or sckness ,
notwthstandng that at the tme of hs retrement ta payer was
sufferng from physca dsabtes whch were ncurred In the ne
of duty for whch he mght have been retred had he not been retred
for age. There had been no determnaton by the Commssoners
of the e tent of dsabty as a bass for f ng an amount of reef
for dsabty, and, even though the Federa authortes are not
Secton 29.107-2 provdes In part:
The method of aocatng the cross Income from the artstc work or Inventon to the
ta abe vcars In whch fas any of the caendar months (not e ceedng 36 caendar months)
Incuded wthn the part of the perod of work whch precedes the cose of the current
ta abe year may he Iustrated hv the foowng e ampes :
ampe ( ). On October 1, 19 2. . an Indvdua, who makes hs returns on a
caendar year bass and on the bass of cash recepts and dsbursements, receves 36,000
In fu pavment for n musca composton, the work on whch was commenced by on
uy 10, 11)3 . and competed on anuary 29. 19 3. though the perod of work covers
f caendar months, aocatons may be made to ony the ast 3 1 caendar months I Retorted
wthn the part of the perod of work whch precedes the cose of 19 2 (the current ta abe
year). Therefore. 1,000 ( 6,000 dvded by 30) must be aocated to each of the 36
caendnr months precedng anuary 1. 19 3. ccordngy, 12,000 Is aocated to 19 0,
12,(100 to 19 1, and 12,000 to 19 2 (the current ta abe year).
ampe (2). ssume the same facts as In e ampe (1) e cept that the perod of
work was commenced by on uy 1, 19 1, and competed on September 1, 19 . thon;:h
the pero of work covers 3 caendar months, aocatons may be made to ony the IS
caendar oonths whch are ncuded wthn the part of the perod of work whch precedes
the cose of 19 2 (the current ta abe year). Therefore, 2,000 ( 30,000 dvded by 1 )
must be aocated to each of 1 caendar months precedng anuary 1. 19 3. ccordngy.
112,000 Is aocated to 19 1, and 2 ,000 to 19 2 (the current ta abe year).
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69
29.22 (a)-2.
bound by the Interpretaton of the stuaton made by the Dstrct
authortes, namey, that he was retred for age, the correct nter-
pretaton for Federa ncome ta purposes s that ta payer was
retred for age.
2. Decson ffrmed.
Decson of The Ta Court of the Unted States (17 T. C. 1)
affrmed.
Unted States Court of ppeas for the Dstrct of Coumba Crcut
oseph . Smms, pettoner, v. Commssoner of Interna Revenue, respondent
196 Fed. (2d) 23
Petton for revew of decson of The Ta Court of the Unted States
efore dgerton, Wkur . Mer and Faht, Crcut udges
pr 3, 19 2
OPINION
Fahy, Crcut udge: Pettoner oseph . Smms seeks reversa of a decson
of The Ta Court of the Unted States to the effect that he owes a defcency of
ncome ta for the year 19 n the sum of 072.71. s poston s that the
ncome whch resuted n the ta was n ega contempaton receved for phys-
ca dsabty ncurred n the ne of duty as a member of the Fre Department
of the Dstrct of Coumba. ccordngy, he contends, t was no part of hs
ta abe ncome because secton 22(b) ( ) of the Interna Revenue Code, 3 Stat.
9 (1939), as amended, 26 U. S. C. secton 22(b)( ) (19 6), e empts amounts
receved under workmen s compensaton acts, as compensaton for persona
n|ures or sckness. The respondent, Commssoner of Interna Revenue,
rued that the ncome was pad to pettoner as a resut of hs retrement for
age and not for dsabty. If ths s rght there s no controversy the defcency
s due. The Ta Court agreed wth the Commssoner that pettoner was
retred for age and therefore hs retrement pay s not attrbutabe to dsabty.
The Dstrct of Coumba Code, secton - 01- 17, D. C. Code (19 0). as
amended, supp. II (19 9), provdes that fremen may be retred wth compen-
saton to he pad from the Pocemen and Fremen s Reef fund (1) by reason
of permanent dsabty ncurred n ne of duty, or (2) after twenty-fve years
servce, under certan condtons, or, (3) havng reached the age of 60 years, n
the dscreton of the Commssoners.
Pettoner was retred under an order of the oard of Commssoners of the
Dstrct, dated anuary 31, 19 2, rectng that he and others of the Fre De-
partment, havng reached or passed the age of 6 years are retred, and are
granted reef payabe from the Pocemen and Fremen s Reef
of the Dstrct of Coumba . Pettoner s reef was stated to be
the sum of 1S7. 0 per month, whch pettoner states was 0 percent of hs
saary, n whch event t was the ma mum permtted by aw. Secton - 07,
D. C. Code (19 0). On pr 20, 19 , the Commssoners by a further order
rected that at the tme of hs retrement pettoner, and others, were sufferng
from physca dsabtes whch were ncurred n the ne of duty to such an
e tent that had they not been retred when they were, for age, they woud have
been retred for physca dsabty ncurred n the ne of actve Fre Department
duty . It appears ndependenty that pror to retrement pettoner
had suffered physca dsabty n ne of duty. The e tent of ths dsabty,
however, e cept that t was permanent, has never been ascertaned or trans-
ated by admnstratve acton Into an award of compensaton or retrement pay
for dsabty. See footnote 1, nfra.
Notwthstandng that both the 19 2 and 19 orders make cear that pet-
toner was retred not for dsabty but for age, he contends that snce he had
become permanenty dsabed t was the duty of the Commssoners to retre
hm for dsabty under secton - 07, D. C. Code (19 0).1 Therefore, he con-
Ths secton reads n pertnent part:
Whenever any member of the fre department of the Dstrct of Coumba
sha become so permanenty dsabed through n|ury receved or dsease contracted n the
ne of duty as to ncapactate hm for the performance of duty , he sha
be retred from the servce thereof and he entted to receve reef from the sad poce-
men and fremen s reef fund, Dstrct of Coumba. In an amount not to e ceed 0 per
rentum per year of the saary receved by hm at the date of retrement.
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29.22(a)-3.
70
tnues, a vested rght to dsabty retrement accrued and the determnaton
made n connecton wth hs retrement that he shoud receve 0 percent of hs
saary s n ega effect an award of that amount for dsabty. We are unabe
to accept ths vew for two reasons. In the frst pace there has been no de-
termnaton by the Commssoners of the e tent of dsabty as a bass for
f ng an amount of reef for dsabty. See Waer v. Unted Sates, S6 U. S.
pp. D. C. 93, ISO Fed. (2d) 19 (19 0). In the second pace, even though, as
pettoner argues, the Federa authortes are not bound by the Interpretaton
of the stuaton made by the Dstrct authortes, namey, that he was retred
for age, nevertheess t s our vew that the correct nterpretaton for Federa
purposes s that pettoner was retred for age. Therefore the ncome he
receved as a consequence was not pad to hm under workmen s compensaton
acts, as compensaton for persona n|ures or sckness, secton 22(a)( ),
supra, and s not e cudabe from hs gross ncome In the process of arrvng at
hs Federa Income ta .
ffrmed.
Secton 29.22(a)-2: Compensaton for persona
servces.
INT RN L R NU COD
mounts receved by former empoyees of the Isthman Cana Com-
msson or the Panama Raroad Co. under Pubc Law 319,
Seventy-eghth Congress ( Stat. 2 7). (See I. T. 09 , page 7 .)
Secton 29.22(a)-3: Compensaton pad other 19 2-22-129
than n cash. IR-Mm. 3
Retroactve effect of Mmeograph 6 72 (C. . 19 0-1, 1 ) wth
respect to refunds aowed pror to ts pubcaton.
Washngton 2 , D. C, September 19, 10 2.
Concerned:
1. The purpose of ths mmeograph s to carfy, n response to a
number of nqures, the e tent to whch Mmeograph 6 72 (C. .
19 0-1, 1 ) w be apped wthout retroactve effect n cases n
whch vng quarters or meas are determned to be compensatory
wthout reference to the convenence of the empoyer rue and n
whch ncome ta es wthhed or pad on the vaue of such vng quar-
ters or meas had been refunded pror to the pubcaton of the
mmeograph.
2. In paragraph f the mmeograph t was stated that:
Under the authorty contaned In secton 3791(b) of the Interna Revenue
Code, the provsons of ths mmeograph w be apped wthout retroactve
effect from anuary 1, 19 9, n cases n whch vng quarters or meas are
determned to be compensatory wthout reference to the convenence of the
empoyer rue, e cept that any ta es whch have been w hhed or pad on
the vaue of such vng quarters or meas w not be refunded.
The ssue rased s the meanng whch s to be gven to the words
w not be refunded n cases where the ta pad for ta abe years
endng pror to anuary 1, 19 9, had aready been refunded n proc-
essng returns subsequent to anuary 1,19 9, but pror to the pubca-
ton of Mmeograph G 72, on February 1 , 19 0. Ths nvoves the
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71
29.22(a)- .
reated ssue of whether t s proper to assert a defcency n ta to
recover such a refund on the ground that the refund was erroneousy
made.
3. In paragraph of the mmeograph, the ureau announced a
change of pocy n the treatment of the ssue nvoved theren, and
prevous pubshed rungs on the sub|ect were modfed. In most
cases, the amount of ta defcency or ta refund nvoved was too
sma to warrant the cost of tgaton, and the genera pocy of
paragraph of the mmeograph, quoted above, was not to dsturb cases
reated to ta abe years endng pror to anuary 1, 19 9. Under ths
pocy, the ureau w make no attempt to assert possbe defcences
n ta for such ta abe years; and a of the refunds whch had been
made for such ta abe years pror to the pubshed announcement, on
February 1 , 19 0, of the change n pocy w not be dsturbed. c-
cordngy, the words w not be refunded have no appcaton to
refunds whch had been accompshed pror to February 1 ,19 0, and
such refunds w not be sub|ect to recovery by the ureau.
. The e cepton n paragraph of the mmeograph reates to cases
where the refunds for ta abe years ended pror to anuary 1, 19 9,
were otherwse aowabe under the new pocy but had not yet been
aowed when the mmeograph was pubshed. Such cases do not n-
vove the reversa of an acton prevousy taken and, hence, the over-
ayments w not be refunded. ccordngy, the words w not
e refunded appy ony to overpayments whch may be under con-
sderaton on or after February 1 , 19 0, for refund purposes wth
respect to ta abe years ended pror to anuary 1, 19 9.
. Correspondence reatng to ths mmeograph shoud refer to ts
number and the symbos O: : IM.
ohn . Dt|nap,
Commssoner.
Secton 29.22(a)- : Gross ncome from busness. 19 2-23-139
I. T. 10
INT RN L R NU COD
mounts pad for goods n e cess of ceng prces estabshed by
the Offce of Prce dmnstraton, under the mergency I rce
Contro ct of 19 2 (Tte 0, pp. U. S. C. .), are aowabe as
a part of the cost of goods sod n computng ncome sub|ect to
Federa ncome ta aton.
I. T. 372 (C. . 19 , 7) modfed.
I. T. 372 (C. . 19 , 7) hods n part that amounts pad for goods
n e cess of ceng prces estabshed by the Offce of Prce dmnstra-
ton, under the mergency Prce Contro ct of 19 2 (Tte 0, pp.
U. S. C. .), are not aowabe as a part of the cost of goods sod n
computng ncome sub|ect to Federa ncome ta aton.
In Commssoner v. en|amn Wesman et d. (197 Fed. (2d) 221),
offerhert v. nderson Odsmobe, Inc. (197 P ed. (2d) 0 ), ones v.
. S. erber et a. (19 Fed. (2d) ), Commssoner v. Wnnfred
Gumnsk et a. (19 Fed. (2d) 26 ), Commssoner v. r te.e . Gentry
et a. (19 Fed. (2d) 267) t s hed that amounts pad for goods n
e cess of ceng prces estabshed under the mergency Prce Contro
ct of 19 2, supra, are ncudbe n the cost of goods sod n computng
gross ncome for Federa ncome ta purposes. To the same effect s
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S 22(b).
72
the hodng n Lea Suenger et a. v. Commssoner (11 T. C. 1076,
nonacquescence, C. . 19 9-1, 6, wthdrawn, and acquescence sub-
sttuted therefor, page 1, ths uetn).
In vew of the foregong, t s hed that amounts pad for goods n
e cess of ceng prces estabshed by the Offce of Prce dmnstra-
ton, under the mergency Prce Contro ct of 19 2, supra, are aow-
abe as a part of the cost of goods sod n computng ncome sub|ect
to Federa ncome ta aton. I. T. 372 , supra, nsofar as t s ncon-
sstent wth the foregong, s hereby modfed. (Cf.I. T. 10 , page 93,
ths uetn.)
Secton 29.22(a)- : Gross ncome from busness.
INT RN L R NU COD
mounts pad n voaton of prce stabzaton provsons of the
Defense Producton ct of 19 0, as amended. (See I. T. 10 ,
page 93.)
S CTION 22(b). GROSS INCOM : CLUSIONS
FROM GROSS INCOM
19 2-1 -13 71
I. T. 0
INT RN L R NU COD
For Federa ncome ta purposes, the ta -e empt status of ds-
abty retrement pay ot a retred otcer of the Reguar rmy,
whch pay s suspended durng hs empoyment as a cvan wth the
Federa Government, w not be affected when payment thereof Is
resumed upon termnaton of such cvan empoyment. The com-
pensaton receved by the ta payer durng such cvan empoyment
s ncudbe n gross ncome under secton 22(a) of the Interna
Revenue Code.
dvce s requested as to the ta -e empt status of dsabty retre-
ment pay receved by a retred offcer of - the Reguar rmy where
such pay s suspended durng hs empoyment as a cvan wth the
Federa Government but s to be resumed upon termnaton of such
cvan empoyment.
In the nstant case, an offcer of the Reguar rmy was retred from
actve servce under secton 12 1 of the Revsed Statutes (secton
933, Tte 10, U. S. C. .) whch provdes as foows:
When a retrng board fnds that an offcer s ncapactated for actve servce,
and that hs ncapacty s the resut of an ncdent of servce, and such decson
s approved by the Presdent, sad offcer sha be retred from actve servce
and paced on the st of retred offcers.
Secton 12 1 of the Revsed Statutes, supra, was repeaed, effectve
October 1, 19 9. by secton 31(b)(2) of the Career Compensaton
ct of 19 9 (G3 Stat. 02, 3 ), and secton 02 of such ct was
enacted n eu thereof but not mted to secton 12 1 of the Revsed
Statutes. (See I. T. 017, C. . 19 0-2, 12, reatng to the ta abe
status of dsabty retrement pay receved by members of the un-
formed servces who retre under secton 02(f) of the Career
Compensaton ct.)
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73
1 22(b).
I. T. 36 1 (C. . 19 , 70) hods that the retrement pay or aow-
ances receved by offcers of the Reguar rmy who have been retred
from actve servce under secton 12 1 of the Revsed Statutes, supra,
for persona n|ures or sckness resutng from actve servce n the
Unted States rmy, are not sub|ect to Federa ncome ta for the
year 19 2 and subsequent years.
It s hed that, for Federa ncome ta purposes, the ta -e empt
status of dsabty retrement pay of a retred offcer of the Reguar
rmy, whch pay s suspended durng hs empoyment as a cvan
wth the Federa Government, w not be affected when payment
thereof s resumed upon termnaton of such cvan empoyment.
The compensaton receved by the ta payer durng such cvan
empoyment s ncudbe n gross ncome under secton 22(a) of the
19 2-23-13961
I. T. 107
INT RN L R NU COD
Sef-nsured pans estabshed by empoyers whch provde for
the payment of sckness or accdent dsabty benefts to ther em-
poyees, and whch are not n themseves pans of Insurance wthn
the purvew of secton 22(b)( ) of the Interna Revenue Code, do
not become pans of nsurance merey by vrtue of compance wth
State dsabty benefts statutes and approva by the approprate
State agences. enefts receved under sef-nsured pans whch do
not quafy as pans of nsurance are ncudbe u gross ncome of
the recpents and are sub|ect to wthhodng of ncome ta at the
source on wages under secton 1622 of the Code.
I. T. 000 (C. . 19 0-1, 21), I. T. 01 (O. . 19 0-1, 23), and
I. T. 000 (C. . 19 1-2, 11) modfed.
dvce s requested whether dsabty benefts receved by em-
poyees under a sef-nsured pan estabshed by an empoyer and ap-
proved by approprate State agences as conformng to the requre-
ments of artce 9 (known as the dsabty benefts aw) of the New
York workmen s compensaton aw, and chapter 21, tte 3 of the
Revsed Statutes of New ersey, as amended, are e cudabe from gross
ncome under secton 22(b)( ) of the Interna Revenue Code and
whether such payments are sub|ect to wthhodng of ncome ta at
the source on wages under secton 1622 of the Code.
The submtted sef-nsured pan provdes reguar saared and
houry empoyees who are necessary absent from work because of
ness or accdent wth cash benefts whch equa reguar wages (wth
the e cepton of a 3-day watng perod for houry empoyees) and
whch e ceed n amount and duraton benefts requred by New York
and New ersey dsabty benefts statutes. Such cash benefts are
provded not ony n case of an accdent sustaned n connecton wth
company actvtes but aso n the event of any other type of accdent.
The pan aso provdes that f an absence from work s due to sckness
or accdent whch enttes empoyees to payments under workmen s
compensaton aws, ony the dfference, f any, between the payments
under the company pan and any such other compensaton w be
aowed. The empoyer has the soe dscreton to determne who
2 2100 3 6
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f 29.22(b)(3)- .
7
sha receve benefts and may aso revoke the pan at w wthn the
tme mts f ed by appcabe State dsabty benefts statutes. ene-
fts pad under the sef-nsured pan are not made from any nde-
pendent fund or under any contract wth an nsurance carrer, the
entre e pense beng borne by the empoyer.
Secton 22(b) ( ) of the Code provdes n part as foows:
(b) cusons From Gross Income. The foowng Items sha not be
ncuded n gross ncome and sha be e empt from ta aton under ths chapter
chapter 1 of the Code :
( ) Compensaton fob n|ures or sckness. cept n the case of
amounts attrbutabe to (and not n e cess of) deductons aowed under
secton 23( ) n any pror ta abe year, amounts receved, through accdent
or heath nsurance as compensaton for persona n|ures or
sckness Itacs supped.1
It s hed that the sef-nsured pan n the nstant case s not n tsef
a pan of nsurance wthn the purvew of secton 22(b)( ) of the
Code. The fact that such pan has been estabshed pursuant to State
dsabty benefts statutes and has been approved by the approprate
Sate agences does not transform t nto a pan of nsurance. Snce
the pan does not quafy as a pan of nsurance, benefts receved there-
under are ncudbe n gross ncome of the recpents and are sub|ect
to wthhodng of ncome ta at the source on wages under secton
1622 of the Code.
I. T. 000 (C. . 19 0-1,21), I. T. 01 (C. . 19 0-1, 23), and I. T.
060 (C. . 19 1-2. 11) are modfed to the e tent that they are n-
consstent wth the vews e pressed heren.
Pursuant to authorty contaned n secton 3791(b) of the Interna
Revenue Code, the nstant rung w not be apped wth respect to
dsabty beneft payments receved pror to anuary 1, 19 3, under a
sef-nsured pan whch has been approved by approprate State agen-
ces as conformng to the requrements of State dsabty benefts
statutes.
INT RN L R NU COD
Retrement pay of Dstrct of Coumba fremen. (See Ct. D. 17 0,
page 6 .)
Secton 29.22(b) (2)- : mpoyees annutes.
INT RN L R NU COD
Federa ncome ta treatment by nonresdent benefcares of em-
poyees annutes. (See IR-Mm. 71, page 170.)
Secton 29.22(b) (3)-1: Gfts and bequests. 19 2-20-1392
( so Secton 22(a), Secton 29.22(a)-2.) I. T. 09
INT RN L R NU COD
mounts receved by former empoyees (ctzens of the Unted
States) of the Isthman Cana Commsson or the Panama Ra-
road Co. under the prevsons of I ubc Law 319, Seventy-eghth
Congress ( Stat. L 7), approved May 29, 19 , consttute gfts
under secton 22(b)(3) of the Interna Revenue Code and are not
ncudbe n the gross ncome of the recpents.
I. T. 3701 (C. . 19 , 66) revoked.
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7
29.22(d)- .
Reconsderaton has been gven to I. T. 3701 (C. . 19 , 66) n
vew of the decson n ndrew W. Dewng v. Unted States (101
Fed. Supp. 92).
In I. T. 3701, mpra, t s hed that annutes receved by cvan
ofcas and empoyees (ctzens of the Unted States) of the Isthman
Cana Commsson or the Panama Raroad Co. under the provsons
of Pubc Law 319, Seventy-eghth Congress ( Stat. 2 7), approved
May 29, 19 . n recognton of servces rendered durng the construc-
ton perod (May , 190 , to March 31, 191 ) of the Panama Cana,
are sub|ect to Federa ncome ta and that the fu amount of such
annutes s ncudbe n the gross ncome of the recpents.
Secton 22(b)(3) of the Interna Revenue Code provdes n part
as foows:
(b) cusons From Gnoss Income. The foowng tems sha not be
ncuded n gross ncome and sha be e empt from ta aton under ths chapter
chapter 1 of the Code :

(3) Gfts, bequests, devses, and nhertances. The vaue of property
acqured by gft, bequest, devse, or Inhertance.
In the Dewng case, supra, the court emphaszed that 30 years or
more had eapsed between the renderng of the servces and the pas-
sage of the ct of May 29, 19 , and that a ega obgaton on
the part of the Unted States wth respect to such servces had been
dscharged. The court concuded that the ct was passed, not to
fuf a ega obgaton, but as a token of the grattude of Congress
for the arduous servces rendered, and that the amounts pad under
the ct were gfts from the Unted States Government and shoud
not be ncuded n the gross ncome of the ta payer.
The ureau w foow the decson n the Dewng case wth
respect to amounts pad under Pubc Law 319, supra, but w not
consder that case as a precedent n the dsposton of any case not
nvovng amounts pad under Pubc Law 319. ccordngy, I. T.
3701, supra, s hereby revoked.
Prze receved for symphonc composton. (See Ct. D. 17 6,
page 66.)
S CTION 22(d). GROSS INCOM : IN NTORI S-
L CTI M T OD
Prce nde es for uy 10 2. pubshed by the ureau of Labor Sta-
tstcs September , 10. 2, for use by department stores empoyng
the reta nventory and eectve nventory methods.
The foowng prce nde es for uy 19 2, pubshed by the ureau
of Labor Statstcs on September , 19 2, for use by department
Secton 29.22(b) (3)-: Gfts and bequests.
INT RN L R NU COD
Secton 29.22 (d)-: Inventores under eec-
tve method.
19 2-26-13990
I. T. 112
INT RN L R NU COD
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29.22(d)-7.)
76
stores empoyng the reta nventory and eectve nventory methods,
are accepted by the ureau of Interna Revenue pursuant to Treasury
Decson (10 (C. . 19 -1,16), approved March ,19 , and Mmeo-
graph 62 (C. . 19 -1, 21), dated March 9, 19 , for approprate
appcaton to nventores for ta abe years of 12 months ended on
une 30,19 2, and uy 31,19 2.
ureau of Labor Statstcs, department store nventory prce nde es, by
department groups
anuary 19 1 1001
Percent
Oroup
uy 19M
uy 196:
change from
uy 19 1 to
uy 19 2
222.
20 .2
- .2
II. Show
222.
210.
- .
1 0.3
17 .7
-3.1
179.
179.
- .
203.3
203.
0.0
209.
20 .3
-2.1
19 .0
190.0
.0
III. Ma|or appances and eectrca goods
107.3
1 9.0
- .0
I . Notons and toet artces
160.3
160.
0.1
16 .3
170.6
1.
193.7
1 9.
-2.2
Tota. Oroups I. II, and III
19 .0
1 6.6
-1
193.6
1 .
-2.6
Secton 29.22(d)-7: Invountary qudaton 19 2-21-13936
and repacement. T. D. 932
( so Secton 19.22(d)-7, Reguatons 103.)
TITL 20 INT RN L R NU . C PT R I, SU C PT R , P RT 19 ND
P RT 29
Reguatons 103 and 111 amended to conform to Pubc Law 919,
shty-frat Congress C. . 19 1-1, 179 , and to secton 306 of the
Revenue ct of 19 1, reatng to nvountary qudaton and re-
pacement of nventores accounted for on the ast-In frst-out
method.
Washngton 2 , D. C.
Concerned:
On pr 9, 19 2, notce of proposed rue makng to conform Regu-
atons 103 26 CFR, part 19 and 111 26 CFR, part 29 to Pubc
Law 919, ghty-frst Congress C. . 19 1-1,179 , approved anuary
11, 19 1, and to secton 306 of the Revenue ct of 19 1, approved
October 20, 19 1, was pubshed n the Federa Regster (17 F. R.
310 ). fter consderaton of a reevant matter presented by n-
terested persons, the amendments to such reguatons set forth beow
are hereby adopted.
R GUL TIONS 103 2U CFR, P RT 191
19.22(d)- 26 CFR 19.22(d)- the foowng:
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77
29.22 (d)-7.
PU LIC L W 919, IG TY-FIRST CONGR SS, PPRO D
NU RY 11, 19 1
e t enacted by the Senate am Tonse of Representatve of the
Unted States of merca n Congress assembed, That secton 22(d) (6)
(reatng to the nvountary qudaton and repacement of eectve
Inventores) of the Interna Revenue Code Is hereby amended as
foows:
(a) y amendng the tte of subparagraph ( ) thereof to read as
foows:
( ) d|ustment of Net Income and Resutng Ta . Years begn-
nng pror to anuary 1, 19 .
(b) y strkng out In subparagraph ( ) thereof anuary 1, 10 1
and by nsertng In eu thereof anuary 1, 19 3 .
(c) The amendments made by ths secton sha be appcabe wth
res ect to ta abe years begnnng after December 31, 19 0.

Par. 2. Secton 19.22 (d)-7, as amended by Treasury Decson 1
C. . 19 1-1, 11 , approved May 22, 19 1 2G CFR 19.22(d)-7 , s
further amended by strkng from the second paragraph, as revsed
by Treasury Decson 6 C. . 19 -2, 1 , approved duy 20, 19
26 CFR 19.22(d)-7 , the date anuary 1, 19 1 and nsertng n
eu thereof the foowng: anuary 1, 19 3 .
R GUL TIONS 111 20 CFR, P RT 291
Par. 3. There s nserted mmedatey precedng secton 29.22 (d)-
26 CFR 29.22(d)- the foowng:
PU LIC L W 919, IG TY-FIRST CONGR SS, PPRO D
NU RY 11, 19 1
e t enacted by the Senate and ouse of Representatves of the
Unted States of merca n Congress assembed, That secton 22(d) (0)
(reatng to the nvountary qudaton and repacement of eectve n-
ventores) of the Interna Revenue Code s hereby amended as foows:
(a) y amendng the tte of subparagraph ( ) thereof to read as
foows:
( ) d|ustment of Net Income and Resutng Ta . Years
begnnng pror to anuary 1, 10 .
(b) y strkng out n subparagraph ( ) thereof anuary 1, 10 1
and by nsertng n eu thereof anuary 1, 10 3 .
(c) The amendments made by ths secton sha be appcabe wth
respect to ta abe years begnnng after December 31,19 0.
S C. 2. LI UID TIONS IN T L Y RS NDING FT R
UN 30, 19 0, ND PRIOR TO NU RY 1, 19 .
(a) In Gknkra. Secton 22(d)(0) of the Interna Revenue Code
Is hereby amended by the addton of the foowng subparagraph :
(F) Years ndng fter une 30,10 0, and Pror to anuary
1, 19 .
() d|ustment of Net Income and Resutng Ta . If,
for any ta abe year endng after une 30,19 0, and pror to
anuary 1, 10 , the cosng nventory of a ta payer nven-
toryng goods under the method provded n ths subsecton
reh cts a decrease from the openng nventory of such
goods for such year, and f the ta payer eects, at such
tme and n such manner and sub|ect to such reguatons
as the Commssoner wth the approva of the Secretary
may prescrbe, to have the provsons of ths paragraph
appy, and f t s estabshed to the satsfacton of the
Commssoner, n accordance wth such reguatons, that
mch decrease s attrbutabe to the nvountary qudaton
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29.22(d)-7.
7
of sucL Inventory as defned n subparagraph ( ) (as mod-
fed by cause (11) of ths subparagraph), and If the cosng
nventory of a subsequent ta abe year, endng pror to
anuary 1, 19 6, refects a repacement, n whoe or n part,
of the goods so prevousy qudated, the net ncome of
the ta payer otherwse determned for the year of such
nvountary qudatons sha be ncreased by an amount
equa to the e cess, f any, of the aggregate cost of such
goods refected n the openng .nventory of the year of n-
vountary qudaton over the aggregate repacement cost,
or decreased by an amo at equa to the e cess, f any, of
the aggregate repacement cost of such goods over the
aggregate cost thereof refected n the openng nventory
of the year of the nvountary qudaton. The ta es m-
posed by ths chapter and by chapter 2 for the year of such
yqudaton, for precedng ta abe years, and for a ta abe
years ntervenng between the year of qudaton and the
year of repacement sha be redetermned, gvnp effect
to such ad|ustments. ny ncrease n such ta es resutng
from such ad|ustments sha be assessed and coected as a
defcency but wthout nterest, and any overpayment so
resutng sha be credted or refunded to the ta vayer
wthout nterest.
() Defnton of Invountary Lqudaton. For the
purposes of ths subparagraph the term nvountary
qudaton sha have the meanng gven to t n subpara-
graph ( ) and, n addton. It sha mean a faure, as
referred to n that subparagraph, on the part of the ta -
payer due, drecty and e cusvey, to dsrupton of norma
trade reatons between countres For the purposes of
ths subparagraph the words enemy and war , as used
n subparagraph ( ), sha be nterpreted, pursuant to
reguatons prescrbed by the Secretary, n such a way as
to appy to crcumstances, occurrences and condtons, ack-
ng a state of war, whch are smar, by reason of a state
of natona preparedness, to those whch woud e st under
a state of war.
() ppcaton o Subparagraphs (C) and ( ).
Subparagraphs (C) and ( ), to the e tent that they refer
to any ta payer sub|ect to the provsons of subparagraph
( ) or to the ad|ustments specfed n or resutng from
the effect of subparagraph ( ), sha be as appcabe to a
ta payer sub|ect to the provsons of ths subparagraph or
to ad|ustments specfed n or resutng from the effect of
ths subparagraph as though they specfcay referred to
ths subparagraph. For ths purpose, and wth respect to
the ta abe years covered by ths subparagraph, the refer-
ence n subparagraph ( ) to secton 73 (d) sha be taken
as a reference to secton 0(d) sc .
(b) ffectve Date. The amendment made by ths secton sha be
appcabe wth respect to ta abe years endng after une . 10, 19 0.
pproved anuary 11. 19 1.
S C. 30f. IN OLUNT RY LI UID TION ND R PL C M NT OF
IN NTORY (R NU CT OF 19 1, PPRO D OCTO R
20, 19 1
(a) mendment of Secton 22(d) (6) (F) ((. Secton 22(d)(6)-
(F) () (reatng to repacement of nventory nvountary qudated)
s hereby amended by strkng out the ast sentence and nsertng n
eu thereof the foowng: If, for any ta abe year endng after une
30, 19 0. and pror to anuary 1, 19 3, subparagraph (C) s appcabe
wth respect to nvountary qudatons of goods of the same cass sub-
|ect to te provsons of both subparagraph ( ) and ths subparagraph,
the nvountary qudatons of such goods sub|ect to the provsons
of ths subparagraph sha be consdered for the purpose of subpara-
graph (C) as havng occurred pror to the nvountary qudatons of
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79
29.22(d)-7.
such goods sub|ect to the provsons of subparagraph ( ). For the pur-
pose of ths cause, and wth respect to the ta abe years covered by
ths subparagraph, the reference n subparagraph ( ) to secton 73 (d)
sha be taken as a reference to secton 2(d).
(b) ffectve Date. The amendment made by subsecton (a) sha
be appcabe wth respect to ta abe years endng after une 30, 19 0.
Par. . Secton 29.22(d)-7, as amended by Treasury Decson 1,
approved May 22, 19 1 2C CFt 29.22(d)-7 , s further amended as
foows:
( ) y strkng from the frst sentence If prevang war cond-
tons beyond the contro of the ta payer shoud render t mpossbe
durng the perod of the war for a ta payer usng the eectve nven-
tory method to have on hand at the cose of the ta abe year a stock
of merchandse and nsertng n eu thereof the foowng:
If prevang war condtons beyond the contro of the ta payer, or certan pre-
scrbed postwar condtons beyond hs contro, shoud render t mpossbe ether
durng the perod of the war or wthn the prescrbed postwar perod for a
ta payer usng the eectve Inventory method to have on hand at the cose of
the ta abe year a stock of merchandse
( ) y strkng If the ta payer notfes the Commssoner at any
tme not ater than 6 months after the tme of fng hs ncome ta
return for the year of the qudaton from the second sentence and
If the ta payer notfes the Commssoner at any tme not ater than 6 months
after the tme of fng hs ncome ta return for the year of the qudaton, or
at any tme not ater than December 1 , 10 2, n the case of the year of quda-
ton beng a ta abe year endng after une 30, 19 0, and before March 1, 19 2,
(C) y strkng anuary 1, 19 1 from the second paragraph and
nsertng n eu thereof the foowng: anuary 1, 19 3 .
(D) y nsertng at the end of the second paragraph the foowng:
The statutory provsons affordng recognton to the nvountary character of
nventory decreases whch become apparent n postwar ta abe years and au-
thorzng for ta purposes a repacement of the tems of merchandse so qu-
dated are mted n ther appcaton to qudatons occurrng n ta abe years
endng after une 30, 19 0, and pror to anuary 1, 19 , and to nventory re-
pacements effected n ta abe years endng pror to anuary 1, 19 0.
( ) y strkng faure on the part of the ta payer from the
frst sentence of the thrd paragraph and nsertng n eu thereof the
foowng: Wth respect to nventory decreases occurrng durng the
perod of the war, a faure on the part of the ta payer .
(F) y nsertng mmedatey after the thrd paragraph the fo-
owng new paragraph:
Wth respect to nventory decreases occurrng n ta abe years endng after
une 30, 19 0, and pror to anuary 1, 19 , the rues prescrbed n the precedng
paragraph sha appy. For the purpose of such rues, the words enemy and
war sha be nterpreted to appy to crcumstances, occurrences, and condtons
ackng a state of war, whch are smar, by reason of a state of natona pre-
paredness, to those whch woud e st under a state of war. The varous drec-
tves, orders, reguatons, and aotments ssued by the Federa Government n
connecton wth natona preparedness are among such crcumstances and con-
dtons. Lkewse, a vountary compance wth a request of an authorzed
representatve of the Federa Government made upon an ndustry or an mportant
segment thereof, or a vountary aocaton of materas by an ndustry or mpor-
tant segment thereof sanctoned by the Federa Government, f made n con-
necton wth the natona preparedness program, mght be consdered as such
a crcumstance or condton. Smary, so much of an Inventory decrease as
s drecty and e cusvey attrbutabe to the Federa Government s stock png
Program for perods durng whch an tem s not sub|ect to aotment sha aso
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29.22(d)-7.
0
be consdered as sub|ect to the provsons of secton 22(d) (6). Thus, so much
of an nventory decrease as s due whoy to the effect of drectves, orders,
reguatons, or aotments ssued pursuant to the Defense Producton ct of 19 0,
or to any other crcumstance or condton whch s soey dependent upon other
actons taken by the Federa Government n furtherance of the natona pre-
paredness program, ordnary sha be consdered as an nvountary qudaton
under secton 22(d)(0) and ths secton; however, to the e tent that such a
decrease s due to the dsposton of goods acqured n voaton of such drectves,
orders, reguatons or aotments, such decrease sha not be consdered as such
a nvountary qudaton. Wth respect to an nventory decrease n a ta abe
year endng after une 30, 19 0, and pror to anuary 1, 19 , due drecty and
e cusvey to a dsrupton of norma trade reatons between countres, such an
nventory decrease sha be consdered as an nvountary qudaton sub|ect to
the rues and requrements prescrbed n the precedng paragraphs, ncudng the
requrement that the ta payer estabsh to the satsfacton of the Commssoner
the cause of the nvountary qudaton. dsrupton of norma trade reatons
between countres may be reected by unusua e port mtatons m sed by a
foregn government, by unusua e change restrctons, or by other unusua cr-
cumstances or condtons beyond the contro of the ta payer.
(() y strkng the frst sentence from the fourth paragraph and
If the ta payer woud have the nvountary qudaton and repacement pro-
vsons appcabe wth respect to any nventory decrease, he must so eect wthn
the tme prescrbed by these reguatons.
( ) y strkng from the second sentence of the fourth paragraph
(3) the crcumstances reed upon as renderng the ta payer unabe
to mantan throughout the ta abe year a norma nventory of the
tems nvoved and nsertng n eu thereof the foowng:
(3) the crcumstances reed upon as renderng the ta payer unabe to mantan
throughout the ta abe year a norma nventory of the tems nvoved, ncudng
evdence of the appcabe Natona Producton uthorty nventory contro
fgures for the begnnng and the cose of the ta abe year (or f none, a state-
ment to that effect), aotments apped for, aotments receved, and reason for
faure to pace aotments receved
(I) y strkng the perod at the end of the frst sentence of the
penutmate paragraph and nsertng n eu thereof the foowng:
; however, n a case nvovng Invountary qudatons of goods of the same
cass sub|ect to the provsons of both secton 22(d)(6)( ) and secton
22(d)(6)(F). the nvountary qudatons of such goods sub|ect to the prov-
sons of secton 22(d)(6)(F), sha, for the purpose of repacements made n
ta abe years endng pror to anuary 1, 19 3, be consdered as havng occurred
pror to the nvountary qudatons of such goods sub|ect to the provsons of
secton 22(d) (6) ( ).
( ) y changng the penutmate sentence of the ast paragraph
to read as foows:
The ta prevousy determned sha be ascertaned n accordance wth the
prncpes stated n secton 73 (d) and secton 2(d) and those sectons of the
reguatons prescrbed thereunder
(Ths Treasury Decson s ssued under the authorty contaned
n sectons 22. 62, and 371)1 of the Interna Revenue Code ( 3 Stat.
9, 32, G7; 26 U. S. C. 22, 62, 3791).)
Norman . Sdgarman,
pproved September 22, 19 2.
Thomas . Lynch,
ctng Secretary of the Treamry.
(Fed wth the Dvson of the Federa Regster September 2 , 19 2, : 6 a. m.)
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1 29.22(n)-
S CTION 22(k). GROSS INCOM : LIMONY,
TC., INC OM
Secton 29.22(k)-: mony and separate man-
tenance payments Income of former wfe.
INT RN L R NU COD
Perodc payments receved by a dvorced wfe after she has re-
marred. (See I. T. 10 , page 113.)
S CTION 22(n). GROSS INCOM : D FINITION OF
D UST D GROSS INCOM
Secton 29.22(n)-: d|usted gross ncome. 19 2-26-13991
( so Secton 117, Sectons 29.117-1, 29.117 T.D. 9 1
-2, 29.117-3, 29.117-6, 29.117-7: Secton
122, Secton 29.122-3; Secton 1G2, Sectons
29.1G2-1, 29.1C2-2; Secton 1 9, Secton
29.1 9-1.)
TITL 26 INT RN L R NU . C TF.R I. SL ItC PT R , P RT 29.
Reguatons 111 amended to conform to sectons 123 and 322 of
the Revenue ct of 1U 1, reatng to the treatment of capta gans
and osses.
Washngton 2 , D. C.
To Offcers and mpoyees of the Interna Revenue Servce and
Others Concerned:
On ugust , 19 2, notce of proposed rue makng wth respect to
amendments to conform Reguatons 111 to secton 123 (reatng to
the aternatve ta on corporatons n the case of capta gans and
osses) and secton 322 (reatng to the treatment of capta gans and
osses) of the Revenue ct of 19 1 ( 2d Cong., 1st sess.), approved
October 20, 19 1, was pubshed n the Federa Regster (17 F. R.
72 9). No ob|ecton to the rues proposed havng been receved, the
amendments of Reguatons 111 20 CFR, part 29 , set forth beow
are hereby adopted.
29.22 (n)-, as added by Treasury Decson 2 C. . 19 , 10 ,
approved December 29, 19 26 CFR 29.22(n)- , the foowng:
S C. 322. C PIT L G INS ND LOSS S R NU CT OF
19 1, PPRO D OCTO R 20, 19 1 .

(c) Technca mendments.
(1) mendment ok secton 22(n). Secton 22(n) (reatng to
the defnton of ad|usted gross ncome) s hereby amended by strk-
ng out the word and at the end of paragraph ( ). by strkng
out the perod at the end of paragraph (G) and Insertng In eu
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29.22(n)-.
2
thereof ; and , and by nsertng after paragraph (6) the foow-
ng new paragraph:
(7) I N -T capta oans. The deducton aowed by sec-
ton 23 (ee).

(d) ffectve Date. The amendments made by ths secton sha
be appcabe ony wth respect to ta abe years begnnng on or after the
date of the enactment of ths ct.
Par. 2. Secton 29.22(n)-, as added by Treasury Decson 2
26 CFR 29.22(n)- , s amended as foows:
( ) y strkng the word and mmedatey precedng (6) n
the thrd paragraph thereof.
( ) y strkng the perod at the end of the thrd paragraph and
nsertng n eu of such perod a semcoon and the foowng: and
(7) for ta abe years begnnng on or after October 20, 19 1, the
deducton for ong-term capta gans aowed by sectons 23(ee) and
117(b).
Par. 3. There s nserted mmedatey after secton 29.23(bb)-, as
added by Treasury Decson 73 C. . 19 2-1,23 , approved Decem-
ber 7,19 1 26 CFR 29.23(bb)- , the foowng:
S C. 322. C PIT L G INS ND LOSS S R NU CT OF 19 1,
(a) Treatment of Long-Tkrm Capta Gans and Losses.
(1) mendment of secton 23. Secton 23 (reatng to deduc-
tons from gross ncome) s hereby amended by addng at the end
thereof the foowng new subsecton :
(ee) Lono-Tebm Capta Gans. In the case of a ta payer other
than a corporaton, the deducton for ong-term capta gans provded
n secton 117(b).

(d) ffectve Date. The amendments made by ths secton sha be
appcabe ony wth respect to ta abe years begnnng on or after the
Par. . There s nserted mmedatey precedng secton 29.117-1
S C. 123. COMPUT TION OF LT RN TI C PIT L G INS
T R NU CT OF 19 1, PPRO D OCTO R 20, 19 1 .
Secton 117(c)(1) (reatng to aternatve ta on corporatons) s
hereby amended by strkng out the second paragraph and nsertng n
( ) parta ta sha frst be computed upon the net Income
reduced by the amount of such e cess, at the rates and n the manner
as f ths subsecton had not been enacted.
( ) There sha then be ascertaned an amount equa to 2 per
centum of such e cess, e cept that n the case of any ta abe year
begnnng after March 31. 19 1. and before pr 1, 19 , there sha
be ascertaned an amount equa to 26 per centum of such e cess.
(C) The tota ta sha be the parta ta computed under sub-
paragraph ( ) pus the amount computed under subparagraph ( ).
S C. 322. C PIT L G INS ND LOSS S R NU CT OF 19 1,
(a) Tkeatmknt of Long-Term Capta Gans and Losses.

(2) mendment of secton n(b). Secton 117(b) (reatng
to treatment of ong-term capta gans and osses) s hereby
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29.22(n)-.
(b) Deducton Fbom Gross Income. In the case of a ta payer
other than a corporaton, f for any ta abe year the net ong-term cap-
ta gan e ceeds the net short-term capta oss, 0 per centum of the
amount of such e cess sha be a deducton from gross ncome. In the
case of an estate or trust, the deducton sha be computed by e cudng
the porton (f any), of the gans for the ta abe year from saes or
e changes of capta assets, whch, under secton 162 (h) or (c), s n-
cudbe by the ncome benefcares as ganed derved from the sae or
e change of capta assets.
(b) ternatve Ta . Secton 117(c)(2) (reatng to aternatve
ta ) s hereby amended to read as foows:
(2) Other ta payers. If for any ta abe year the net ong-
term capta gan of any ta payer (other than a corporaton) e -
ceeds the net short-term capta oss, there sha be eved, coected,
and pad, n eu of the ta mposed by sectons 11 and 12 (or, n
the case of certan ta -e empt trusts, n eu of the ta mposed by
secton 21), a ta determned as foows, f and ony f such ta Is
ess than the ta mposed by such sectons:
( ) parta ta sha frst be computed upon the net n-
come reduced hy an amount equa to 0 per centum of such
e cess, at the rates and n the manner as f ths subsecton had
not been enacted.
( ) There sha then be ascertaned an amount equa to 2
per centum of the e cess of the net ong-term capta gan over
the net short-term capta oss. In the case of any ta abe
year begnnng after October 31, 19 1, and before November 1,
19 3, there sha be ascertaned, n eu of the amount computed
under the precedng sentence, an amount equa to 20 per centum
of the e cess of the net ong-term capta gan over the net
short-term capta oss.
(C)The tota ta sha be the parta ta computed under
subparagraph ( ) pus the amount computed under subpara-
graph ( ).

(2) mendment of secton 117(a). Paragraphs (2) and ( )
of secton 117(a) (reatng to defntons of short-term capta gan
and ong-term capta gan) are each hereby amended by strkng
out net ncome and nsertng n eu thereof gross ncome .
(3) mendment of secton 7(|). Secton 117(|)(2)( ) (re-
atng to gans and osses from nvountary converson and from the
sae or e change of certan property used n the trade or busness)
( ) In determnng under ths paragraph whether gans
e ceed osses, the gans descrbed theren sha be ncuded
ony f and to the e tent taken nto account n computng gross
ncome and the osses descrbed theren sha be ncuded ony
f and to the e tent taken nto account n computng net n-
come, e cept that subsecton (d) sha not appy.

date of the enactment of ths ct. In determnng under secton 117(e)
of the Interna Revenue Code the amount of the carryover to a ta abe
year begnnng on or after such date, of the capta oss for a ta abe year
begnnng before such date, such amendments sha not affect the com-
putaton of the amount of the net capta oss or of the net capta gan
for any ta abe year begnnng before such date.
Par. . Secton 29.117-1, ts amended by Treasury Decson 93
C. . 19 2-1, 126 , approved pr , 19 2 26 CFR 29.117-1 , s
further amended as foows:
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S 29.22(n)-.

( ) y strkng the second sentence of the second paragraph
thereof and nsertng n eu thereof the foowng:
Gans and osses from the sae or e change of such property are not treated as
gans and osses from the sae or e change of capta assets, e cept to the e tent
provded n secton 117(|).
( ) y strkng from the ffth sentence of the second paragraph
thereof the words s not sub|ect to the mtatons of secton 117 (b),
(c), and (d) and nsertng n eu thereof the words s not sub|ect
to the provsons of secton 117 .
(C) y strkng from the fourth sentence of the fourth paragraph
thereof the words are not sub|ect to the percentage provsons of
secton 117(b) and osses from such transactons are not sub|ect to the
mtaton on osses provded n secton 117(d) and nsertng n eu
thereof the words are not sub|ect to the mtatons provded n
secton 117 .
(D) y strkng from the eghth paragraph of such secton (begn-
nng Gans and osses from the sae or e change ) the second sen-
tence thereof.
( ) y strkng the ffth sentence from the nnth paragraph
thereof.
26 CFR 29.117-2 , s further amended as foows:
( ) y strkng a that precedes paragraph (b) thereof and n-
sertng n eu thereof the foowng:
Sec, 29.117-2. Percentage of Capta Gan or Loss Taken Into ccount
Deducton for Long-Term Capta Gans Lmtaton on Capta Losses Net
Capta Loss Carry-Ovek. (a) Oenera. (1) Ta abe years begnnng pror to
October 20, 19 1. In computng the net capta gan, net capta oss, ad|usted
gross ncome, and net ncome of a ta payer, other than a corporaton, for a ta a-
be year begnnng pror to October 20, 19 1 (the date of the enactment of the
Revenue ct of 19 1), ony the foowng percentages of the gan or oss (com-
puted under secton 111, recognzed under secton 112. and taken nto account
wthout regard to secton 117) upon the sae or e change of a capta asset sha
be taken nto acerunt:
() One hundred percent f the capta asset has been hed for 6 months
or ess:
( Ffty percent f the capta asset has been hed for more than 6
months.
For nstance, f unmproved rea estate purchased by an ndvdua for 20,000
s a capta asset and s sod by hm for 2 ,000 after havng been hed for more
than 0 months, ony 0 percent of the recognzed gan ( ,000), or 2, 00, sha
be taken nto account n computng net ncome; or f such property s sod for
1 ,000, ony 0 percent of the recognzed oss ( ( ,000), or 3,000, sha be so
taken nto account. (In the case of nonresdent aen ndvduas not engaged
n trme or busness wthn the Unted States, see secton 211 and the regua-
tons thereunder for the determnaton of the net amount of capta gans sub|ect
to ta wth respect to ta abe years begnnng on or after anuary 1, 19 0.)
(2) Ta abe years begnnng on or after October 20, 19 1. In computng gross
ncome, ad|usted gross ncome, net ncome, net capta gan, and net capta oss,
for a ta abe year begnnng on or after October 20, 19 1, 100 percent of any
gan or oss (computed under secton 111, recognzed under secton 112. and
taken nto account wthout regard to secton 117) upon the sae or e change
of a capta asset sha be taken nto account regardess of the perod for whch
the capta asset has been hed. Nevertheess, the net short-term capta gan
or oss and the net ong-term capta gan or oss must be separatey computed.
In computng the ad|usted gross ncome or the net ncome of a ta payer other
than a corporaton, f for any suct ta abe year the net ong-term capta gan
e ceeds the net short-term capta oss, 0 percent of the amount of the e cess
s aowabe as a deducton from gross ncome under sectons 23(ee) and 117(b).
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29.22(n)-.
For nstance, f nn ndvdua reazes 2,000 of ong-terra capta gan and sus-
tans 1, 00 of short-term capta oss durng the ta abe year, the whoe amount
of the gan ( 2,000) Is ncudbe n gross ncome. Snce the net ong-term
capta gan e ceeds the net short-term capta oss by 00, 0 percent of tho
e cess ( 2 0) s aowabe as a deducton under secton 23(ee).
In the case of an estate or trust, for the purpose of computng the deducton
aowabe under secton 23(ee), any ong-term or short-term capta gans whch
under secton 102 (b) or (c) are ncudbe n the gross ncome of ts ncome
benefcares as gans derved from the sae or e change of capta assets must
be e cuded n determnng whether for the ta abe year of the estate or trust
ts net ong-term capta gan e ceeds ts net short-term capta oss. For e -
ampe, durng 10 2 a trust reazed a gan of 1,000 upon the sae of stock hed
for 10 months. Under the terms of the trust nstrument a of such gan must
be dstrbuted not ater than 30 days after the cose of the year to , the soe
ncome benefcary. The trust Is not entted to any deducton wth respect to
such gan under sectons 23(ee) and 117(b). Ou the other hand, assumng
bad no other capta gans or osses n 19 2, he woud be entted to a deducton
of 00.
( ) y strkng the second, thrd, and fourth sentences of para-
graph (b) thereof and nsertng n eu of such sentences the foowng:
Thus, where n a ta abe year begnnng pror to October 20, 10 1, an ndvdua
ta payer, hrvng an ordnary net ncome of ,000, has a oss of ,0 ) from the
sae of a capta asset w deh he hed for more than 6 months, of whch oss
2,000 ( 0 percent of ,000) s taken nto account, such net ong-term capta
oss of 2,000 s aowabe ony to the e tent of 1,000, the remanng 1,000 beng
a net capta oss. If the ta payer s ordnary net ncome hnd been 00 nstead
of ,000. ony 00 of the net ong-term capta oss of 2,000 woud have been
aowed, eavng a net capta oss of 1,600. If the ta abe year n ths ustra-
ton were a ta abe year begnnng on or afer October 20, 1061, the entre ,000
oss woud be taken nto account as a net ong-term capta oss, of whch 1,000
and 00 woud be aowabe as deductons under the respectve assumptons,
and the net capta oss woud be 3,000 and 3,000, respectvey. (For carry-
over of a net capta oss, see (c) of ths secton.)
(C) y strkng a that foows the frst paragraph of (c) of such
secton and nsertng n eu thereof the foowng:
The practca operaton of the provsons of secton 117(e)(1) may be us-
trated by the foowng e ampe:
For the ta abe years 19 0 to 19 , ncusve, an ndvdua s assumed to
have a net short-term capta oss, net short-term capta gan, net ong-term
capta oss, net ong-term capta gan, and Let ncome as foows:
Carry-over from pror years:
19 0
19 1
19 2
19 3
19
( 0,000)
( 29. 00)
( 20. 00)
(19. 00)
Net short-term oss (computed wthout regard to the
carry-overs)
(tso, nno)
( ,000)
(10,000)
( 13,000)
Net short-tprm gan (computed wthout regard to the
0,000
Net ong-term oss:
(20. 00)
(10.000)
( ,000)
Net ong-term gan:
2 .000
16,000
00
Ordnary net ncome (computed wthout regard to
capta gans and osseM
600
00
00
1.000
Sf.OOO
Net capta gan (computed wthout regard to the
20, 00
Net capt oss
(so.ono)
(19, 00)
Deducton aowabe under secton 23(ee)
None
None
None
Nono
1,000
1,600
Net ncome (computed wthout regard to deducton
aowabe under secton 23(ee))
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f 29.22(n)-.)
6
N T C PIT L LOSS OF 1930
The net capta oss Is 0,000. Ths fgure, computed by takng Into account
100 percent of short-term gans and osses and 0 percent of ong-term gans and
osses, s the e cess of the osses from saes or e changes of capta assets over
the sum of (1) gans from such saes or such e changes, and (2) ordnary net
ncome of 00. Ths amount may be carred forward n fu as a short-term
oss to 19 1. owever, n 19 1 there was a net capta gan of 20, 00, as defned
by secton 117(a) (10) ( ) and mted by secton 117(e) (1), aganst whch ths
net capta oss of 0,000 s aowed n part. The remanng porton 29. 00
may be carred forward to 19 2 and 19 3 snce there was no net capta gan n
19 2. In 19 3 ths 29, 00 s aowed n fu aganst net capta gan of 36,000,
as defned by secton 117(a) (10) ( ) and mted by secton 117(e)(1). For
19 2 and 19 3 the net ong-term capta oss s computed by takng nto account
100 percent of gans and osses upon the sae or e change of capta assets hed
for more than 6 months. owever, In determnng the amount of the capta
oss carry-over ( 29, 00) to 19 2 and 19 3, the net capta oss for 19 0 s com-
puted by takng nto account ony 0 percent of gans and osses upon the sae or
e change of capta assets hed for more than 6 months, and the net capta gan
for 19 1 s smary computed.
N T C PIT L LOSS OF 19 2
The net capta oss s 19, 00. Ths fgure, computed by takng nto account
100 wrcent of both ong-term and short-term gans and osses, s the e cess of
the osses from saes or e changes of capta assets over the sum of (1) gans
from such saes or e changes and (2) ordnary net ncome of 00. Ths amount
may be carred forward n fu as a short-term oss to 19 3. owever, n 19 3
there was a net capta gan of 6, 00, as defned by secton 117(a) (10) ( ) and
mted by secton 117(e)(1), aganst whch ths net capta oss of 19, 00 s
aowed n part. The remanng porton 13,000 may be carred forward to
1 . Snce ths amount s treated as a short-term capta oss n 19 under
secton 117(e)(1), the e cess of the net ong-term capta gan over the net
short-term capta oss Is 2,( ). af of ths e cess s aowabe as a deducton
under sectons 23(ee) and 117(b). Thus, the ta payer has a net ncome of
1, 00 for 19 .
page 1 1, ths uetn , approved ugust 2 , 19 2 26 CFR 29.117-
2 , s further amended as foows:
( ) y strkng the second sentence of the frst paragraph thereof
For any ta abe year begnnng pror to October 20. 19 1 (the date of the enact-
ment of the Revenue ct of 19 1), ths aternatve ta s the sum of (1) a parta
ta . computed at the rates provded by sectons 11 and 12 on the net ncome,
e cudng therefrom for ths purpose the whoe amount of such e cess of the
net ong-term capta gan (determned by takng nto account ony 0 percent
of the gans and osses upon the sae or e change of capta assets hed for more
than 0 months) over the net short-term capta oss, pus (2) 0 percent of such
e cess. In the case of a ta abe year begnnng on or after October 20, 19 1, ths
aternatve ta s the sum of (1) a parta ta . computed at the rates provded
by sectons 11 and 12 on the net ncome reduced by an amount equa to 0 percent
of the e cess of the net ong-term capta gan (determned by takng nto ac-
count 100 percent of the g:ns and osses upon the sae or e change of capta
assets hed for more than ( mouths) over the net short-term capta oss, pus
(2) 2 percent (or 26 percent f the ta abe year begns after October 31, 19 1,
and before November 1, 19 3) of the e cess of the net ong-term capta gan
over the net short-term capta oss.
( ) y nsertng mmedatey after the words 2 percent n the
second sentence of the second paragraph thereof the foowng: (or
26 percent f the ta abe year begns after March 31,19 1, and before
pr 1, 19 ) .
(C) y nsertng mmedatey after the words provsons of ths
secton n the frst sentence of the thrd paragraph thereof the foow-
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7
20.22(n)-.
ng: (other than those appcabe to a ta abe year begnnng on or
after October 20, 19 1) .
Par. . Secton 29.117-6. as amended by Treasury Decson 1
C. . 19 2-1, 6 , 26 CFR 29.117-6 , s further amended as foows:
( ) y strkng from the frst sentence of the frst paragraph
thereof the words the percentage of the recognzed gan or oss to be
taken nto account under secton 117(b) from a short sae sha be
computed and nsertng n eu thereof the foowng: whether the
recognzed gan or oss from a short sae s ong-term or short-term
capta gan or oss sha be determned .
( ) y strkng from the second sentence of the frst paragraph
thereof the words 100 percent of the recognzed gan or oss woud be
taken nto account under secton 117 (b) and nsertng n eu thereof
the foowng: the recognzed gan or oss woud be consdered short-
term capta gan or oss .
Par. 9. Secton 29.117-7, as amended by Treasury Decson 1 26
CFR 29 117-7 . s further amended as foows:
( ) y strkng therefrom the second and thrd undesgnated para-
graphs and nsertng n eu thereof the foowng:
In determnng whether such gans e ceed such osses for the purposes of
secton 117( ), osses upon the destructon n whoe or n part, theft or .sezure,
requston or condemnaton of the property descrbed n secton 1171|) are
ncuded whether or not there was a converson of such property Into money or
other property. For e ampe. If a capta asset hed for more than s months,
wth an ad|usted bass of 00, s stoen, and the oss from ths theft s not
compensated for by Insurance or otherwse, the 00 oss s ncuded n the
computatons under secton 117(|) to determne whether gans e ceed osses.
Furthermore, n makng ths computaton for any ta nbe year, the gans and
osses descrbed In secton 117 ( ) are taken nto account n fu, that s, 100
percent of such gans and osses s taken nto account. For e ampe, f a ta -
payer for a ta abe year begnnng before October 20. 10 1. sustans a oss of
00 upon the sae under threat of condemnaton of a capta asset, hed for
more than s months, such oss s taken nto account for the purpose of secton
117f |) to the e tent of 100, even though ony 200 woud be taken nto account
under secton 117(b), pror to ts amendment by the Revenue ct of 19 1. n
computng net ncome. Smary, the provsons of secton 117(d) mtng the
deducton of capta osses are not appcabe to e cude any osses from the
computatons under secton 117( ). Wth these e ceptons, gans are ncuded n
the computatons under secton 117(|) ony to the e tent that they are taken
nto account n computng gross ncome, and osses are ncuded ony to the
e tent that they are taken nto account n computng net ncome. Thus, osses
whch are not deductbe tems under secton 2 or secton 11 are not ncuded
n the computatons under secton 117(|). Smary, f a ta payer reports on
the nstament bass under secton the gan on the sae of property descrbed
n secton 117( ). ony the porton of the gan reported under secton s n-
cuded n the computatons for such ta nbe year under secton 117(|). ny
gans and osses whch are not recognzed under secton 112 are not ncuded n
the computatons under secton 117(|). Thus, f property s nvountary con-
verted nto smar property, so that the gan on such converson s not recog-
nzed under the provsons of secton 112(f), such gan s not ncuded n the
computatons under secton 117(.t).
If t s determned under the above computatons that the gans e ceed the
osses, a of such gans and osses are treated as gans and osses from the
sae or e change of capta assets hed for more than s months. such
gans and osses are then sub|ect to te mtatons of secton 117 (c) and (d),
reatng to the aternatve ta n the case of capta gans and osses and the
e tent to whch capta osses are aowed; and n the ense of ta abe years
begnnng pror to October 20, 10 1, such gans and osses are taken nto account
ony to the e tent of 0 percent. If t s determned under the above computa-
tons that the gans do not e ceed the osses, none of such gans and osses are
treated as gans and osses from the sae or e change of capta assets. Such
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29.22(n)-.

gans and osses are then to be taken nto account n fu, and such osses are
not sub|ect to the mtatons provded n secton 117(d). For e ampe, f
the ta payer durng the ta abe year 19 2 has osses of 1,000 on the sae of
certan deprecabe machnery used n hs trade or busness, hed for more
than s months, and a gan of 00 on the sae under threat of condemnaton
of a capta asset hed for more than 6 months, such osses e ceed such gan,
and such osses and gan are not treated as osses and gan from the sae or
e change of capta assets. The gan on the sae of the capta asset woud
therefore be taken nto account n fu, nstead of to the e tent of 0 percent.
( ) y nsertng n the second sentence of e ampe (/) thereof
mmedatey foowng the words secton 117(b), the foowng:
pror to ts amendment by the Revenue ct of 19 1, .
(C) y nsertng n the second sentence of the second paragraph
of e ampe (/) thereof mmedatey foowng the words secton
117(b). the foowng: pror to ts amendment by the Revenue
ct of 19 1, .
(D) y nsertng n the second sentence of e ampe (3) thereof
mmedatey foowng the words secton 117(b) the foowng:
, pror to ts amendment by the Revenue ct of 19 1, .
19 1, PPRO D OCTO R 20, 19 1 .

(e) Technca mendments.

( ) mendment of secton 122(d) ( ). Secton 122(d)( ) (re-
atng to computaton of net operatng oss deducton) s hereby
amended to rend as foows:
( ) The amount deductbe on account of osses from saes or
e changes of capta assets sha not e ceed the amount ncudbe
on account of gans from such saes or e changes. The deducton _
provded n secton 23 (ee) sha not be aowed.

Par. 11. Secton 29.122- 3 26 CFR 29.122-3 s amended as foows:
( ) y strkng ( ) from (a) thereof and nsertng n eu thereof
the foowng:
( ) Gans and osses recognzed upon saes or e changes of capta assets
hed for more than 6 months sha be taken nto account n fu. The deducton
provded n sectons 23(ee) and 117(b), appcabe to ta abe years begnnng
on or after October 20, 19 1, sha not be aowed ;
( ) y strkng out the words (as denned n secton 117(a) ( ))
from the second sentence of (d) thereof.
19 1, PPRO D OCTO R 20, 19 1 .


( ) mendment of secton 162va). Secton 162(a) (reatng
to computaton of net ncome of estates and trusts) Is hereby
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29.22(n)-.
amended by strkng out the semcoon and nsertng n en thereof
a perod and the foowng: Where any amount of the ncome so
pad or set asde s attrbutabe to gan from the sae or e change
of capta assets hed for more than 6 months, proper ad|ustment
of the deducton otherwse aowabe under ths subsecton sha be
made for any deducton aowabe to the trust under secton
23 (ee); .
(d) ffectve Date. The amendments made by ths secton sha
be appcabe ony wth respect to ta abe years begnnng on or after
the date of the enactment of ths ct.
C. . 19 1-1, 3 , approved pr 17, 19 1 26 CFR 29.162-1 , s
further amended by nsertng, mmedatey before the ast sentence
of paragraph (a) thereof, the foowng:
For any ta abe year begnnng before October 20, 19 1 (the (ate of the enact-
ment of te Revenue ct of 19 1), f an amount of the ncome so pad or set
asde s attrbutabe to gan from the sae or e change of capta assets hed
for more than 6 months, the amount of the deducton aowabe under secton
162(a) must be determned wth reference to the requrement that ony 0 per-
cent of such gans be ncuded n cross ncome of the trust. See Unted Sates
v. enedct et a. Trustees, (19 0) 33 U. S. 692 Ct. D. 1730, C. . 19 0-1, 70 .
Smary, n a ta abe year begnnng on or after October 20, 19 1, where any
amount of the ncome so pad or set asde for the chartabe uses or purposes
referred to or descrbed n secton 162(a) s attrbutabe to gan from the sae
or e change of capta assets hed for more than 6 months, the amount of the
deducton aowabe under secton 162(a) must be determned wth regard to
the ncuson of 100 percent of such gans n gross ncome and wth approprate
ad|ustment for the deducton provded n sectons 23(ee) and 117(b) of 0
percent of the e cess, f any, of the net ong-term capta gan over the net
short-term capta oss. See secton 29.117-2(a) (2). The appcaton of these
rues s ustrated n the foowng e ampes.
ampe (1). Under the terms of a trust created by the w of a decedent,
the trust net ncome (ncudng capta gans) s to be dstrbuted, one-haf to
certan ndvdua benefcares and one-haf to M Unversty, an organzaton
e empt from ta aton under secton 101(6). Durng 19 1 the trust has ordnary
net ncome of 100,000, and n addton 100,000 of gans from the sae of capta
assets hed for more than 6 months, of whch ony 0 percent, or 0,000, s
ncudbe n gross Income. The trust pays 100,000 one-haf of ts net ncome
under the terms of the trust to M Unversty. The deducton aowabe to
the trust under secton 162(a) s mted to 7 ,000, snce ony 0 percent of
the capta gans s ncuded n gross Income for ta purposes.
ampe (2). Durng 19 2 the trust referred to n e ampe (1) aso has
ordnary net ncome of 100,000, pus 100,000 of gans from the sae of capta
assets hed for more than 6 months. In computng the gross ncome of the
trust for ta purposes 100 percent of such gans are ncudbe. M Unversty
receves a tota of 100,000 from the trust n respect of the year 19 2. owever,
the amount aowabe to the trust as a deducton under secton 162(a) s sub-
|ect to approprate ad|ustment for the deducton aowabe under secton 23(ee).
In vew of the dstrbutons made to ndvdua benefcares, the deducton
aowabe to the trust under secton 23(ee) s mted by the provsons of secton
117(b) to 2 ,000. Snce the whoe of ths deducton s attrbutabe to the
dstrbuton to M Unversty, the deducton aowabe n 19 2 to the trust under
secton 162(a) w be 7 ,000.
Par. 1 . Secton 29.162-2, as amended by Treasury Decson
C. . 19 , , approved une 1 ,19 26 CFR 29.162-2 , s further
amended by nsertng mmedatey foowng the words secton
117(b) appearng n the frst e ampe of (a) thereof, the foowng:
pror to ts amendment bv the Revenue ct of 19 1 .
Par. 1 . Secton 29.1 9-1 26 CFR 29.1 9-1 s amended as foows:
( ) y strkng the frst sentence of paragraph (a) (1) and nsert-
2 2160 0 7
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29.23(a)- .
90
The partnershp s (rans nnd osses from saes or e changes of capta assets
hed for more than 6 months sha he taken nto account In fo.
( ) y strkng the sentence n paragraph (6) (2) and nsertng
The partnershp s gans and osses from saes or e changes of capta assets
hed for more than 6 months sha be taken nto account n fa.
26 U. S. C. 62, 3791).)
Iustn F. Wnke,
pproved December 2,19 2.
Thomas . Lynch,
S CTION 23(a). D DUCTIONS FROM GROSS
INCOM : P NS S
Secton 29.23(a)-: usness e penses. 19 2-1 -13909
I. T. 09
INT RN L R NU COD
penses Incurred by a Congressman n prntng and addressng
a etter to hs consttuents, whch etter conssts prncpay of a
report of hs actvtes and fndngs n connecton wth an offca
nspecton trp to foregn countres but aso contans a bref persona
message, quafy as ordnary and necessary busness e penses wthn
the meanng of secton 23(a) (1) ( ) of the Interna Revenue Code.
dvce s requested reatve to the deductbty, for Federa ncome
ta purposes, of the e penses ncurred by a Congressman n prntng
and addressng a etter to hs consttuents, whch etter conssts prnc-
pay of a report of hs actvtes and fndngs n connecton wth an
offca nspecton trp to foregn countres but aso contans a bref
persona message.
Secton 23(a) (1) ( ) of the Interna Revenue Code provdes that
n computng net ncome there sha be aowed as deductons a the
ordnary and necessary e penses pad or ncurred durng the ta abe
year n carryng on any trade or busness. Secton (d) of the Code
provdes that the term trade or busness ncudes the performance of
the functons of a pubc offce. On the other hand, secton 29.23(a)-
1 (6) of Reguatons 111 precudes the deducton of campagn e -
penses of a canddate for pubc offce. (See Mchae F. McDonad v.
Commssoner, 323 U. S. 7, Ct. D. 1617, C. . 19 , 9 .)
It s often dffcut to determne the ne of demarcaton between
deductbe busness e penses and nondeductbe campagn e penses of
a Congressman. The mere fact, however, that t mght be potcay
e pedent for a Congressman to ncur an otherwse deductbe e pense
woud not ordnary convert that e pense nto a nondeductbe cam-
pagn e pense. For e ampe, O. D. 310 (C. . 1, 10 (1919)) hods
that an amount e pended by a Member of Congress for cerk hre, n
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29.23(a)- .
e cess of the aowance made by the Government for such purpose,
may be propery deducted as a busness e pense. The prncpe n
0. D. 310, supra, s appcabe even though such cerks may be em-
poyed prmary to answer the Congressman s ma, a functon whch
mght be consdered as ncdentay furtherng the Congressman s
canddacy for reeecton. It s the opnon of ths offce that reportng
to consttuents wth respect to a Congressman s offca actons shoud
be recognzed, for Federa ncome ta purposes, as a part of the offca
dutes of hs offce.
ccordngy, t s hed that e penses ncurred by a Congressman n
prntng and addressng a etter to hs consttuents, whch etter con-
ssts prncpay of a report of hs actvtes and fndngs n connecton
wth an offca nspecton trp to foregn countres but aso contans a
bref persona message, quafy as ordnary and necessary busness e -
penses. It foows that a Member of Congress may deduct such e -
penses provded hs statonery aowance s ncuded n gross ncome
and hs ta -e empt e pense aowance has been e hausted by other
e penses propery chargeabe thereto for whch no deducton s
camed. (The e pense aowance of 2, 00 s ta -e empt unt
anuary 3, 19 3, but not thereafter. See secton 619 of the Revenue
ct of 19 1.)
Secton 29.23(a)-: usness e penses. 19 2-1 -13910
I. T. 096
INT RN L R NU COD
Treatment for Federa ncome ta purposes of payments made by
surgeons to other physcans for professona assstance and under
fee-spttng arrangements.
dvce s requested reatve to the deductbty, for Federa ncome
ta purposes, of payments made by a surgeon for professona assst-
ance n conductng hs practce, and of payments made by a surgeon,
on a spt-fee bass, to other physcans who refer patents to hm.
Secton 23(a) (1) ( ) of the Interna Revenue Code provdes that
n computng net ncome there sha be aowed as deductons:
(a) penses.
(1) Trade or busness e penses.
( ) Id Genera. the ordnary and necessary e penses pad or
ncurred durng the ta abe year n carryng on any trade or busness,
ncudng a reasonabe aowance for saares or other compensaton
for persona servces actuay rendered .
Thus, reasonabe compensaton for persona servces actuay ren-
dered whch s pad by a surgeon for professona assstance n con-
ductng hs practce may be deducted under secton 23(a) (1) ( ) of
the Code as an ordnary and necessary e pense of carryng on a trade
or busness.
Whether reasonabe payments made by a surgeon, on a spt-fee
bass, to other physcans who refer patents to hm represent deduct-
be busness e penses must be determned n the ght or a the crcum-
stances n each case. owever, as a genera rue, such payments are
deductbe for Federa ncome ta purposes provded they are norma,
usua, and customary n the professon and n the communty; are
approprate and hepfu n obtanng busness; and do not frustrate
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29.23(a)-1 .)
92
sharpy defned Natona or State poces evdenced by a governmenta
decaraton proscrbng partcuar types of conduct. (See Thomas
. Ly et u . v. Commssoner, 3 3 U. S. 90, Ct. D. 17 1, C. .
19 2-1,16.)
Secton 29.23(a)-: usness e penses.
INT RN L R NU COD
Payments made n voaton of the Defense Producton ct of 19 0,
as amended, and payments made by way of fne for voaton of such
ct. (See I. T. 10 , page 93.)
Secton 29.23(a)-6: Compensaton for persona
servces.
INT RN L R NU COD
mounts pad n voaton of wage stabzaton provsons of the
Defense Producton ct of 19 0, as amended. (See I. T. 10 ,
page 93.)
Secton 29.23 (a)-1 : pendtures for adver- 19 2-2 -13976
tsng or promoton of good w. T. D. 9 0
TITL 26 INT RN L R NU . C PT R I, SU C PT R . P RT 29.
Reguatons 111 amended to conform to secton 303 of the cess
Profts Ta ct of 19 0, reatng to the deducton of e pendtures
for advertsng and good w.
Washngton 2 , D. C.
Concerned:
On September , 19 2, notce of proposed rue makng, regardng
certan provsons of the cess Profts Ta ct of 19 0, approved
anuary 3, 19 1, was pubshed n the Federa Regster (17 F. R.
0 ). No ob|ecton to such rues havng been receved, the amend-
ments set forth beow necessary to conform Reguatons 111 to such
provsons are hereby adopted.
29.23(a)- 2G CFR 29.23(a)- the foowng:
S C. 303. P NDITUR S FOR D RTISING ND GOOD WILL
C SS PROFITS T CT OF 19 0, PPRO D NU RY
3, 19 1 .
Secton 23(a)(1)(C) of the Interna Revenue Code (reatng to e -
pendtures for advertsng and good w) s hereby amended to read as
foows:
(C) pendtures for dvertsng and Good W. If a cor-
poraton has, for the purpose of computng ts e cess profts
ta credt under Chapter 2 , or subchapter D of ths Chapter,
camed the benefts of the eecton provded n secton 733 or
secton 1, as the case may be, no deducton sha be aowabe
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29.23 (a)-16.
under subparagraph ( ) to such corporaton for e pendtures
for advertsng or the promoton of good w whch, under the
rues and reguatons prescrbed under secton 733 or secton 1,
as the case may be, may be regarded as capta nvestments.
Par. 2. Secton 29.23(a)-1 26 CFR 29.23(a)-1 reatng to the
deducton of e pendtures for advertsng or promoton of good w,
s amended to read as foows:
Sec. 29.23 (a) -1 . pendtures fob dvertsng ob Promoton of Good W.
corporaton whch has, for the purpose of computng ts e cess profts credt,
eected under secton 733 (appcabe to the e cess profts ta mposed by sub-
chapter of chapter 2) or under secton 1 (appcabe to the e cess profts ta
mposed by subchapter D of chapter 1) to charge to capta account for ta abe
years n ts base perod e pendtures for advertsng or the promoton of good
w whch may be regarded as capta nvestments may not deduct smar e -
pendtures for the ta abe year. Such a ta payer has the burden of provng that
e pendtures for advertsng or the promoton of good w whch t seeks to
deduct for such ater ta abe years may not be regarded as capta nvestments
under the provsons of the reguatons prescrbed under sectons 733 or 1, as
the case may be. For rues for determnng what e pendtures for. advertsng
or the promoton of good w may be regarded as capta nvestments, and for
Informaton requred to be submtted wth respect to such e pendtures, see
secton 30.733-2 of Reguatons 109 and secton 3 .733-2 of Reguatons 112
(whch sectons are appcabe to the e cess profts ta mposed by subchapter
of chapter 2) and secton 0. 1-2 of Reguatons 130 (appcabe to the e cess
profts ta mposed under subchapter D of chapter 1).
n secton 62 of the Interna Revenue Code ( 3 Stat. 32; 26 U. S. C.
62).)
ustn F. Wnke,
pproved November 19, 19 2.
Thomas . Lynch,
(Fed wth the Dvson of the Federa Regster November 21, 19 2, : 0 a. m.)
Secton 29.23(a)-16: Wage and saary payments 19 2-23-139
h contraventon of wage and saary mtatons I. T. 10
not deductbe.
( so Secton 29.23(a)-1, Secton 29.23(a)-6;
Secton 22(a), Secton 29.22(a)- .)
INT RN L R NU COD
Payments made n voaton of the Defense Producton ct of
19 0 ( 6 Stat. 79 ), as amended, payments made by way of fne
for voaton of such ct, and payments made to the Unted States
or to any buyer of any matera or servce n compromse or
satsfacton of any abty arsng from a voaton of such ct w
be dsregarded and dsaowed, for Federa ncome ta purposes,
n the amounts determned and certfed to the ureau of Interna
Revenue by the conomc Stabzaton gency or ts authorzed
components.
dvce s requested regardng the pocy of the ureau of Interna
Revenue wth respect to the treatment, for Federa ncome ta pur-
poses, to be accorded payments made n voaton of the Defense
Producton ct of 19 0 (6 Stat. 79 ), as amended (sometmes heren-
after referred to as the ct), payments made by way of fne for vo-
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29.23(a)-16.
9
aton of such ct, and payments made to the Unted States or to
any buyer of any matera or servce n compromse or satsfacton
of any abty arsng from a voaton of the ct.
Tte I of the ct, as amended, whch tte reates to prce and
wage stabzaton, provdes n part as foows:
Sec. 01. Whenever the authorty granted by ths tte s e er-
csed, a agences of the Government deang wth the sub|ect matter of ths
tte, wthn the mts of ther authorty and ursdcton, sha cooperate n
carryng out these purposes.

Sec. 0 . (a) It sha be unawfu, regardess of any obgaton heretofore
or hereafter entered nto, for any person to se or dever, or n the reguar
course of busness or trade to buy or receve, any matera or servce, or
otherwse to do or omt to do any act, n voaton of ths tte or of any regu-
aton, order, or requrement ssued thereunder, or to offer, soct, attempt
or agree to do any of the foregong. The Presdent sha aso prescrbe the
e tent to whch any payment made, ether n money or property, by any person
n voaton of any such reguaton, order, or requrement sha be dsregarded
by tbe e ecutve departments and other governmenta agences n determnng
the costs or e penses of any such person for the purposes of any other aw
or reguaton, ncudng bases n determnng gan for ta purposes.
(b) No empoyer sha pay, and no empoyee sha receve, any wage, saary,
or other compensaton n contraventon of any reguaton or order promugated
by the Presdent under ths tte. The Presdent sha aso prescrbe the e tent
to whch any wage, saary, or compensaton payment made n contraventon
of any such reguaton or order sha be dsregarded by the e ecutve depart-
ments and other governmenta agences In determnng the costs or e penses of
any empoyer for the purposes of any other aw or reguaton.
Sec, 09. (d) The Presdent sha aso prescrbe the e tent to whch any
payment made by way of fne pursuant to subsecton (b) of ths secton 0 ), or
any payment made to the Unted States or to any buyer n compromse or sats-
facton of any abty or of any rght of acton, sut, or |udgment, authorzed
pursuant to subsecton (c) of ths secton 09 for seng any matera or servce,
n voaton of a reguaton or order provdng a ceng or cengs, sha be ds-
regarded by the e ecutve departments and other governmenta agences n de-
termnng the costs or e penses of any such person for the purposes of any other
aw or reguaton.
ecutve Order 10161 (1 F. R. 610 , September 12, 19 0) creates
the conomc Stabzaton gency and provdes that the functons
conferred upon the Presdent by tte I of the ct are deegated
to the dmnstrator of the gency.
Genera Order No. 1 (17 F. R. 299 , pr ,19 2), of the conomc
Stabzaton gency, promugated pursuant to the ct, as amended,
and ecutve Order 10161, as amended, sets forth the pocy and
procedure wth respect to dsaowances and carfes the respectve
functons of the conomc Stabzaton dmnstrator and the con-
sttuent organzatons of the conomc Stabzaton gency. The
Genera Order states that the Drector of Prce Stabzaton has
authorty to determne whether any person has made any payment
ether n money, or property, or other consderaton n voaton of the
ct or of any reguaton, order, or requrement reatng to prces
under the ct. Where such determnaton has been made, the Drector
has authorty further to determne the amount of such payment to be
dsregarded and dsaowed for the purposes sted n the Genera
Order. Smar statements are made wth respect to fnes pad for
voaton of the ct or for amounts pad n compromse or satsfac-
ton of any abty, rght or acton, sut or |udgment for voaton
of a prce reguaton or order under the ct. The Genera Order
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9
29.23(c)- .
further sets forth e tenuatng and mtgatng crcumstances to be
taken nto consderaton and provdes that the agency sha certfy
and forward ts fna determnaton n each case to the approprate
governmenta agency or agences.
Genera Order No. 1 (17 F. R. 692 , uy 29, 19 2), estabshes the
Natona nforcement Commsson wthn the conomc Stabzaton
gency and redeegates certan authorty to that Commsson to de-
termne whether any wage, saary, or other compensaton has been
pad n voaton of the ct. The Commsson s further authorzed
to certfy and transmt such determnatons n accordance wth the
pocy and procedure set forth n Genera Order No. 1 , supra, and
other orders, drectves, genera poces or genera reguatons of the
conomc Stabzaton dmnstrator.
In vew of the foregong, payments made n voaton of the Defense
Producton ct of 19 0, as amended, payments made by way of fne for
voaton of such ct, and payments made to the Unted States or to
any buyer of any matera or servce n compromse or satsfacton
of any abty arsng from a voaton of such ct w be dsre-
garded and dsaowed, for Federa ncome ta purposes, n the amounts
determned and certfed to the ureau of Interna Revenue by the
conomc Stabzaton gency or ts authorzed components.
S CTION 23(c). D DUCTIONS FROM GROSS
INCOM : T S G N R LLY
Secton 29.23(c)-: Ta es. 19 2-22-139 6
T. D. 93
Reguatons 111 amended to conform to provsons of ct of May
12,19 1 (Pubc Law 29, 2d Cong. O. . 19 1-1,1 3 ).
Washngton 2 , D. C.
Concerned:
On uy 10, 19 2, there was pubshed n the Federa Regster (17
F. R. 6200) a notce of proposed rue makng to conform Reguatons
111 26 CFR, part 29 to the ct of May 12, 19 1, Pubc Law 29,
ghty-second Congress C. 19 1-1, 1 3 , aowng the consumer
of gasone to deduct, for ncome ta purposes, State ta es on gaso-
ne mposed on the whoesaer and passed on to the consumer. No
ob|ecton to the rues proposed havng been receved, the amendments
set forth beow are hereby adopted.
Paragraph 1. There s n erted mmedatey precedng secton
29.23(c)- 26 CFR 29.23(c)- the foowng:
PU LIC L W 29 ( 2d CONG.) PPRO D M Y 12, 19 1
Unted State of merca n Congress assembed, That secton 23(c) (3)
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S 29.23(c)- .
96
of the Interna Revenue Code (reatng to deducton of reta saes
ta es) s hereby amended to read as foows:
(3) Gasone and reta saes ta es. In the case of a ta
mposed by any State, Terrtory, Dstrct, or possesson of the
Unted States, or any potca subdvson thereof, upon persons
engaged n seng tangbe persona property at reta, or upon
persons seng gasone or other motor vehce fues ether at whoe-
sae or reta, whch s measured by the gross saes prce or the
gross recepts from the sae or whch s a stated sum per unt of
such property sod, or upon persons engaged In furnshng servces
at reta, whch s measured by the gross recepts for furnshng
such servces, f the amount of such ta s separatey stated, then
to the e tent that the amount so stateo s pad by the consumer
(otherwse than n connecton wth the consumer s trade or bus-
ness) to hs vendor such amount sha be aowed as a deducton
n computng the net ncome of such consumer as f such amount
consttuted a ta mposed upon and pad by such consumer.
Sec. 2. The amendment made by ths ct sha appy to ta abe
years begnnng after December 31, 19 0.
Par. 2. Secton 29.23(c)-. as amended by Treasury Decson
C. . 19 , , approved une 1 , 19 26 CFR 29.23(c)- , s
( ) y revsng the headng and frst paragraph of ( ) thereof
to read as foows:
(6) State and oca saes and gasone ta es. mounts representng saes or
gasone ta es pad by a consumer of servces or tangbe persona property arc
deductbe by such consumer as ta es, provded they are not pad n connecton
wth hs trade or busness. The fact that, under the aw mposng t, the nc-
dence of the saes or gasone ta does not fa on the consumer s mmatera.
The requrement of secton 23(c)(3) that the amount of the ta must )e
separatey stated w be deemed comped wth where t ceary appears that,
at the tme of sae to the consumer, the ta was added to the saes prce and
coected or charged as a separate tem. It s not necessary, for the purposes of
ths secton, that the consumer be furnshed wth a saes sp, b. Invoce, or
other statement on whch the ta s separatey stated. Where the aw mposns
the saes or gasone ta for whch the ta payer seeks a deducton contans a
prohbton aganst the seer absorbng the ta , or a provson requrng a
posted notce statng that the ta w be added to the quoted prce, or a requre-
ment that the ta be separatey shown In advertsements or sepnraey stated
on a bs and nvoces, t s presumed that the amount of the saes or gasone
ta was separatey stated at the tme pad by the consumer; e cept that such
presumpton sha have no appcaton to a gasone ta mposed upon a whoe-
saer uness such provsons of aw appy wth respect to both the sae at whoe-
sae and the sae at reta.
( ) y addng at the end of (6) thereof the foowng new
paragraphs:
For ta abe years begnnng after December 31, 10 0, the term gasone ta
means, for purpose of ths secton, a ta mposed by such authortes upon per-
sons seng gasone or ether motor vehce fues ether at whoesae or reta,
whch Is measured by the gros saes prce or the gross recepts from the sae,
or whch s a stared sum per unt of the gasone or fue sod; but such term
does not e cude f-om the defnton of saes ta , for ta abe years begnnng
before anuary 1, 19 1, a ta mposed by such authortes upon persons seng
such products at reta.
In genera, the term consumer means the utmate user or purchaser; t
does not ncude a purchaser who acqures the property for resae, such as a
retaer.
Par. 3. The amendments hereby prescrbed sha be appcabe wth
respect to ta abe years begnnng after December 31, 19 0.
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97
29.23(c)- .
sectons 62 and 3791 ( 3 Stat. 32, 67; 26 U. S. C. 62, 3791) of the
Interna Revenue Code.)
ohn . Dunap,
pproved October 3, 19 2.
Thomas . Lynch,
(Fed wth the Dvson of the Federa Regster October , 19 2, : 9 a. m.)
Secton 29.23(c)-1 : Ta es. 19 2-2 -13977
( so Secton 3, Secton 29. 3-2.) G. C. M. 27 0
INT RN L R NU COD
Deductbty, for Federa ncome ta purposes, as between a
grantor and a grantee of rea property, of rea estate ta es eved
by the State of Washngton.
G. C. M. 21373 (C. . 1939-2, 2) modfed.
n opnon s requested as to the deductbty of rea estate ta es
eved under the aws of the State of Washngton as between an
accrua bass ta payer who ses the property subsequent to anuary 1,
19 1, and a cash bass ta payer who purchases the property and pays
such ta es durng the year 19 2.
In Commssoner v. Theodore Pestcheeff et u . (100 Fed. (2d) 62.
Ct. D. 1 10, C. . 1939-2, 200), t was hed that the deducton for
accrued rea property ta es s mted to the person who owns the
reaty at the tme the en for the ta es attaches; that under the
statutes of the State of Washngton the en for rea property ta es
attaches on March 1 of each year (the date of the assessment of the
property), e cept as between a grantor and a grantee, n whch case t
attaches on the frst Monday n February of the succeedng year; and
that a devsee s a grantee wthn the meanng of the Washngton
statute. The statute consdered n that case provded n part as
foows:
The ta es assessed upon rea property sha be a en thereon from and n-
eudng the frst day of March n the year n whch they are eved unt the
same are pad, but as between a grantor and grantee such en sha not attach
unt the_ frst Monday n February of the succeedng year.
G. C. M. 21373 (C. . 1939-2, 2), nsofar as t reates to Wash-
ngton rea estate ta es, was based on the decson n the Pestcheeff
case, supra, and states that the decson n that case shoud not be gven
genera appcaton but shoud be apped ony n cases nvovng
Washngton rea property ta es.
The pertnent sectons of tte , of the Revsed Code of Washng-
ton, provde n part as foows:
. 0.010 Property sub|ect to ta aton. property now e stng, or that s
hereafter created or brought nto ths state, sha be sub|ect to assessment and
ta aton for state, county, and other ta ng dstrct purposes, upon equazed
vauatons thereof, f ed wth reference thereto on the frst day of anuary at
12 o cock merdan n each year,
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29.23(c)-.
9
.60.020 Tme of attachment of reaty en. The ta es assessed upon rea
property sha be a en thereon from and ncudng the frst day of anuary
n the year n whch they are eved unt the same are pad, but as between the
grantor and grantee of any rea property, and as between the vendor and pur-
chaser of any rea property, when there s no e press agreement as to payment
of the ta es thereon due and payabe In the caendar year of the sae or the
contract to se, the grantor or vendor sha be abe for the same proporton of
such ta es as the part of the caendar year pror to the day of the sae or the
contract to se bears to the whoe of such caendar year, and the grantee or
purchaser sha be abe for the remander of such ta es and subsequent
ta es.
Snce the present statute provdes for ony one date for the en to
attach, whch date s aso the date of assessment, t s the opnon of
ths offce that the en attaches even as between grantor and grantee
on anuary 1, and s an encumbrance on the property from that date.
In M. ampton Magruder v. Frederck M. Suppee et u . (316
U. S. 39 , Ct. D. 1 9. C. . 19 2-1,173), t was hed that where ether
a en or persona abty e sts before the sae of reaty takes pace,
the purchaser s not entted to a deducton for ta es pad. (See G. C.
M. 23 12 (C. . 19 3,13 ).) The Court further stated :
For ony the person ownng the property at that tme 1. e., when the
ta en attaches s sub|ected to the burden whch the aw mposes; and ony
the person who has been thus sub|ected to the burden of the ta s entted to a
deducton for pavng t. Payment by a subsequent purchaser Is not the ds-
charge of a burden whch the aw has paced upon hm, but s actuay as we
as theoretcay a payment of purchase prce; for, after the en attaches and
the ta ng authorty becomes pro tanto an owner of an nterest n the property,
payment of the ta by a purchaser s nothng but a part of the payment for
unencumbered tte.
ccordngy, t s the opnon of ths offce that the cash bass ta -
payer who purchased the property and pays the 19 1 ta es durng the
year 19 2 may not deduct such ta es but must add them to the cost
bass of the property as a part of the purchase prce. The seer must
kewse treat the ta es pad by the purchaser as a part of the purchase
prce and as ncome to the seer n addton to the cash or other con-
sderaton receved for the property. Furthermore, t woud seem to
foow, snce the proratng provsons of the present Washngton
statute do not even provde for a speca en n the grantor-grantee
reatonshp, that even where the proratng provsons are nvoked,
the rghts of the State are not affected and the en mposed as of
anuary 1 remans as a abty smar to the encumbrance consdered
n the Magruder case, supra.
In G. C. M. 21373, supra, t s stated that t has been the ureau s
poston that generay State property ta es accrue on the date as of
whch the assessment of the ta s made (frequenty referred to as the
assessment date), even though the amount of the ta s not ascertan-
abe on that date. Snce the statute consdered n the Pestcheeff
case, supra, provded for two ens whe the present statute provdes
for ony one en, t s the opnon of ths offce that the Pestcheeff
case no onger s appcabe to the grantor-grantee stuaton and that
snce the assessment date and the en date concde on anuary 1,
the accrua date for rea property ta es n Washngton s anuary 1.
ccordngy, the seer may propery accrue the tota amount of
Washngton rea property ta es on that date and may deduct the tota
amount, provded, of course, that the amount s aso ncuded n
ncome on the sae of the property as ponted out above.
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99
29.23(e)- .
G. C. M. 21373, supra, s modfed to the e tent that t s nconsstent
wth the opnons heren e pressed.
Chares W. Davs,
Chef Counse, ureau of Interna Revenue.
S CTION 23(e). D DUCTIONS FROM GROSS INCOM : -
LOSS S Y INDI IDU LS
Secton 29.23 (e)-: Losses by ndvduas. 19 2-2 -1397
( so Secton 23(f), Secton 29.23(f)-; I. T. 110
Secton 2(a), Secton 29. 2-1; Secton
3, Secton 29. 3-2.)
INT RN L R NU COD
Treatment, for Federa ncome ta purposes, of Interest on Unted
States savngs bonds, Seres , and of the refund by a ta payer of a
porton of such aready reazed nterest upon redempton of such a
bond before ts maturty.
dvce s requested reatve to the proper treatment, for Federa
ncome ta purposes, of nterest on Unted States savngs bonds, Seres
, and of the refund of a porton of such prevousy reazed nterest
whch hoders of the bonds are requred to make upon redempton
thereof before ther maturty (e cept f acqured n e change for
matured Unted States savngs bonds, Seres , and n certan cases
upon death) n accordance wth ther ssuance terms ncorporated
theren.
egnnng May 1, 19 2, these bonds, the terms and condtons of
w hch are set forth theren and n Department Crcuar No. 906, were
paced on sae, and the sae of Unted States savngs bonds, Seres G,
was dscontnued.
In I. T. 3 0 (C. . 19 1-2, 93) the pertnent terms and condtons
of Unted States savngs bonds, Seres G, were quoted and dscussed.
It was there hed (1) that the nterest thereon s ncudbe n gross
ncome when receved or accrued, dependng upon the ta payer s
method of accountng, and that t accrues when t becomes payabe
but not unt then; (2) that no ad|ustment, for Federa ncome ta
purposes, s to be made n any ta abe year of such aready reazed
nterest on account of the refund by the ta payer of a porton thereof
upon redempton of such a bond before ts maturty, but that the
amount thus refunded by the bond purchaser s deductbe n the
ta abe year of such redempton and refund as an ordnary oss n-
curred n a transacton entered nto for proft; and (3) that, nsofar as
the bond tsef s concerned, a purchaser thereof has no gan or oss,
ether ordnary or capta, upon ts redempton, whether at or before
ts maturty.
though those bonds bear nterest payabe semannuay by check
at the rate of 21/2 percent per annum from date of ssue, whereas
Unted States savngs bonds, Seres . bear nterest so payabe at
the rate of 2.76 percent per annum, t appears that the terms and
condtons of bot seres of bonds are substantay the same nsofar
as here matera. ccordngy, the rues stated n I. T. 3 0 ,
supra, are aso appcabe n cases nvovng Unted States savngs
bonds, Seres .
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29.23(o)-. 100
S CTION 23(f). D DUCTIONS FROM GROSS INCOM :
LOSS S Y CORPOR TIONS
Secton 29.23(f)-: Losses by corporatons.
INT RN L R NU COD
Interest refunded upon redempfonpror to maturty of Unted
States savngs bonds, Seres . (See I. T. 110, page 99.)
S CTION 23(g). D DUCTIONS FROM GROSS
INCOM : C PIT L LOSS S
Secton 29.23(g)-: Capta osses.
INT RN L R NU COD
Payment of |udgment by transferees of qudatng corporaton.
(See Ct. D. 17 2, page 136.)
S CTION 23(o). D DUCTIONS FROM GROSS INCOM :
C RIT L ND OT R CONTRI UTIONS
Secton 29.23(o)-: Contrbutons or gfts by 19 2-1 -13911
ndvduas. T. D. 92
( so Secton 23(q), Secton 29.23(q)-; Sec-
ton 101, Sectons 29.101-3, 29.101 (6)-;
Secton 27 , Secton 29.27 -1; Secton 3 13,
Sectons 29.3 13-1, 29.3 13-2, 29.3 13-3; Sec-
ton 3 1 , Secton 29.3 1 -1.)
TITL 2ft INT RN L R NU . C PT R I, SU C PT R , P RT 29.
INCOM T ; T L Y RS GINNING FT R D C M R 31. 19 1
Reguatons 111 amended to conform to certan provsons of
parts I and n of tte III of the Revenue ct of 19 0, to secton 11
of the Interna Securty ct of 1 ) 0 a . 19 0-2, 2 0 , and to
secton 601 of the Revenue ct of 19 1.
Washngton 2 , D. C.
To Coectors of Interna Revenue and Others Concerned:
On anuary 3, 19 2, notce of proposed rue makng was pubshed
n the Federa Regster (17 F. R. 7 ), n order to conform Reguatons
111 26 CFR, part 29 to certan provsons of parts I and III of
tte III of the Revenue ct of 19 0, approved September 23, 19 0,
to secton 11 of the Interna Securty ct of 19 0 C. . 19 0-2, 2 0 ,
enacted September 23,19 0, and to secton 601 of the Revenue ct of
19 1, approved October 20, 19 1. fter consderaton of a such
reevant matter as was presented by nterested persons regardng the
rues proposed, the amendments to Reguatons 111 26 CP R, part 29
6et forth beow are hereby adopted.
29.23(o)- 26 CFR 29.23(o)- the foowng:
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101
29.23(o)-.
S C. 11. D NI L OF T D DUCTIONS ND MPTIONS
INT RN L S CURITY CT OF 19 0, N CT D S PT M R
23, 19 0 .
(a) Notwthstandng any other provson of aw, no deducton for
Federa ncome-ta purposes sha be aowed n the case of a contrbu-
ton to or for the use of any organzaton f at the tme of the makng
of such contrbuton (1) such organzaton s regstered under secton 7,
or (2) there s n effect a fna order of the oard the Subversve
ctvtes Contro oard requrng such organzaton to regster under
secton 7.

S C. 332. T C NIC L M NDM NTS R NU CT OF 19 0,
PPRO D S PT M R 23, 19 0 .
(a) mendment of Secton 23(o). Secton 23(o)(2) s hereby
amended by strkng out egsaton; and nsertng n eu thereof the
foowng: egsaton. For dsaowance of certan chartabe, etc.,
deductons otherwse aowabe under ths paragraph, see sectons 3 13
and 102(g) (2) ; .

Par. 2. Secton 29.23(o)-, as amended by Treasury Decson 93
C. . 19 2-1, 126 , approved pr , 19 2 26 CFR 29.23(o)- ,
s further amended by nsertng mmedatey precedng the ast
sentence of the frst paragraph thereof the foowng:
For dsaowance of certan chartabe deductons otherwse aowabe under
secton 23(o)(2), see sectons 3 13 and 162(g)(2) and the reguatons promu-
gated pursuant thereto. For certan provsons wth respect to gfts made before
anuary 1, 19 1, see secton 29.101-3(a).
Par. 3. There s nserted mmedatey precedng secton 29.23(q)-
26 CFR 29.23(q)- the foowng:
23, 19 0 .
of such contrbuton (1) such organzaton s regstered under secton 7,
or (2) there s n effect a fna order of the oard the Subversve
secton 7.

PPRO D S PT M R 23, 19 0 .

(b) mendment or Secton 23(q). Secton 23(q)(2) s hereby
amended by strkng out egsaton; or and nsertng n eu thereof
the foowng: egsaton. For dsaowance of certan chartabe, etc.,
deductons otherwse aowabe under ths paragraph, see sectons 3 13
and 102(g) (2) ; or .

Par. . Secton 29.23 (q)-, as amended by Treasury Decson 796
C. . 19 0-2, 2 , approved uy 19, 19 0 26 CFR 29.23 (q)- , s
further amended by nsertng mmedatey after the ast sentence of
the frst paragraph thereof the foowng:
For dsaowance of certan chartabe, etc., deductons otherwse aowabe
under secton 23(q) (2), see sectons 3 13 and 102(g)(2) and the reguatons
promugated pursuant thereto. For certan provsons wth respect to gfts made
before anuary 1,19 1, see secton 29.101-3(a).
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29.23(o)-.
102
Par. . There s nserted mmedatey precedng secton 29.101-1
23. 19 0 .

(b) No organzaton sha be entted to e empton from Federa
ncome ta , nnder secton 101 of the Interna Revenue Code, for any
ta abe year f at any tme (urng such ta abe year (1) such organza-
ton s regstered under secton 7, or (2) there Is In effect a fna order
of the oard the Subversve ctvtes Contro oard requrng snch
organzaton to regster under secton 7
S C. 301. INCOM OF DUC TION L. C RIT L . ND C R-
T IN OT R MPT ORG NIZ TIONS R NU CT OF
19 0, PPRO D S PT M R 23. 19 0 .

(b) Feeder Organzatons. Secton 101 s hereby amended by addng
at the end thereof the foowng paragraph:
n organzaton operated for the prmary purpose of carryng
on a trade or busness for proft sha not be e empt under any para-
graph of ths secton on the gronnd that a of ts profts are payabe
to one or more organzatons e empt under ths secton from ta a-
ton. For the purposes of ths paragraph the term trade or bus-
ness sha not ncude the renta by an organzaton of ts rea
property (ncudng persona property eased wth the rea
property).
(1) Secton 101 s hereby amended ( ) by strkng out The
foowng organzatons sha be e empt and Insertng In eu
thereof cept as provded In suppement U, the foowng organ-
zatons sha be e empt , and ( ) by addng at the end of such
secton (foowng the wragraph added by subsecton (b) of ths
secton) the foowng paragraph:
Notwthstandng suppement U, an organzaton descrbed In ths
secton (other than n the precedng paragraph) sha be consdered an
organzaton e empt from ncome ta es for the purpose of any aw
whch refers to organzatons e empt from ncome ta es.

S C. 303. FF CTI D T OF P RT I R NU CT OF
19 0, PPRO D S PT M R 23, 19 0 .
The amendments made by ths part sectons 301, 302, and 303 of the
Revenue ct of 19 0 sha be appcabe ony wth respect to ta abe
years begnnng after December 31, 19 0. The determnaton as to
whether an organzaton Is e empt under secton 101 of the Interna
Revenue Code from ta aton for any ta abe year begnnng before
anuary 1, 19 1, sha be made as f secton 301(b) of ths ct had not
been enacted and wthout nferences drawn from the fact that the
amendment made by such secton s not e pressy made appcabe
wth respect to ta abe years begnnng before anuary 1, 19 L
Par. 6. There s nserted mmedatey after secton 29.101-2 26
CFR 29.101-2 the foowng:
Sec. 29.101-3. Lmtatons on empton. (a) In nenera. Under secton
11(b) of the Interna Securty ct of 19 0, no organzaton s entted to e emp-
ton under secton 101 for any ta abe year f at any tme durng such yeaT
such organzaton s regstered under secton 7 of such ct or If there s n
effect a fna order of the Subversve ctvtes Contro oard estabshed
by secton 12 of such ct requrng such organzaton to regster under secton 7
of such ct. Under sectons 3 13 and 3S1 of the Interna Revenue Code, certan
organzatons descrbed n secton 101(6) may be dened e empton under secton
101 (( ) for ta abe years begnnng after December 31,19 0. See secton 29.3 13-1
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103
29.23(o)-.
and secton 29.3 1 -1 of these reguatons. Secton 302 of the Revenue ct of
19 0 as amended by secton 601 of the Revenue ct of 19 1. prescrbes the
foowng rues respectng e empton of certan organzatons for ta abe years
begnnng pror to anuary 1, 10 1:
(a) Trade or sness Not Unreated. For any ta abe year begnnng
pror to anuary 1, 19 1, no organzaton sha be dened e empton under
paragraph (1), (6), or (7) of secton 101 of the Interna Revenue Code on the
grounds that t s carryng on a trade or busness for proft f the ncome from
such trade or busness woud not be ta abe as unreated busness ncome under
the provsons of suppement U of the Interna Revenue Code, as amended by
ths ct. or If such trade or busness Is the renta by such organzaton of ts
rea property (ncudng persona property eased wth the rea property).
(b) Perod of Lmtatons. In the case of an organzaton whch woud
otherwse be e empt under secton 101 of the Interna Revenue Code were t
not carryng on a trade or busness for proft, the fng of the nformaton
return requred by secton (f) of the Interna Revenue Code (reatng to
returns by ta -e empt organzatons) for any ta abe year begnnng pror to
anuary 1, 19 1, sha be deemed to be the fng of a return for the purposes
of secton 27 of the Interna Revenue Code (reatng to perod of mtaton
upon assessment and coecton). In the case of such an organzaton whch
was. by the provsons of secton (f) of the Interna Revenue Code, specf-
cay not requred to fe such Informaton return, for the purposes of the pre-
cedng sentence a return sha be deemed to have been fed at the tme when
such return shoud have been fed had t been so requred. The provsons
of ths subsecton sha not appy to a ta abe year of such an organzaton
wth respect to whch, pror to September 20, 19 0, (1) any amount of ta
was assessed or pad, or (2) a notce of defcency under secton 272 of the
Interna Revenue Code was sent to the ta payer.
(c) Dena of Deductons. gft or bequest to an organzaton pror to
anuary 1, 19 1, for regous, chartabe, scentfc, terary, or educatona
purposes (ncudng the encouragement of art and the preventon of cruety
to chdren or anmas) otherwse aowabe as a deducton under secton
23(o)(2), 23(q)(2), 162(a), 0 (a)(2), of the Interna Revenue
Code, may. not be dened under such sectons If a dena of e empton to such
organzaton for the ta abe year of the organzaton n whch such gft or
bequest was made s prevented by the provsons of subsectons (a) or (b) of
ths secton.
(d) Profts Inurng to the eneft of Certan ducatona Organza-
tons or osptas. For any ta abe year begnnng pror to anuary 1, 19 1,
an organzaton operated for the prmary purpose of carryng on a trade or
busness for proft, no part of the net earnngs of whch nures to the beneft
of any prvate sharehoder or ndvdua and a of the net earnngs of whch
Inure to the beneft of an educatona organzaton whch normay mantans
a reguar facuty and currcuum and normay has a reguary organzed body
of pups or students In attendance at the pace where ts educatona actvtes
are reguary carred on, or to the beneft of a hospta, or an nsttuton for the
rehabtaton of physcay handcapped persons, whch mantans or s bud-
ng for proper mantenance a hospta or nsttuton staffed or to be staffed by
quafed professona persons for the treatment of the sck and/or the rehab-
taton of the physcay handcapped, sha not be dened e empton from ta aton
under secton 101 of the Interna Revenue Code on the ground that t s carryng
on a trade or busness for proft. The determnaton as to whether an organ-
zaton other than one descrbed n ths subsecton s e empt under secton 101
of the Interna Revenue Code from ta aton for any ta abe year begnnng
before anuary 1, 19 1, sha be made as f ths subsecton and secton 301(b)
addng the ast two sentences to secton 101, reatng to feeder organzatons
of ths ct had not been enacted and wthout nferences drawn from the
fact that ths subsecton and the amendment made by secton 301(b) are not
e pressy made appcabe wth respect to ta abe years begnnng before
anuary 1, 19 1.
(6) Feeder organzatons. In the case of an organzaton operated for the
prmary purpose of carryng on a trade or busness for proft, e empton s not
aowed under any paragraph of secton 101 on the ground that a the profts
of such organzaton are payabe to one or more organzatons e empt from
ta aton under secton 101. For the purpose of ths rue, the term trade or
busness does not ncude the renta by an organzaton of ts rea property
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29.23 o)-.
10
(ncudng persona property eased wth the rea property). In determnng
the prmary purpose of an organzaton, a the crcumstances must be con-
sdered, ncudng the sze and e tent of the trade or busness and the sze and
e tent of those actvtes of such organzaton whch are specfed n the appcabe
paragraph of secton 101. If a subsdary organzaton of a ta -e empt organza-
ton woud tsef be e empt on the ground that ts actvtes are an ntegra part
of the e empt actvtes of the parent organzaton, ts e empton w not be
ost because, as a matter of accountng between the two organzatons, the sub-
sdary derves a proft from ts deangs wth ts parent organzaton, for
e ampe, a subsdary organzaton whch s operated for the soe purpose of
furnshng eectrc power used by ts parent organzaton, a ta -e empt educa-
tona organzaton, n carryng on ts educatona actvtes. owever, the
subsdary organzaton s not e empt from ta f t s operated for the prmary
purpose of carryng on a trade or busness whch woud be an unreated trade
or busness (that s, unreated to e empt actvtes) f reguary carred on by
the parent organzaton. For e ampe, f a subsdary organzaton s operated
prmary for the purpose of furnshng eectrc power to consumers other than
ts parent organzaton (and the parent s ta -e empt subsdary organzatons),
t s not e empt snce such busness woud be an unreated trade or busness
f reguary carred on by the parent organzaton. Smary, f the subsdary
s owned by severa unreated e empt organzatons, and s operated for the
purpose of furnshng eectrc power to each of them, t s not e empt snce such
busness woud be an unreated trade or busness If reguary carred on by any
one of the ta -e empt organzatons.
In certan cases an organzaton whch carres on a trade or busness for
proft but s not operated for the prmary purpose of carryng on such trade or
busness s sub|ect to ta under suppement U of chapter 1 of the Interna
Revenue Code (whch suppement begns wth secton 21) on ts unreated
busness net ncome.
Par. 7. Immedatey precedng each of sectons 29.101 (1)-1 26
CFR 29.101(1)- to 29.101 ( )- 26 CFR 29.101( )-1 . ncusve,
each of sectons 29.101 (7)- 26 CFR 29.101 (7)- to 29.101 (13)-1
26 CFR 29.101 (13)-1 , ncusve, secton 29.101 (1 )-1 26 CFR
29.101 (1 )-1 , and mmedatey after secton 101(19) (whch secton
s set forth mmedatey after secton 29.101 (1 )-1 26 CFR 29.101
(1 )-1 ), there s nserted the foowng:
S C. 301. INCOM OF DUC TION L, C RIT L . ND C R-
T IN OT R MPT ORG NIZ TIONS IR NU CT OF
19 0, PPRO D S PT M R 23, 19 0 .

n organzaton operated for the prmary purpose of carryng on
a trade or busness for proft sha not be e empt under any para-
graph of ths secton on the ground that a of ts profts are payabe
ness sha not ncude the renta by an organzaton of Its rea
property (ncudng persona property eased wth the rea
property).
foowng organzatons sha be e empt and nsertng n eu thereof
cept as provded n suppement U, the foowng organzatons
sha be e empt , and ( ) by addng at the end of such secton
(foowng the paragraph added by subsecton (b) of ths secton)
the foowng paragraph :
Notwthstandng suppement U, an organzaton descrbed n ths
secton (other than n the precedng paragraph) sha be consdered an
organzaton e empt from ncome ta es for the purpose of any aw whch
refers to organzatons e empt from ncome ta es.

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10
29.23(o)-.
19 0, PPRO D S PT M R 23, 19 0 .
The amendments made by ths part sectons 301, 302, and 303 of
the Revenue ct of 19 0 sha be appcabe ony wth respect to ta abe
whether an organzaton s e empt under secton 101 of the Interna
anuary 1, 19 1, sha be made as f secton 301(b) of ths ct had
not been enacted and wthout nferences drawn from the fact that the
amendment made by such secton s not e pressy made appcabe wth
respect to ta abe years begnnng before anuary 1, 19 1.
Par. . There s nserted mmedatey precedng secton 29.101 (6)-
26 CFR 29.101 (6)-1 the foowng:
S C. 301. INCOM OF DUC TION L, C RIT L , ND C R-
19 0, PPRO D S PT M R 23, 19 0 .

n organzaton operated for the prmary purpose of carryng
on a trade or busness for proft sha not be e empt under any para-
graph of ths secton on the ground that a of ts profts are payabe
ness sha not ncude the renta by an organzaton of ts rea
property (ncudng persona property eased wth the rea prop-
erty).
foowng organzatons sha be e empt and nsertng n eu
thereof cept as provded n suppement U, the foowng organ-
zatons sha be e empt , and ( ) by addng at the end of such
secton (foowng the paragraph added by subsecton (b) of ths
secton) the foowng paragraph:
Notwthstandng suppement U, an organzaton descrbed n ths
secton (other than n the precedng paragraph) sha be consdered
an organzaton e empt from ncome ta es for the purpose of any aw
whch refers to organzatons e empt from ncome ta es.

S C. 303. FF CTI D T OF P RT I R NU CT OF 19 0,
PPRO D S PT M R 23, 19 0 .
whether an organzaton s e empt under secton 101 of the Interna
anuary 1, 1901, sha be made as f secton 301(b) of ths ct had
not been enacted and wthout nferences drawn from the fact that the
amendment made by such secton s not e pressy made appcabe wth
respect to ta abe years begnnng before anuary 1, 19 1.
PPRO D S PT M R 23, 19 0 .

(c) mendment of Secton 101(C). Secton 101(6) s hereby
amended by strkng out egsaton; and nsertng n eu thereof
the foowng: egsaton. For oss of e empton under certan cr-
cumstances, see sectons 3 13 and 3 1 ; .

2 2100 3
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29.23(o)-.)
106
Par. 9. Secton 29.101 (6)- 26 CFR 29.101(6)-1 s amended by
addng at the end thereof the foowng:
Sectons 3 13 and 3 1 set forth rues under whch certan organzatons
descrbed n secton 101(6) may be dened e empton. See secton 29.3 13-1
and secton 29.3 1 -1.
23, 19 0 .
of such contrbuton (1) such organzaton Is regstered under secton
7, or (2) there s n effect a fna order of the oard the Subversve
secton 7.

Pah. 11. Secton 29.27 -1, as amended by Treasury Decson 16
C. . 19 6-1, 1 9 , approved May 27, 1916 26 CFR 29.27 -1 , s
further amended by addng at the end thereof the foowng:
For speca provsons wth respect to ta abe years begnnng pror to anuary
1, 19 1 n the case of an organzaton whch woud be e empt from ta under
secton 101 were t not carryng on a trade or busness for proft, see secton 302(b)
of the Revenue ct of 19 0, set forth n secton 29.101-3 (o).
Par. 12. There s nserted mmedatey precedng secton 29. 0 -1
26 CFR 29. 0 -1 the foowng:
23. 19 0 .
ton to or for the use of any organzaton f at the tme of the makng of
such contrbuton (1) such organzaton s regstered under secton 7. or
(2) there s In effect a fna order of the oard the Subversve ctvtes
Contro oard requrng such organzaton to regster under secton 7.

PPRO D S PT M R 23, 19 0 .

(d) mendment of Secton 0 (a). Secton 0 (a)(2) Is hereby
amended by addng at the end thereof the foowng: For dsaowance
of certan chartabe, etc., deductons otherwse aowabe under ths
paragraph, see sectons 3 13 and 162(g) (2).

Par. 13. There s nserted mmedatey precedng subpart of
Reguatons 111 26 CFR 29.6000 the foowng:
S C. 331. MPTION OF C RT IN ORG NIZ TIONS UND R
S CTION 101 (6) ND D DUCTI ILITY OF CONTRI UTIONS
M D TO SUC ORG NIZ TIONS R NU CT OF 19 0,
PPRO D S PT M R 23, 19 0 .
Chapter 3 s hereby amended by nsertng at the end thereof the
foowng new sectons:
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107
( 29 23(o)-.
S T. 3S13. R UIR M NTS FOR MPTION OF C RT IN
ORG NIZ TIONS UND R S CTION 101 ( ) ND FOR D DUCTI-
ILITY OF CONTRI UTIONS M D TO SUC ORG NIZ -
TION
(a) Organzatons to Whch Secton ppes. Ths secton sha
appy to any organzaton descrbed In secton 101 (6) e cept
(1) a regous organzaton (other than a trust) ;
(2) an educatona organzaton whch normay mantans a
reguar facuty and currcuum and normay has a reguary enroed
body of pups or students n attendance at the pace where ts educa-
tona actvtes are reguary carred on;
(3) an organzaton whch normay receves a substanta part
of ts support (e cusve of ncome receved n the e ercse or
performance by such organzaton of Its chartabe, educatona, or
other purpose or functon consttutng the bass for ts e empton
under secton 101 (6)) from the Unted States or any State or pot-
ca subdvson thereof or from drect or ndrect contrbutons from
the genera pubc;
( ) an organzaton whch s operated, supervsed, controed, or
prncpay supported by a regous organzaton (other than a
trust) whch s tsef not sub|ect to the provsons of ths secton;
and
( ) an organzaton the prncpa purposes or functons of whch
are the provdng of medca or hospta care or medca educaton
or medca research.
(b) Pbohbted Transactons. For the purposes of ths secton, the
term prohbted transacton means any transacton n whch an organ-
zaton sub|ect to the provsons of ths secton
(1) ends any part of ts ncome or corpus, wthout the recept
of adequate securty and a reasonabe rate of nterest, to;
(2) pays any compensaton, n e cess of a reasonabe aowance
for saares or other compensaton for persona servces actuay
rendered, to;
(3) makes any part of ts servces avaabe on a preferenta
bass to;
( ) makes any substanta purchase of securtes or any other
property, for more than adequate consderaton n money or money s
worth, from;
( ) ses any substanta part of ts securtes or other property,
for ess than an adequate consderaton n money or money s worth,
to; or
(6) engages n any other transacton whch resuts n a sub-
stanta dverson of ts ncome or corpus to;
the creator of such organzaton (f a trust) ; a person who has made a
substanta contrbuton to such organzaton ; a member of the famy
(as defned n secton 2 (b) (2) (I))) of an ndvdua who s the creator
of such trust or who has made a substanta contrbuton to such organ-
zaton ; or a corporaton controed by such creator or person through
the ownershp, drecty or ndrecty, of 0 per centum or more of the
tota combned votng power of a casses of stock entted to vote or 0
per centum or more of the tota vaue of shares of a casses of stock
of the corporaton.
(c) Dena of empton to Organzatons ngaged n Prohbted
Transactons.
(1) Genera rue. No organzaton sub|ect tc the provsons of
ths secton whch has engaged n a prohbted transacton after
uy 1, 19 0, sha be e empt from ta aton under secton 101(6).
(2) Ta abe years affected. n organzaton sha be dened
e empton from ta aton under secton 101(6) by reason of para-
graph (1) ony for ta abe years subsequent to the ta abe year
durng whch t s notfed by the Secretary that t has engaged n
a prohbted transacton, uness such organzaton entered nto such
prohbted transacton wth the purpose of dvertng corpus or n-
come of the organzaton from ts e empt purposes, and such trans-
acton nvoved a substanta part of the corpus or ncome of such
organzaton.
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I 29.23(o)-.
10
(d) Future Status of Organzaton Dened empton. ny
organzaton dened e empton under secton 101(6) by reason of the
provsons of subsecton (c), wth respect to any ta abe year foowng
the ta abe year n whch notce of dena of e empton was receved,
may, under reguatons prescrbed by the Secretary, fe cam for e -
empton, and f the Secretary, pursuant to such reguatons, s satsfed
that such organzaton w not knowngy agnn engage n a prohbted
transacton, such organzaton sha be e empt wth respect to ta abe
years subsequent to the year n whch such cam s fed.
(e) Dsaowance of Certan Chartabe. tc., Deductons. No
gft or bequest for regous, chartabe, scentfc, terary, or educatona
purposes (ncudng the encouragement of art and the preventon of
cruety to chdren or anmas), otherwse aowabe as a deducton under
secton 23(o)(2), 23(q)(2), 162(a), 0 (a)(2), sha be
aowed as a deducton f made to an organzaton whch, n the ta abe
year of the organzaton n whch the gft or bequest s made, s not
e empt under secton 101(6) by reason of the provsons of ths secton.
Wth respect to any ta abe year of the organzaton for whch the organ-
zaton s not e empt pursuant to the provsons of subsecton (c) by
reason of havng engaged n a prohbted transacton wth the purpose
of dvertng the corpus or ncome of such organzaton from ts e empt
purposes and such transacton nvoved a substanta part of such corpus
or ncome, and whch ta abe year s the same, or pror to the, ta abe
year of the organzaton n whch such transacton occurred, such de-
ducton sha be dsaowed the donor ony f such donor or (f such donor
s an ndvdua) any member of hs famy (as defned n secton
2 (b) (2) (D)) was a party to such prohbted transacton.
(f) Defnton. For the purposes of ths secton, the term gft or
bequest means any gft, contrbuton, bequest, devse, egacy, or
transfer.

S C. 333. FF CTI D T S NU CT OF 10 0, P-
PRO D S PT M R 23, 10 0 .
Subsectons (c) and (d) of secton 3 13 of the Interna
Revenue Code, added by secton 331 of ths ct, sha appy wth respect
to ta abe years begnnng after December 31, 10 0, and subsecton (e)
of secton 3 13 of the Interna Revenue Code sha appy ony wth re-
spect to gfts or bequests (as defned n secton 3 13 of the Interna
Revenue Code) made on or after anuary 1,19 1.
Sec. 29.3 13-1. Dena, of empton to Organzatons ngaged n Prohbted
Transactons. The prohbted transactons enumerated n secton 3 13(b) are
In addton to and not n mtaton of the restrctons contaned n secton 101 (6).
ven chough an organzaton has not engaged n any of the prohbted transac-
tons referred to n secton 3 13(b), t st may not quafy for ta e empton n
vew of the genera provsons of secton 101(6). Thus, If a trustee or other
fducary of the organzaton (whether or not he s aso a creator of such organ-
zaton) enters nto a transacton wth the organzaton, such transacton w
be cosey scrutnzed n the ght of the fducary prncpe requrng undvded
oyaty to ascertan whether the organzaton s n fact beng operated for the
stated e empt purposes.
n organzaton descrbed n secton 101(6), other than an organzaton e -
cepted by secton 3 13(a), whch has engaged n any prohbted transacton (as
descrbed n secton 3 13(b)) after uy 1, 19 0, sha not he e empt from ta a-
ton under secton 101(6) for any ta abe year subsequent to the ta abe year
n whch there s maed to t a notce n wrtng by the Commssoner that t
has engaged n such prohbted transacton. Such notfcaton by the Comms-
soner sha be by regstered ma to the ast known address of the organzaton.
owever, notwthstandng the requrement of notfcaton by the Commssoner,
e empton sha be dened wth res ect to any ta abe year begnnng after De-
cember 31. 10 0, f such organzaton durng or pror to such ta abe year com-
menced the prohbted transacton wth the purpose of dvertng ncome or
corpus from ts e empt purposes and such transacton nvoved a substanta
part of the ncome or corpus of such organzaton. For the purpose of ths
secton, the term ta abe year means the estabshed annua accountng perod
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109
1 29.23 (o)-.
of the organzaton; or, f the organzaton has no such estabshed annua ac-
countng perod, the ta abe year of the organzaton means the caendar year.
ampe (1). creates a foundaton n 19 9 ostensby for educatona pur-
poses. , as trustee, accumuates the foundaton s ncome from 19 2 unt 19
and then uses a substanta part of ths accumuated ncome to end s chdren
to coege. The foundaton woud ose ts e empton for the ta abe years 19 2
through 19 and for subsequent ta abe years unt t regans ts e empt status.
ampe (2). If under the facts n e ampe (1) such prvate beneft was the
purpose of the foundaton from ts ncepton, such foundaton Is not e empt by
reason of the genera provsons of secton 101(6) and wthout regard to the
provsons of secton 3 13 for a years snce ts ncepton, that s, for the ta -
abe years 19 9 through 19 and subsequent ta abe years, snce under secton
101(6) the organzaton must be organzed and operated e cusvey for e empt
purposes. (See secton 29.101(6)-1. ee aso secton 29.3 1 -1 for oss of
e empton n the case of certan organzatons accumuatng Income.)
Sec. 29.3 13-2. Future Status of Organzaton Dened empton. ny
organzaton dened e empton under secton 101(6) by reason of the provsons
of secton 3 13(c) may te, n any ta abe year foowng the ta abe year n
whch notce of dena of e empton was ssued, a cam for e empton wth the
coector for the dstrct n whch Is ocated the prncpa pace of busness or
prncpa offce of the organzaton. Form 1023, the e empton appcaton, a
copy of whch may be obtaned from any coector, sha be used for ths purpose.
The cam must contan or have attached to t, In addton to the Informaton
generay requred of an organzaton camng e empton under secton 101(6),
an affdavt, by a prncpa offcer of such organzaton authorzed to make such
affdavt, that the organzaton w not knowngy agan engage n a prohbted
transacton. See secton 29.101-2 for proof of e empton requrements n
genera.
If the Commssoner s satsfed that such organzaton w not knowngy
agan engage a prohbted transacton and that the organzaton aso satsfes
a other requrements under secton 101(6), he sha so notfy the organzaton
n wrtng. In such case the organzaton w be e empt (sub|ect to the prov-
sons of sectons 101(6), 3 13, and 3 1 ) wth res ect to the ta abe years sub-
sequent to the ta abe year n whch such cam s fed. Secton 3 13 contem-
pates that an organzaton dened e empton because of the terms of such secton
w be sub|ect to ta aton for at east one fu ta abe year. For the purpose
of ths secton, the term ta abe year means the estabshed annua account-
ng perod of the organzaton; or, If the organzaton has no such estabshed
annua accountng perod, the ta abe year of the organzaton means the
caendar year.
Sec. 29.3 13-3. Dsaowance of Certan Chartabe, tc., Deductons. No
gft or contrbuton made on or after anuary 1, 19 1, whch woud otherwse
be aowabe as a chartabe or other deducton under secton 23(o) (2), 23(q) (2),
162(a), or 0 (a) (2), sha be aowed as a deducton f made to an organzaton
whch at the tme the gft or contrbuton s made s not e empt under secton
101(6) by reason of the provsons of secton 3 13.
If an organzaton, whch receves a gft or contrbuton made after December
31, 19 0, s not e empt under secton 101(6) because t engaged n a prohbted
transacton nvovng a substanta part of Its ncome or corpus wth the purpose
of dvertng ts ncome or corpus from ts e empt purposes, and f the ta abe
year of the organzaton durng whch such gft or contrbuton s made begns
after December 31, 19 0, and s the same as, or s pror to, the ta abe year of
the organzaton n whch such transacton occurred, then a deducton by the
donor wth respect to the gft or contrbuton sha not be dsaowed under the
precedng paragraph uness the donor (or any member of hs famy f the
donor s an ndvdua) s a party to such prohbted transacton. For the pur-
pose of the precedng sentence, the members of an ndvdua donor s famy
ncude ony hs brothers and ssters, whether by whoe or haf bood, spouse,
ancestors, and nea descendants.
ampe. In 1902, corporaton , whch fes ts ncome ta returns on the
caendar year bass, creates a foundaton purportedy for chartabe purposes and
deducts from ts gross ncome for that year the amount of the gft to the founda-
ton. Corporaton makes addtona gfts to ths foundaton n 19 3, 19 , and
19 , and takes chartabe deductons for such years. , an ndvdua, aso con-
trbutes to the foundaton n 19 3,19 , and 19 , and takes chartabe deductons
for such years. In 1 3, the foundaton commences purposey to dvert Its
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29.23(o)-.
110
corpus to the beneft of corporaton , and a substanta amount of such corpus
s so dverted by the cose of the ta abe year 19 . For 19 3 and subsequent
ta abe years, the e empton aowed the foundaton under secton 101(6) s
dened by reason of the provsons of secton 3 13(c). oth corporaton and
ndvdua woud be dsaowed any deducton for the contrbutons made dur-
ng 19 to the foundaton. Moreover, the chartabe deductons taken by cor-
poraton for contrbutons to the foundaton n the years 19 3 and 19 woud
aso be dsaowed snce corporaton was a party to the prohbted transacton.
If the facts and surroundng crcumstances ndcate that the contrbuton n
19 2 by corporaton was for the purpose of the prohbted transacton, then the
chartabe deducton for the year 19 2 sha aso be dsaowed wth respect to
corporaton , snce the prohbted transacton woud then have commenced wth
the makng of such contrbuton and the e empton aowed the foundaton under
secton 101(6) woud then be dened for 19 2 by reason of provsons of secton
3 13(c).
S CTION 101(6) ND D DUCTI ILITY OF CONTRI UTIONS
PPRO D S PT M R 23, 19 0 .
1 Chapter 3 s hereby amended by nsertng at the end thereof the fo-
owng new sectons:

S C. 3 1 . D NI L OF MPTION UND R S CTION 101(6)
IN T C S OF C RT IN ORG NIZ TIONS CCUMUL T-
ING INCOM .
In the case of any organzaton descrbed n secton 101(6) to whch
secton 3 13 s appcabe, f the amounts accumuated out of ncome
durng the ta abe year or any pror ta abe year and not actuay pad
out by the end of the ta abe year
(1) are unreasonabe n amount or duraton n order to carry
out the chartabe, educatona, or other purpose or functon const-
tutng the bass for such organzaton s e empton under secton
101(6) ; or
(2) are used to a substanta degree for purposes or functons
other than those consttutng the bass for such organzaton s
e empton under secton 101(6) ; or
(3) are nvested n such a manner as to |eopardze the carryng
out of the chartabe, educatona, or other purpose or functon con-
sttutng the bass for such organzaton s e empton under secton
101(6),
e empton under secton 101(6) sha be dened for the ta abe year.

S C. 333. FF CTI D T S R NU CT OF 19 0, P-
PRO D S PT M R 23, 19 0 .
secton 3 1 of the Interna Revenue Code, added by secton
331 of ths ct, sha appy wth respect to ta abe years begnnng after
December 31, 19 0, .
Sec. 29.3 1 -1. Dena op empton Under Secton 101(6) n the Case of
Certan Organzatons ccumuatng Income. The restrctons enumerated
n secton 3 1 are In addton to and not n mtaton of the restrctons con-
taned n secton 101(6). ven though an organzaton has not voated any of
the terms of secton 3 1 , t st may not quafy for ta e empton n vew of
the genera provsons of secton 101 (6). Thus, f a trustee or other fducary of
the organzaton (whether or not he Is aso a creator of such organzaton)
enters nto a transacton wth the organzaton, such transacton w be cosey
scrutnzed n the ght of the fducary prncpe requrng undvded oyaty
to ascertan whether the organzaton s n fact beng operated for the stated
e empt purposes.
For any ta abe year begnnng after December 31, 19 0. any organzaton
descrbed n secton 101 ) other than an organzaton descrbed n secton 3 13
(a) (1) through ( ), ncusve, sha not be e empt under secton 101(6) f the
amounts accumuated out of ncome durng the ta abe year, or any pror ta -
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29.23(o)-.
abe year (ncudng ta abe years begnnng pror to anuary 1. 10 1), and
not actuay pad out for e empt purposes by the end of the ta abe year, are
unreasonabe. mounts accumuated out of ncome become unreasonabe when
more ncome s accumuated than s needed, or when the duraton of the ac-
cumuaton s onger than s needed, n order to carry out the purpose consttutng
the bass for the organzaton s e empton. Furthermore, an organzaton sha
not be e empt under secton 101(6) f amounts accumuated out of ncome are
used to a substanta degree for purposes or functons other than those const-
tutng the bass for the organzaton s e empton, or f such amounts are nvested
n such a manner as to |eopardze the carryng out of the purpose or functon
consttutng the bass for the organzaton s e empton.
For the purpose of secton 3 1 , the term ncome means gans, profts, and
ncome determned under the prncpes appcabe n determnng the earnngs
or profts of a corporaton. The amount accumuated out of ncome durng
the ta abe year or any pror ta abe year sha be determned under the prn-
cpes appcabe n determnng the accumuated earnngs or profts of a
corporaton. In determnng the reasonabeness of an accumuaton out of
ncome, there w be dsregarded the foowng: (1) The accumuaton of gan
upon the sae or e change of a donated asset to the e tent that such gan
represents the e cess of the far market vaue of such asset when acqured by the
organzaton over ts substtuted bass In the hands of the organzaton; (2)
the accumuaton of gan upon the sae or e change of property hed for the
producton of nvestment ncome, such as dvdends, nterest, and rents, where
the proceeds of such sae or e change are wthn a reasonabe tme renvested
n property acqured and hed n good fath for the producton of nvestment
ncome.
Whether the condtons specfed n paragraphs 1), (2), and (3) of secton
3 1 are present n any case must be determned from a the facts. The
condtons specfed n secton 3 1 (1), (2), and (3) may resut from the use
of ony one organzaton or of a chan of two or more organzatons.
n organzaton that has ost ts e empt status by reason of the provsons
of secton 3 1 may, n order to reestabsh ts e empton, fe a cam for e emp-
ton wth the coector for the dstrct n whch s ocated the prncpa pace
of busness or prncpa offce of the organzaton. Form 1023, the e empton
appcaton, a copy of whch may be obtaned from any coector, sha be used
for ths purpose. The cam for e empton must contan or be accompaned
by nformaton or evdence showng that the crcumstances that caused the
oss of e empton under secton 3 1 no onger e st, and an affdavt, by a
prncpa offcer of such organzaton authorzed to make such affdavt, that
the organzaton w not knowngy agan voate the terms of secton 3 1 .
See secton 29.101-2 for proof of e empton requrements n genera. The
provsons of secton 3 1 contempate that an organzaton dened e empton
thereunder w he sub|ect to ta aton for at east one fu ta abe year. For
the purpose of ths secton, the term ta abe year means the estabshed annua
accountng perod of the organzaton; or, f the organzaton has no such
estabshed annua accountng perod, the ta abe year of the organzaton
means the caendar year.
In the case of an organzaton dened e empton under secton 101(6) soey
by reason of the provsons of secton 3 1 , deductons otherwse aowabe
under secton 23(o)(2), 23(q)(2), 162(a), or 0T (a)(2) for gfts or contr-
butons to such organzaton sha not be dsaowed.
62).)
ohn . Dt|nap,
pproved ugust ,19 2.
Thomas . Lynch,
ctng Secretary of tfe Treasury.
(Fed wth the Dvson of the Federa Regster ugust 7, 19 2, : 0 a. m.)
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29.23(o)-.
112
Secton 29.23 (o)-: Contrbutons or gfts by 19 2-22-139 7
ndvduas IR-Mm. 3
( so Secton 107, Secton 29.107-1, Secton
29.107-2, Secton 29.107-3.)
Recomputaton of deductons for medca e penses and chartabe
contrbutons n connecton wth the computatons requred by sec-
ton 107 of the Interna Revenue Code.
Washngton , D. C, September 30, 1962.
Concerned:
1. Secton 107(a) of the Interna Revenue Code provdes that f
at east 0 per centum of the tota compensaton for persona servces
coverng a perod of 36 caendar months or more (from the begnnng
to the competon of such servces) s receved or accrued n one ta abe
|ear by an ndvdua or a partnershp, the ta attrbutabe to any
part thereof whch s ncuded n the gross ncome of any ndvdua
sha not be greater than the aggregate of the ta es attrbutabe to
such part had t been ncuded n the gross ncome of such ndvdua
rataby over that part of the perod whch precedes the date of such
recept or accrua.
2. In determnng the mtaton upon ta abty under secton
107(a) of the Code, supra, t s necessary to make certan ta computa-
tons wth respect to the compensaton sub|ect to the provsons of that
secton. The computatons to be made are set forth n secton 29.107-1
of Reguatons 111.
3. In dward . Thayer et u . v. Commssoner (12 T. C. 79 , acqu-
escence, C. . 19 0-1, ), The Ta Court of the Unted States hed that
the deducton for medca e penses under secton 23( ) of the Interna
Revenue Code must be recomputed each tme a dfferent amount s
taken to represent ad|usted gross ncome n the computatons requred
under secton 107(a) of the Code. The Commssoner announced hs
acquescence n that decson n Interna Revenue uetn 19 0-2
(page 1), dated anuary 23,19 0. Snce the amount of the chartabe
contrbutons deducton under secton 23 (o) of the Code s based on a
percentage of ad|usted gross ncome, as s the medca e pense deduc-
ton under secton 23( ) of the Code, t s hed that the nterreaton
between the chartabe contrbutons deducton under secton 23(o)
of the Code and the provsons of secton 107(a) of the Code s
requred to be construed n the same manner as the Ta Court, n the
Thayer case, construed the nterreaton between the medca e pense
deducton under secton 23( ) of the Code and the provsons of
secton 107(a) of the Code.
. ccordngy, n determnng the mtaton upon the amount of
the chartabe contrbutons deducton aowabe under secton 23(o)
of the Code, there must be a recomputaton each tme a dfferent
amount s taken to represent ad|usted gross ncome n the computa-
tons requred under secton 107(a) of the Code. Ths rue of recom-
putaton w aso appy wth respect to the determnaton of the
mtaton upon ta abty under secton 107 (b) of the Code reatng
to ncome from artstc work or nventon, and secton 107(d) of the
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113
29.23(u)-L
Code reatng to back pay, snce the requrements of those subsectons
are anaogous to the requrements of secton 107(a) of the Code.
. Pursuant to authorty contaned n secton 3791(b) of the In-
terna Revenue Code, the provsons of ths mmeograph w not be
apped wth respect to ta abe years ended pror to anuary 1, 19 0.
6. Correspondence reatng to the contents of ths mmeograph
shoud refer to ts number andto symbos T: R: C.
ohn . Dunap,
Commssoner.
S CTION 23(p). D DUCTIONS FROM GROSS INCOM :
CONTRI UTIONS OF N MPLOY R TO N M-
PLOY S TRUST OR NNUITY PL N ND COMP NS -
TION UND R D F RR D-P YM NT PL N
Secton 29.23(p)-9: Contrbutons of an
empoyer under an empoyees annuty
pan that meets the requrements of sec-
ton 16 (a) (Secton 23(p) (1) ( )).
INT RN L R NU COD
ppcabty of sectons 16 (a) and 23(d)(1) ( ) of the Interna
Revenue Code to nonresdents of the Unted States. (See IR-Mm. 71,
page 170.)
S CTION 2 (u). D DUCTIONS FROM GROSS INCOM :
LIMONY, TC., P YM NTS
Secton 29.23(u)-1: Perodc amony payments. 19 2-2 -13906
( so.Secton 22(k), Secton 29.22(k)-.) L T. 10
INT RN L R NU COD
Payments made to a dvorced wfe after she has remarred and
pror to retroactve modfcaton of the decree of dvorce to desgnate
such payments as support for a mnor chd, rather than as a-
mony and support of the chd wthout aocaton, as orgnay
provded n the decree, quafy, wthn the meanng of sectons
22(k) and 23(u) of the Interna Revenue Code, as perodc pay-
ments n dscharge of a ega obgaton mposed, because of the
marta reatonshp, under a decree of dvorce.
dvce s requested whether payments made under the crcum-
stances heren by a former husband to a dvorced wfe after she has
remarred quafy as perodc payments whch are deductbe by
the former husband under secton 23 (u) of the Interna Revenue Code.
The ta payer s former wfe procured a decree of dvorce n 1937
whch requred the ta payer to pay a weeky sum as amony and as
support of ther mnor chd, wthout aocaton. In 19 1, the wfe
remarred. The ta payer contnued to make payments pursuant to
the dvorce decree after such remarrage. In 19 7, the ta payer,
havng faen n arrears wth hs payments, was cted for faure to
compy wth the order of the dvorce court wth respect to support
of the mnor chd. The court stated that amony termnated as of
the date of the former wfe s remarrage n 19 1, but entered an order
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29.23(u)-.)
11
contnung the payments as and for the support of the mnor chd
of the partes.
Secton 22(k) of the Interna Revenue Code provdes n part as
foows:
(k) mony, tc., Income. In the case of a wfe who s dvorced or egay
separated from her husband under a decree of dvorce or of separate mantenance,
perodc payments (whether or not made at reguar ntervas) receved subse-
quent to such decree n dscharge of a ega obgaton whch, because
of the marta or famy reatonshp, s mposed upon or ncurred by such hus-
band under such decree or under a wrtten nstrument ncdent to such dvorce
or separaton sha be ncudbe n the gross ncome of such wfe
Secton 23(u) of the Code provdes n part that n computng net
ncome there sha be aowed as deductons:
(u) mony, tc., Payments. In the case of a husband descrbed In sec-
ton 22(k), amounts ncudbe under secton 22(k) n the gross ncome of hs
wfe, payment of whch s made wthn the husband s ta abe year.
Secton 29.22(k)-(o ) of Reguatons 111 provdes that where
perodc payments are receved by the wfe for the support and man-
tenance of hersef and of mnor chdren of the husband wthout
specfc desgnaton of the porton for the support of such chdren,
the whoe of such amounts s ncudbe n the ncome of the wfe as
provded n secton 22(k) of the Code.
In state of omer Laughn v. Commssoner (167 Fed. (2d) 2 ),
the prncpes of whch have been accepted n G. C. M. 2 999 (C. .
19 9-1, 116), the decedent had entered nto a property settement
agreement wth hs then wfe, whch agreement was ater ncorporated
n a fna decree of dvorce. The agreement provded that he or hs
estate, shoud hs wfe survve hm, woud pay her for her natura fe
00 a month for support and mantenance, such amount to be reduced
to 300 a month shoud she remarry. s estate pad the former wfe
9,600 durng 19 2 pursuant to the agreement and the dvorce .decree
and camed such sum as a deducton n ts ncome ta return. The
Government contended that secton 23(u) of the Code contempated
ony those payments made under a decree of dvorce or separaton
whch are n the nature of amony, that s, payments for support and
mantenance; that at hs death the decedent s obgaton to support hs
wfe ceased at common aw and n accordance wth the appcabe
State aw; and, therefore, that the payments made by hs estate were
not n dscharge of hs ega obgaton for support but were n ds-
charge of contract obgatons, and as such were not deductbe. The
court, n re|ectng such poston, stated n part as foows:
It w be noted that the te t of the statute makes no reference to
amony as such, nor to payments for support or mantenance, but seems to
encompass a payments made under a decree of dvorce or separaton n ds-
charge of a ega obgaton mposed under a decree of dvorce because of the
marta reatonshp. In the nstant case we thnk t s cear that the
payments made by the estate were n dscharge of the ega obgaton mposed
under a decree of dvorce because of the marta reatonshp.
Thus, n the Laughn case the court hed n effect that, despte the
death of the husband, payments made after hs death contnued to
come wthn the scope of secton 22(k) of the Code. Lkewse, n the
nstant case the payments made by the husband to the dvorced wfe
after her remarrage and pror to the entry of the modfyng order n
19 7, contnued to come wthn the scope of secton 22(k). Such pay-
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11
29.2 -3.
ments, n the words of the court above, were payments made under a
decree of dvorce n dscharge of a ega obgaton mposed under a
decree of dvorce because of the marta reatonshp. s such, they
shoud be treated as ta abe to the wfe under secton 22(k) and deduc-
tbe by the husband under secton 23(u) of the Code. (In the Laugh-
n case the court hed that the deducton was provded for by secton
162(b) and secton 171(b) of the Code, rather than secton 23 (u), snce
secton 23(u) appes ony durng the husband s fetme).
The modfyng order of the court does not, for ta purposes, have
the effect of makng retroactve specfc desgnaton of the entre
amount as a sum payabe for the support of the mnor chd begnnng
wth the date of the former wfe s remarrage, and thus removng the
payments from the scope of sectons 22(k) and 23(u) of the Code.
The determnaton of Federa ncome ta consequences s not con-
troed by retroactve |udgments of State courts. (See Robert L.
Dane v. Commsoner, 16 Fed. (2d) 9, and Peter an aanderen v.
Commssoner, 17 Fed. (2d) 3 9.) The payments, when made, were
made under a decree of dvorce whch f ed no amount of money or
porton of the payments as sums payabe for the support of the mnor
chd. ( dna M. Gbertson v. Commssoner, Ta Court memoran-
dum opnon, decded une 20, 19 1; cf. Robert L. Dane v. Comms-
soner, supra; Peter an aanderen v. Commssoner, supra.)
In vew of the foregong, t s hed that payments made by a former
husband to a dvorced wfe after she has remarred and pror to retro-
actve modfcaton of the decree of dvorce to desgnate such pay-
ments as support for a mnor chd, rather than as amony and sup-
port of the chd wthout aocaton, as orgnay provded n the
decree, quafy, wthn the meanng of sectons 22(k) and 23(u) of the
Interna Revenue Code, as perodc payments n dscharge of a ega
obgaton mposed, because of the marta reatonshp, under a decree
of dvorce.
S CTION 2 . CR DITS OF INDI IDU L
G INST N T INCOM
Secton 29.2 -3: Persona e empton, surta 19 2-17-13 93
e emptons, and e emptons for both norma I. T. 092
ta and surta .
INT RN L R NU COD
In determnng whether a servceman has furnshed more than
one-haf of the support of an ndvdua camed as a dependent
under secton 2 (b)(1)(D) of the Interna Revenue Code, the
entre amount furnshed by the servceman, Incudng the ta -
e empt basc aowance for quarters to whch the servceman s
entted under the Career Compensaton ct of 19 9 (63 Stat. 02),
as amended, and used for the support of such dependent, must be
consdered.
dvce s requested whether a servceman may take nto consdera-
ton hs basc aowance for quarters, receved under the Career Com-
pensaton ct of 19 9 (63 Stat. 02), as amended, and used for the
support of a dependent, n determnng whether he furnshed more
than one-haf of such dependent s support, for the purposes of a
dependency credt under secton 2 (b) (1) (D) of the Interna Revenue
Code.
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29.2 -3.
116
Secton 2 (b) (1) (D) of the Interna Revenue Code, as amended,
aows (wth an e cepton not matera here) the ta payer an e emp-
ton of 600 for each dependent whose gross ncome for the caendar
year n whch the ta abe year of the ta payer begns s ess than
600. In order to be entted to ths e empton, the ta payer must
have furnshed more than one-haf of the dependent person s support
for the ta abe year and the dependent must be cosey reated to the
ta payer. (See secton 2 (b) (3) of the Code.)
Under the provsons of the Servcemen s Dependents owance
ct of 10 2 ( 6 Stat. 3 1), an ensted member of the rmed Forces
was consdered as furnshng ony that porton of the monthy
famy aowance receved by hs dependents whch was aotted from
hs servce pay. The baance conssted of the Government s contrbu-
ton, whch was regarded as beng n the nature of a gft. (See I. T.
3 7 , C. . 19 2-2, 2, and L T. 3723, C. . 19 ,122.) In determnng
whether the servceman furnshed the ma|or support of hs dependents,
he was permtted to take nto consderaton the amount deducted from
hs pay for aotment to hs dependents, but not the amount contrbuted
to hs dependents by the Government. owever, most of the pro-
vsons of the Servcemen s Dependents owance ct of 19 2 have
become noperatve by reason of the enactment of the Career Compen-
saton ct of 19 9 (63 Stat. 02), as amended by the Dependents
ssstance ct of 19 0 (6 Stat. 79 ).
The Career Compensaton ct of 19 9, as amended by the Depend-
ents ssstance ct of 19 0, has repaced the monthy famy aow-
ance wth a basc aowance for quarters. n ensted member wth
dependents s now entted to a basc aowance for quarters of ,
67. 0, or a month, dependng on hs pay grade and the number
of hs dependents. Such aowance s pad to, or on behaf of, the
specfed dependents, provded the ensted member has n effect an
aotment of pay, for the support of hs dependents, of not ess than
the sum of the basc aowance for quarters to whch he s entted pus
0, 60, or 0, accordng to hs pay grade.
That porton of the monthy payment to dependents whch const-
tutes the basc aowance for quarters s e cudabe from wages sub|ect
to wthhodng of ncome ta at the source and from gross ncome of
both the servceman and hs dependents. The baance receved by the
dependents, whch s charged to the servceman s pay, s ncudbe
both n the servceman s wages sub|ect to wthhodng of ncome ta
and n hs gross ncome, but s not ta abe to hs dependents. though
the basc aowance for quarters may be e cuded from ta abe n-
come, t s not regarded as a gft from the Government to the depend-
ents. The servceman now aots both the quarters aowance and the
requred amount of hs servce pay to hs dependents. e s con-
sdered as furnshng the tota amount thus receved by hs dependents
n much the same manner as f he (ke an offcer n the rmed Forces)
had actuay assgned or gven such amount to them.
The test to be apped n determnng whether a ta payer has fur-
nshed more than one-haf of the support of a person camed as a
dependent s one of actua support, and t s, therefore, a queston of
fact n each case. (See I. T. 3723, C. . 19 , 122.) ccordngy, n
determnng whether a servceman has furnshed more than one-haf
of the support of an ndvdua camed as a dependent under secton
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117
29.27(b)- .
2 (b)(1)(D) of the Interna Revenue Code, the entre amount fur-
nshed by the servceman, ncudng the ta -e empt basc aowance
for quarters to whch the servceman s entted under the Career
Compensaton ct of 19 9, as amended, and used for the support of
such dependent, must be consdered.
S CTION 27(b). CORPOR TION DI ID NDS P ID
CR DIT: SIC SURT CR DIT
The provsons of artce I () of the Unted States-Swtzer-
and ncome ta conventon, e emptng from Unted States ncome
ta dvdends pad by a corporaton other than a Unted States
domestc corporaton to a nonresdent aen resdent n Swtzer-
and or to a Swss corporaton not havng a permanent estabsh-
ment n the Unted States, do not have the effect of e cudng, under
secton 27() of the Interna Revenue Code, such nonta abe dv-
dends from the cacuaton of the basc surta credt under secton
27(1)) of the Code.
dvce s requested whether the provsons of artce I (1) of
the Unted States-Swtzerand ncome ta conventon, T. D. 67,
C. . 19 1-2, 7 , 7 , have the effect of e cudng, under secton 27()
of the Interna Revenue Code, n computng the basc surta credt
under secton 27(b) of the Code dvdends pad by a corporaton
other than a Unted States domestc corporaton where the stock-
hoders receve such dvdends free of Unted States ncome ta by
reason of the terms of that artce.
rtce I (1) of the Unted States-Swtzerand ncome ta con-
venton provdes as foows:
Dvdends and nterest pad by a corporaton other than a Unted States do-
mestc corporaton sha be e empt from Unted States ta where the recpent
s a nonresdent aen as to the Unted States resdent n Swtzerand or a Swss
corporaton, not havng a permanent estabshment n the Unted States.
rtce III(2) of the conventon provdes as foows:
The provsons of the present Conventon sha not be construed to restrct n
any manner any e empton, deducton, credt or other aowance now or here-
after accorded by the aws of one of the contractng States n the determnaton
of the ta mposed by such State.
Secton 27(b) of the Interna Revenue Code sets forth the manner
n whch the basc surta credt sha be computed, and provdes,
among other thngs, that there sha be ncuded n such computaton
the dvdends pad durng the ta abe year. Secton 27 () of the
Code provdes for the e cuson from such computaton of any part
of a dstrbuton whch s not a ta abe dvdend n the hands of such
of the sharehoders as are sub|ect to ta aton under chapter 1 of the
Code for the perod n whch the dvdend s dstrbuted.
To hod that artce I (1) of the conventon converts an other-
wse ta abe dstrbuton nto a nonta abe dstrbuton as contem-
pated by secton 27() of the Code woud be to construe that artce
n such a manner as to pace a restrcton upon the basc surta credt
Secton 29.27(b)-: asc surta credt.
( so Secton 27(); Secton 29.27()-.)
19 2-20-1393
I. T. 099
INT RN L R NU COD
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29. 3-2.1
11
computed under secton 27(b) of the Code, a constructon n drect
contraventon of the provsons of artce III(2) of the conventon
and one whch, n the opnon of ths offce, s not contempated by
secton 27() of the Code.
ccordngy, t s hed that the provsons of artce I (1) of the
Unted States-Swtzerand ncome ta conventon, e emptng from
Unted States ncome ta dvdends pad by a corporaton other than
a Unted States domestc corporaton to a nonresdent aen resdent
n Swtzerand or to a Swss corporaton not havng a permanent
estabshment n the Unted States, do not have the effect of e cudng,
under secton 27 () of the Interna Revenue Code, such nonta abe
dvdends from the cacuaton of the basc surta credt under sec-
ton 27(b) of the Code.
S CTION 27 (). CORPOR TION DI ID NDS P ID
CR DIT: NONT L DISTRI UTIONS
Secton 29.27()-: Nonta abe dstrbutons.
INT RN L R NU COD
Corporate dstrbutons whch are nonta abe under artce I (1)
of the Unted States-Swtzerand ncome ta conventon. (See I. T.
099, page 117.)
P RT I . CCOUNTING P RIODS ND M T ODS OF CCOUNTING
S CTION 2(a). P RIOD IN W IC IT MS OF
GROSS INCOM INCLUD D
Secton 29. 2-1: When ncuded n gross ncome.
INT RN L R NU COD
Interest on Unted States savngs bonds, Seres . (See I. T. 110,
page 99.)
S CTION 3. P RIOD FOR W IC D DUCTIONS
ND CR DITS T N
Secton 29. 3-2: When charges deductbe. 19 2-21-13937
I. T. 101
INT RN L R NU COD
For ta abe years endng after December 31, 19 , rea property
and tangbe persona property ta es eved by the State of Mssour
accrue, for Federa ncome ta purposes, on anuary 1 of each year.
I. T. 3777 (C. . 19 6-1, 63) s nappcabe wth respect to ta es
for years subsequent to 19 .
dvce s requested wth respect to the proper accrua date, fo
Federa ncome ta purposes, of rea property and tangbe persona
property ta es eved by the State of Mssour.
I. T. 3777 (C. . 19 6-1, 63), whch modfed I. T. 2 (C .
1 -1, 6 (193 )), hods that rea property ta es n the State of
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119
29. 3-2.
Mssour do not accrue unt the date upon whch they are eved, . e.,
the date upon whch the en for such ta es attaches; and that no date
can be f ed as the date of evy of rea property ta es throughout
the State, but that they are not actuay eved unt the year for whch
they are mposed.
On February 27, 19 , the State of Mssour adopted a new con-
sttuton wheren t s provded that a ta es sha be eved and
coected by genera aws and sha be payabe durng the fsca or
caendar year n whch the property s assessed (secton 3, artce ,
Consttuton of 19 of the State of Mssour).
The pertnent provsons of the Mssour Laws of 19 effectuatng
the foregong secton of the new consttuton are contaned n chapter
137 of the Mssour Revsed Statutes of 19 9, whch provdes n part
as foows:
137.07 . What property abe for ta es
very person ownng or hodng rea property or tangbe persona property
on the frst day of anuary ncudng a such property purchased on that day,
sha be abe for ta es thereon durng the same caendar year.

137.0 0. nnua assessment date
Rea estate sha be assessed at the assessment whch sha commence on the
frst day of anuary, 10 6, and sha be requred to be assessed every year
thereafter.

137.0 state en on rea property, e tent of

2. Rea property sha n a cases be abe for the ta es thereon, and a en
Is hereby vested n favor of the state on a rea property for a ta es thereon,
whch en sha accrue and become a f ed encumbrance as soon as the amount
of the ta es s determned by assessment and evy, and sad en sha be en-
forced as provded by aw; sad en sha contnue to be enforced unt a ta es,
forfetures, back ta es and costs sha be fuy pad or the and sod or reeased
as provded by aw.

137.11 . Rea and tangbe persona property tme and manner of assessment
1. fter recevng the necessary forms the assessor or hs deputy or deputes
sha, e cept n the cty of St. Lous, between the frst day of anuary and the
frst day of une, 19 0, and each year thereafter, proceed to make a st of a
rea and tangbe persona property n hs county, town or dstrct, and assess
the same at ts true vaue n money

137.020. nnua evy for state revenue
There sha be annuay eved, assessed and coected on the assessed vnue
of a rea estate and tangbe persona property, sub|ect by aw to ta aton n
ths state, three cents on each one hundred doars vauaton for state revenue.
In Unted States v. Certan Land Stuate n Cty of St. Lous, Mo.,
et a. ( 6 Fed. Supp. 297), the court, n determnng when the en
for State, schoo and cty ta es commenced for ta es due and payabe
n 19 6, hed that the State had at east an nchoate en from anuary
1, 19 6, for ta es due on the and n 19 6, whch became f ed n
amount by reaton back to that date after the assessment and evy
were competed.
The genera rue of the ureau, based upon Unted States v. nder-
son (269 U. S. 22, T. D. 3 39, C. . -, 179), has been that the event
whch determnes the abty for property ta es s the ownershp of
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29. -1.
120
the property on the day as of whch the assessment s made under the
State aw. In bert P. Long et a. v. Cty of Independence (229
S. W. 2d. 6 6), the Supreme Court of Mssour, n hodng that the
effectve date of assessment s anuary 1, stated:
The Genera ssemby has enacted many aws outnng the entre
ta ng process, and prescrbng the powers and dutes of varous offcas and
boards of the State, county, cty and other subdvsons, reatve to the assess-
ment, evy and coecton of ta es. Chap. 79, Mo. R. S. . The resut of ths
process, whch commences anuary 1 and s not competed unt months ater, s
the offca assessment as to each ndvdua person or property unt.
Whe ths offca assessment Is not made on anuary 1, t s as of that date
so far as assessment of State and county ta es s concerned. See Sees. 109 2.3,
109 2. , 11000.16, 11000.2 and 11000.3 . Ths s true aso as to cty ta es upon
property wthn the cty on anuary 1.
In vew of the foregong, t s hed that for ta abe years endng
after December 31,19 , rea property and tangbe persona property
ta es eved by the State of Mssour accrue, for Federa ncome ta
purposes, on anuary 1 of the caendar year and are deductbe as
of that date by ta payers who fe ncome ta returns on the accrua
bass of accountng. It s further hed that I. T. 3777, supra, s nap-
pcabe wth respect to ta es for years subsequent to 19 .
Secton 29. 3-2: When charges deductbe.
INT RN L R NU COD
Deductbty of rea property ta es n the State of Washngton as
between a grantor and a grantee of the rea property. (See G. C. M.
27 0, page 97.)
Secton 29. 3-2: When charges deductbe.
INT RN L R NU COD
Interest refunded upon redempton pror to maturty of Unted
States savngs bonds, Seres . (See I. T. 110, page 99.)
S CTION . INST LLM NT SIS
Secton 29. -1: Sae of persona property on 19 2-1 -13 63
nstament pan. G. C. M. 27169
( so Secton 29. - .)
INT RN L R NU COD
ta payer reguary engaged n the sae, on the nstament pan,
of compete factory-but houses constructed In ts own factory Is a
deaer In persona property wthn the meanng of secton (a) of
the Interna Revenue Code. owever, a ta payer whose busness
transactons consst of engagng n the constructon of she or
semfnshed houses on and owned by others s not a deaer n
persona property wthn the meanng of secton (a) of the Code,
an such transactons do not consttute saes or other dspostons
of rea property wthn the meanng of secton (b) of the Code.
n opnon s requested whether a ta payer may be permtted to
report ncome on the nstament bass, under secton of the Interna
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121
S 29. -1.
Revenue Code, from (1) the sae of compete factory-but houses
constructed n ts own factory, and (2) the sae of she or semfn-
shed houses constructed on and owned by the purchasers.
The ta payer proposes to engage n the sae of compete factory-
but houses constructed n ts own factory, such houses to be sod at
a f ed contract prce, pus costs of transportaton to ots owned by
the purchasers where the houses w be paced upon foundatons not
nstaed or erected by the ta payer. These houses w be sod ether
for cash or party for cash wth the baance on tme evdenced by a
note and secured by a mortgage n ke manner as n the case of the
she houses herenafter descrbed.
The ta payer s presenty engaged n constructon, under contracts,
of she or semfnshed houses consstng of a competed e teror
and a studded nteror (nterors to be competed by the owners of the
premses). It aso constructs garages for use n connecton wth
houses aready constructed, makes reta saes of umber and other
budng materas, and does some remodeng work. owever, over
90 percent oT the tota voume of ts busness has conssted of con-
structon of she houses. More than 9 percent of ts house and
garage constructon and remodeng work s pad for on a tme bass,
as evdenced by an nstament note (ncudng tte, nsurance, and
fnance charges, etc.), payabe over a perod of to 10 years and
secured by a frst mortgage on the and and budng, wth a cash down
payment whch, together wth monthy nstaments receved durng
the same ta abe year, does not e ceed 30 percent of the contract prce.
The constructon contract s headed Constructon greement, and
the ta payer s repeatedy referred to theren as contractor and the
she house as mprovement on the premses.
Secton of the Interna Revenue Code provdes n part as
foows:
(a) Df.a.ers n Persona Property. Under reguatons prescrbed by the
Commssoner wth the approva of the Secretary, a person who reguary ses
or otherwse dsposes of persona property on the Instament pan may return
as ncome therefrom n any ta ube year that proporton of the nstament
payments actuay receved n that year whch the gross proft reazed or to be
reazed when payment s competed, bears to the tota contract prce.
(b; Saes ok Reaty ano Casua Saes of Personaty sc . In the case
(1) of a casua sae or other casua dsposton of persona property (other than
property of a knd whch woud propery be ncuded n the nventory of the
ta payer f on hand at the cose of the ta abe year), for a prce e ceedng
1,000, or (2) of a sae or other dsposton of rea property, f n ether case
the nta payments do not e ceed 30 per centum of the seng prce ,
the ncome may. under reguatons prescrbed by the Commssoner wth the
approva of the Secretary, be returned on the bass and n the manner above
prescrbed n ths secton.
It s the opnon of ths offce that a ta payer reguary engaged
as above stated n the sae, on the nstament pan, of compete fac-
tory-but houses constructed n ts own factory s a deaer n persona
property wthn the meanng of secton (a) of the Interna Revenue
Code, mpra, and that the ta payer may report on the nstament bass
the ncome from any such nstament pan saes. owever, a ta -
payer whose busness transactons consst of engagng n the con-
structon of the above-descrbed she or semfnshed houses on and
owned by others s a budng constructon contractor, both n form
2160 S3 9
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29. 1-1.
122
and substance, and ceary s not a deaer n persona property wthn
the meanng of secton (a) of the Code, supra, and such trans-
actons do not consttute saes or other dspostons of rea property
wthn the meanng of secton (b) of the Code, supra (see G. C. M.
7 71, C. . I -1, 207 (1930)). It foows that the ncome from such
saes may not be reported on the nstament bass.
Mason . Lemng,
ctng Chef Counse, ureau of Interna Revenue.
Secton 29. - : Deferred-payment sae of rea
property not on nstament pan.
INT RN L R NU COD
She or semfnshed houses constructed on and owned by pur-
chaser. (See G. C. M. 27169, page 120.)
P RT . R TURNS ND P YM NT OP T
S CTION 1. INDI IDU L R TURNS
Secton 29. 1-1: Indvdua returns. 19 2-2 -13967
( so Secton 27 , Sectons 29.27 -1, 29.27 -2; T. D. 9 2
Secton 322, Secton 29.322-7.)
TITL 20 INT RN L R NU . C PT R I. SU C PT R . P RT 29
Reguatons 111 amended to conform to the provsons of secton
312 of the Revenue ct of 19 1, reatng to the rng of |ont return
after separate return has been fed.
Tueasuk y Department,
Washngton 2 , D. C.
Concerned:
On uy 17, 19 2, notce of proposed rue makng wth respect to
reguatons under secton 1(g) of the Interna Revenue Code, as
added by secton 312 of the Revenue ct of 19 1, approved October
20,19 1, was pubshed n the Federa Regster 17 F. R. 6 61 . fter
consderaton of a reevant matter presented by nterested persons
regardng the rues proposed, the amendments to Reguatons 111
26 CFR, part 29 , set forth beow are hereby adopted.
29. 1-1 26 CFR 29. 1-1 , the foowng:
S C. 312. OINT R TURN FT R FILING S P R T R TURN
(a) Change of ecton. Secton 1 of the Interna Revenue Code
(reatng to makng of ndvdua returns) Is hereby amended by addng
at the end thereof the foowng new subsecton :
(g) ont Return ethr Fng Separate Return.
(1) In genera. If an ndvdua has fed a separate return
for a ta abe year for whch a ont return coud have been made
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123
29. 1-1.
by hm and hs spouse under subsecton (b) of ths secton, and
the tme prescrbed by aw for fng the return for such ta abe
year has e pred, such ndvdua and hs spouse may nevertheess
make a |ont return for such ta abe year. ont return fed by
the husband and wfe n such a case sha consttute the return of
the husband and wfe for such ta abe year, and a payments,
credts, refunds, or other repayments made or aowed wth respect
to the separate return of ether spouse for such ta abe year sha
be taken nto account n determnng the e tent to whch the ta
based upon the ont return has been pad.
(2) Payments requred before |ont return can be made.
|ont return can be made under paragraph (1) ony If there s pad
n fu at or before the tme of the tng of the |ont return
( ) a amounts prevousy assessed wth respect to ether
spouse for such ta abe year;
( ) a amounts shown as the ta by ether spouse upon hs
separate return for such ta abe year; and
(C) any amount determned, at the tme of the fng of
the ont return, as a defcency wth respect to ether spouse
for such ta abe year f, pror to such fng, a notce under
secton 272(a) of such defcency has been maed.
(3) Tme kor makng |ont return. |ont return cannot be
made under paragraph (11
( ) after the e praton of three years from the ast date
prescrbed by aw for fng the return for such ta abe year
(determned wthout regard to any e tenson of tme granted
to ether spouse) ;
( ) after there has been maed to ether spouse, wth re-
spect to such ta abe year, a notce of defcency under secton
272(a), f the spouse, as to such notce, fes a petton wth
The Ta Court of the Unted States wthn the tme prescrbed n
such secton;
(C) after ether spouse has commenced a sut n any court
for the recovery of any part of the ta for such ta abe year;
or
(D) after ether spouse has entered nto a cosng agree-
ment under secton 37(0 wth respect to such ta abe year, or
after any cv or crmna case arsng aganst ether spouse
wth respect to such ta abe year has been compromsed under
secton 3761.
( ) ectons made n separate return. If a |ont return s
made under ths subsecton, any eecton (other than the eecton
to fe a separate return) made by ether spouse n hs separate
return for such ta abe year wth respect to the treatment of any
ncome, deducton, or credt of such spouse sha not be changed n
the makng of the |ont return where such eecton woud have
been rrevocabe f the |ont return had not been made.
( ) Death of spouse. If a |ont return Is made under ths sub-
secton after the death of ether spouse, such return wth respect to
the decedent can be made ony by hs e ecutor or admnstrator.
(6) ddtons o the ta . Where the amount shown as the ta
by the husband and rvfe on a |ont return made under ths sub-
secton e ceeds the aggregate of the amounts shown as the ta upon
the separate return of each spouse
( ) Neggence. If any part of such e cess s attrbutabe
to neggence or ntentona dsregard of rues and reguatons
(but wthout ntent to defraud) at the tme of the makng of
such separate return, then per centum of the tota amount of
such e cess sha be assessed, coected, and pad n the same
manner as f t were a defcency ;
( ) Fraud. If any part of such e cess s attrbutabe to
fraud wth ntent to evade ta at the tme of the makng of
such separate return, then 0 ter centum of the tota amount of
such e cess sha be so assessed, coected, and pad, n eu of
the 0 per centum addton to the ta provded n secton
612(d) (2).
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29. 1-1.
12
(7) RUL S FOR PPLIC TION OF S CTIONS 27S N ) 291. For the
purposes of secton 27 (reatng to perod of mtatons upon
assessment and coecton), and for the purposes of secton 291 re-
atng to denquent returns), a |ont return made under ths sub-
secton sha be deemed to have been fed
( ) where both spouses fed separate returns pror to
makng the |ont return on the date the ast separate return
was fed (but not earer than the Inst date prescrbed by aw
for fng the return of ether spouse) ;
( ) where ony one spouse fed a separate return pror to
the makng of the |ont return, and the other spouse had ess
than 600 of gross ncome for such ta abe year on the date
of the tng of such separate return (but not earer than the
ast date prescrbed by aw for the fng of such separate
return) ; or
(C) wher ony one spouse ted a separate return pror to
the makng of the |ont return, and the other spouse hnd gross
ncome of 000 or more for such ta abe year on the date of
the tng of such |ont return.
( ) Rue kok appcaton of secton 322. For the purposes of
secton 322 (reatng to refunds and credts), a |ont return made
under ths subsecton sha be deemed to have been ted on the ust
date prescrbed by aw for fng the return for such ta nbe year
(determned wthout regard to any e tenson of tme granted to
ether spouse).
(9) ddtona tme fob assessment. If a |ont return s made
under ths subsecton, the perod of mtatons provded n sectons
27 and 276 on the makng of assessments and the begnnng of
dstrant or a proceedng n court for coecton sha wth respect to
such return ncude one year mmedatey after the date of the
fng of such |ont return (computed whout regard to the provsons
of paragraph (7) of ths subsecton).
(10) Rue for appcaton of secton 3 00(a). For the pur-
poses of secton 3 09(a) (reatng to crmna penates n the case
of frauduent returns) the term return ncudes a separate return
fed by a spouse wth respect to a ta abe year for whch a |ont
return Is made under ths subsecton after the fng of such separate
return.
(b) ffectve Date. The amendment made by subsecton (a) sha
be appcabe ony wth respect to ta abe years begnnng after Decem-
ber 31, 19 0.
Par. 2. Secton 29. 1-1, ns amended by Treasury Decson 93
C. . 19 2-1, 126 , approved pr , 19 2 26 CFR 29. 1-1 , s
( ) y strkng therefrom the second undesgnated paragraph of
(b) (1), commencng |ont return may not be made , and nsertng
Wth respect to ta abe years begnnng pror to anuary 1, 19 1, a |ont
return may not be made by a husband and wfe for a ta abe year If a separate
return has been fed by one of the spouses for such year and the tme for fng
the return of such spouse has e pred. For ta abe years begnnng after
December 31, 19 0, see subparagraph (3). For any ta abe year where a |ont
return has been fed, separate returns may not be made by the spouses after the
tme for fng the return of ether has e pred. See, however, subparagraph
(2) for the rght of an e ecutor to fe a ate separate return for a deceased
spouse and thereby dsaffrm a tmey |ont return made by the survvng spouse.
( ) y nsertng n the frst sentence of (b)(2), after e cept
as provded by secton 1 (b), as amended by the Revenue ct of 19 ,
the foowng: or by secton 1(g), as added by the Revenue ct
of 19 1, .
(C) y nsertng mmedatey precedng the ast sentence of the
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12
29. 1-1.
frst undesgnated paragraph of (b) (2), whch sentence begns For
the purposes of ths subparagraph , the foowng:
Secton 1(g), as added by the Revenue ct of 19 1, provdes, for ta abe
years begnnng after December 31, 19 0, that a |ont return may be made,
under certan condtons, after separate returns have been fed even though
the tme prescrbed by aw for fng the return for such year has e pred. See
secton 29. 1-1 (h) (3). |ont return made under secton 1(g) after the
death of ether spouse sha, wth respect to the decedent, be made ony by
hs e ecutor or admnstrator. Thus where no e ecutor or admnstrator has
been apponted, a |ont return cannot be made under .secton 1(g).
(D) I y addng mmedatey after (b) (2) the foowng new
subparagraph:
(3) ont return after fng separate return. () In genera. Secton 1(g),
as added by the Revenue ct of 19 1, provdes, for ta abe years begnnng ater
December 31, 19 0. where an ndvdua has ted a separate return for a ta abe
year for whch a |ont return coud have been made by hm and hs spouse under
secton 1 (b). and I e tme prescrbed by aw for tng the return for such ta abe
year has e pred, such ndvdua and hs spouse may, under condtons heren-
after set forth, make a |ont return for such ta abe year. The |ont return
fed pursuant to secton 1g sha ( nsttute the return of the husband and
wfe for such year, and a payments, credts, refunds, or other repayments, made
or aowed wth respect to the .separate return of ether spouse are to be taken
nto account n determnng the e tent to whch the tu based on the |ont
return has been pad.
For the purpose of ths secton, the determnaton whether an ndvdua
s marred at any tme durng the ta abe year sha be made n accordance wth
the provsons of secton 1(b) ( ). See secton 29. 1-(b) (1). The fact that
the ta payer and hs spouse are dvorced or egay separated at any tme after
the cose of the ta abe year for whch separate returns are ted sha not
deprve them of ther rght to fe a |ont return for such ta abe year pursuant
to secton 1 (g).
() Payments requred before |ont returns can be made. ont return
may not be made under secton 1(g) for a ta abe year uness at or before the
tme of the fng of such |ont return the foowng amounts are pad:
( ) a amounts prevousy assessed wth respect to ether spouse for
such ta abe year;
( ) a amounts shown as the ta by ether spouse upon hs separate
return for such ta abe year; and
(C) any amount determned, at the tme of the fng of the ont return,
as a defcency wth respect to ether spouse for such ta abe year f, pror
to such tng, a notce under secton 272(a) of such defcency has been
maed.
() Tme for makng |ont return. |ont return may not be made under
secton 1(g) wth respect to a ta abe year
( ) after the e praton of : years from the ast day prescrbed by aw
for rng the return for such ta abe year determned wthout regard to
any e tenson of tme granted to ether spouse. Thus where an e tenson
of tme for fng returns as been granted by the Commssoner or hs
representatve In accordance wth secton 3(a), the e tenson sha be
dsregarded n determnng the ast day upon whch a |ont return may
be fed after separate returns have been fed:
( ) after there has been maed to ether spouse, wth respect to such
ta abe year, a notce of defcency under secton 272(a), f the spouse,
as to such notce, fes a petton wth The Ta Court of the Unted States
wthn the tme prescrbed n secton 272(a), that s, wthn 90 days (or
1 0 days f notce s addressed to ta payer outsde the States of the Unon
and the Dstrct of Coumba) after the mang of the notce, e cudng
Saturday, Sunday, or a ega hoday n the Dstrct of Coumba as the
90th day;
(C) after ether spouse has commenced a sut n any court for the
recovery of any part of the ta for such ta abe year; or
(D) after ether spouse has entered nto a cosng agreement under
secton 3760 wth respect to such ta abe year, or after any cv or crmna
case arsng aganst ether spouse wth respect to such ta abe year has
been compromsed under secton 37G1.
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29. 1-U
126
(v) ectons made n separate return. If a |ont return s made under
secton 1(g), any eecton, other than the eecton to fe a separate return, made
by ether spouse n hs separate return for the ta abe year wth respect to the
treatment of any ncome, deducton, or credt of such spouse sha not be changed
n the makng of the |ont return where such eecton woud have been r-
revocabe f the |ont return had not been made. Thus, f one spouse has made
an rrevocabe eecton to adopt and use the eectve nventory method under
secton 22(d), ths eecton may not be changed upon makng the ont return
under secton 1(g).
(v) ddtons to the ta . Where the amount shown as the ta by the husband
and wfe on a |ont return made under secton 1(g) e ceeds the aggregate
of the amounts shown as ta on the separate return of each spouse, and such
e cess s attrbutabe to neggence, ntentona dsregard of rues and regua-
tons, or fraud at the tme of the makng of such separate returns, there sha
be assessed, coected, and pad n the same manner as f t were a defcency
an addtona amount as provded n the two succeedng sentences. If any part
of such e cess s attrbutabe to neggence, or ntentona dsregard of rues
and reguatons, at the tme of the makng of such separate return, but wthout
any ntent to defraud, ths addtona amount sha be percent of the tota
amount of the e cess. If any part of such e cess s attrbutabe to fraud wth
ntent to evade ta at the tme of the makng of such separate return, ths
addtona amount sha be 0 percent of the tota amount of the e cess. The
atter addton s n eu of the 0 percent addton to the ta provded n secton
3012(d) (2).
(v) Rues for appcaton of sectons 27 and 291. For the purpose of secton
27 , reatng to the perod of mtatons upon assessment and coecton, and
secton 291, reatng to denquent returns, a |ont return made under secton
1(g) sha he deemed to have been fed, gvng due regard to any e tenson
of tme granted to ether spouse, on the foowng dates:
( ) where both spouses fed separate returns, pror to makng the |ont
return under secton 1(g), on the date the ast separate return of ether
spouse was fed for the ta abe year, but not earer than the ast date
prescrbed by aw for the fng of the return of ether spouse ;
( ) where ony one spouse was requred to fe and dd fe a return pror
to the makng of the ont return under secton 1(g), on the date of the
fng of the separate return, but not earer than the ast day prescrbed by
aw for the fng of such return; and
(C) where both spouses were requred to fe a return, but ony one spouse
dd so fe, on the date of the fng of the |ont return under secton 1(g)
(v) Rue for appcaton of secton 322. For the purpose of secton 322,
reatng to refunds and credts, a |ont return made under secton 1(g) sha
be deemed to have been fed on the ast date prescrbed by aw for fng the
return for such ta abe year, determned wthout regard to any e tenson of
tme granted to ether spouse for fng the return or payng the ta .
(v) ddtona tme for assessment. In the case of a |ont return made
under secton 1(g), the perod of mtatons provded n sectons 27 and 276
sha not be ess than 1 year after the date of the fng of such |ont return.
The e praton of the 1 year s to be determned wthout regard to the rues
provded n (v) above, reatng to the appcaton of sectons 27 and 291 wth
respect to a |ont return made under secton 1(g).
( ) Rue for appcaton of secton 3 09(a). For the purposes of secton
3 09(a), reatng to crmna penates n the case of a frauduent return, the
term return ncudes a separate return fed by a spouse for the ta abe
year for whch a |ont return s subsequenty made under secton 1(g).
page 100, ths uetn , approved ugust 19 2 26 CFR 29.17 -1 ,
reatng to the perod of mtaton upon assessment of ta s further
amended by nsertng mmedatey precedng the ast paragraph
thereof the foowng:
(12) In the case of a |ont return made under secton 1(g), the perod of
mtatons sha not be ess than 1 year mmedatey after the date of the
actua fng of such return, computed wthout regard to the provsons of secton
1(g)(7).
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127
rs .
Par. . Secton 29.27 -2 26 CFR 29.27 -2 , reatng to the perod
of mtaton upon coecton of ta , s amended by nsertng at the
end thereof the foowng:
(6) In the case of a |ont return made under secton 1(g), the perod of
mtatons sha not be ess than 1 year mmedatey after the date of the actua
fng of such return, computed wthout regard to the provsons of secton
1(g)(7).
Par. . Secton 29.322-7, as amended by Treasury Decson 37
C. . 19 1-1, 61 , approved pr , 19 1 26 CFR 29.322-7 , reat-
ng to mtatons upon the credtng and refundng of ta es pad, s
further amended by nsertng mmedatey precedng the ast para-
graph of (a) the foowng:
In the case of a fng of a |ont return under secton 1(g), the |ont return
sha be deemed to have been ted on the ast date prescrbed by aw for fng
the return for such ta abe year, determned wthout regard to any e tenson
of tme grunted to ether spouse for fng the return or payng the ta . See
secton 29. 1-1 (b) (3).
(Ths Treasury Decson s ssued under authorty contaned n sec-
tons 62 and 37SU of the Interna Revenue Code ( 3 Stat. 32, 67; 26
U. S. C. 62, 3791).)
ohn . Dunap,
pproved October 2 , 19 2.
ohn S. Graham,
(Fed wth the Dvson of the Federa Regster October 2 , 19 2, : 2 a. m.)
S CTION . PU LICITY OF R TURNS
19 2-2 -13979
T. D. 9
TITL 20 INT RN L R NU . C PT R I, SU C PT R , P RT .
INSP CTION OF R TURNS
Inspecton of returns by Senate Commttee on the udcary.
Washngton 2 , D. C.
Concerned:
Sec. .31 . Inspecton of Returns by Senate udcary Com-
mttee n Connecton Wth Investgaton of dmnstraton of
Tradng Wth the nemy ct. (a) Pursuant to the provsons of
sectons (a), 0 , 603, 729(a), and 120 of the Interna Revenue
Code ( 3 Stat. 29, 111, 171, Stat. 9 9,100 , Stat. 722; 26 U. S. C
(a), 0 , 603, 729(a), and 1201) and of the ecutve order ssued
thereunder, any ncome, e cess-profts, decared vaue e cess-profts,
capta stock, estate, or gft ta return for the years 19 1 to 19 1, n-
cusve, sha, durng the ghty-second Congress, be open to nspec-
ton by the Senate Commttee on the udcary or any duy authorzed
subcommttee thereof for the purpose of carryng out the provsons of
Senate Resouton 2 ( 2d Cong., 2d sess.), agreed to March 2 ,19 2.
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12
wth respect to the admnstraton of the Tradng wth the nemy
ct.
The nspecton of returns heren authorzed may be made by the
commttee or a duy authorzed subcommttee thereof, actng drecty
as a commttee or as a subcommttee, or by or through such e amners
or agents as the commttee or subcommttee may desgnate or appont
n ts wrtten request herenafter mentoned. Upon wrtten request
by the charman of the commttee or of the authorzed subcommttee
to the Secretary of the Treasury, gvng the names and addresses of the
ta payers whose returns t s necessary to nspect and the ta abe
perods covered by the returns, the Secretary of the Treasury and any
offcer or empoyee of the Treasury Department, wth the approva
of the Secretary of the Treasury, may furnsh such commttee or sub-
commttee wth any data reatng to or contaned n any such return,
or may make such return avaabe for nspecton by the commttee
or subcommttee or by such e amners or agents as the commttee or
subcommttee may desgnate or appont, n the offce of the Comms-
soner of Interna Revenue. ny nformaton thus obtaned by the
commttee or subcommttee thereof sha be hed confdenta: Pro-
vded, however, That any porton thereof reevant or pertnent to the
purpose of the nvestgaton may be submtted by the commttee to the
Unted States Senate.
(b) ecause of the mmedate need of the sad Senate Commttee
on the udcary to nspect the returns heren mentoned, t s hereby
found that t s mpractcabe and contrary to the pubc nterest to
ssue ths Treasury Decson wth notce and pubc procedure thereon
under secton (a) of the dmnstratve Procedure ct, approved
une 11,19 6, or sub|ect to the effectve date mtaton of secton (c)
of sad ct.
(c) Ths Treasury Decson sha be effectve upon ts fng for
pubcaton n the Federa Regster.
. . Foey,
pproved November 1 , 19 2.
arry S. Truman,
The Whte ouse.
(Fed wth the Dvson of the Federa Regster November 17, 19 2, 10:11 a. m.)
INSP CTION OF R TURNS Y S N T COMMITT ON T UDICI RY
y vrtue of the authorty vested n me by sectons (a), 0 , 603,
729(a), and 120 of the Interna Revenue Code ( 3 Stat. 29, 111, 171,
Stat. 9 9, 100 , Stat. 722; 26 U. S. C. (a), 0 , 603, 729(a),
and 120 ), t s hereby ordered that any ncome, e cess-profts, de-
cared vaue e cess-profts, capta stock, estate, or gft ta return for
the years 19 1 to 19 1, ncusve, sha, durng the ghty-second Con-
gress, be open to nspecton by the Senate Commttee on the udcary
or any duy authorzed subcommttee thereof for the purpose of carry-
ng out the provsons of Senate Resouton 2 ( 2d Cong., 2d sess.),
agreed to March 2 , 19 2, wth respect to the nvestgaton of the ad-
mnstraton of the Tradng wth the nemy ct, sub|ect to the cond-
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129 29.107-3.
tons stated n the Treasury Decson reatng to the nspecton of such
returns by that commttee, approved by me ths date.
Ths ecutve order sha be effectve upon ts fng for pubcaton
n the Federa Regster.
arry S. Truman.
The Whte ouse,
November 1 , 19 2.
( . O. 10 12)
(Fed wth the Dvson of the Federa Regster November 17,19 2, 10:11 a. m.)
SU C PT R C SUPPL M NT L PRO ISIONS
SUPPL M NT . R T S OF T
S CTION 107. COMP NS TION FOR S R IC S R N-
D R D FOR P RIOD OF T IRTY-SI MONT S OR
MOR ND C P Y
Secton 29.107-1: Persona servces.
INT RN L R NU COD
Recomputaton of chartabe contrbutons and medca e pense
deductons n connecton wth computatons under secton 107 of the
Interna Revenue Code. (See IR-Mm. 3, page 112.)
Secton 29.107-2: rtstc work or nventon.
INT RN L R NU COD
Prze receved n 19 7 for symphony composed between 1936 and
1939. (See Ct. D. 17 6, page 66.)
Secton 29.107-2: rtstc work or nventon.
INT RN L R NU COD
Recomputaton of chartabe contrbutons and medca e pense de-
ductons n connecton wth computatons under secton 107 of the
Secton 29.107-3: ack pay attrbutabe to
pror ta abe years.
nterna revenue code
Recomputaton of chartabe contrbutons and medca e pense de-
ductons n connecton wth computatons under secton 107 of the
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29.112(b)()-.
130
SUPPL M NT . COMPUT TION OF N T INCOM
S CTION 111. D T RMIN TION OF MOUNT OF, ND
R COGNITION OF, G IN OR LOSS
Secton 29.111-1: Computaton of gan 0r oss. 19 2-23-139 7
( so Secton 23, Secton 29. 23-3.) I. T. 106
INT RN L R NU COD
ppcaton of G. C. M. 27 91 (page 221, ths uetn)
Under authorty contaned n secton 3791(b) of the Interna Rev-
enue Code, the provsons of G. C. M. 27 91 (page 221. ths uetn)
revokng G. C. M. 10 7 (C. . I-2,10 (1932)), w be appcabe
ony to saes occurrng n ta abe years begnnng after December 31,
19 0.
S CTION 112(b). R COGNITION OF G IN OR LOSS:
C NG S SOL LY IN IND
Secton 29.112(b) (1) 1: Property hed for 19 2-17-1 S9
productve use n trade or busness or for I. T. 093
nvestment.
INT RN L R NU COD
n e change of a producng o ease e tendng unt the e haus-
ton of the depost, whch ease s hed for productve use n trade
or busness or for nvestment, for the fee nterest n an mproved
ranch to be hed for productve use n trade or busness or for
nvestment consttutes an e change of property for property of a
ke knd under secton 112(b) (1) of the Interna Revenue Code to
the e tent of the ranch and and permanent mprovements thereon,
but not ncudng that part of the ranch property consstng of the
persona resdence, equpment, and vestock.
dvce s requested whether the e change of a producng o ease
e tendng unt the e hauston of the depost for the fee nterest n an
mproved ranch quafes as an e change wth respect to whch no
gan or oss s recognzed under secton 112(b)(1) of the Interna
Revenue Code.
Secton 112(b) (1) of the Interna Revenue Code provdes n part
as foows:
(1) Property e.d fob productve use or nvestment. No gan or oss
sha be recognzed f property hed for productve use n trade or busness
or for nvestment (not ncudng stock n trade or other property hed
prmary for sae ) s e changed soey for property of a ke knd
to be hed ether for productve use n trade or busness or for nvestment.
Secton 29.112(b) (1)-1 of Reguatons 111 provdes n part as foows:
Sec. 29.112(b) (1)-1. Pbopebtt ed for Productve Use n Trade ob us-
ness or for Investment. s used In secton 112(b) (1), the words ke knd
have reference to the nature or character of the property and nor to ts grade or
quaty. One knd or cass of property may not, under such secton, be e changed
for property of a dfferent knd or cass. The fact that any rea estate Invoved
s mproved or unmproved s not matera, for such fact reates ony to the
grade or quaty of the property and not to ts knd or cass.
No gan or oss s recognzed f a ta payer who s not a deaer n
rea estate e changes cty rea estate for a ranch or farm, or a easehod of a fee
wth 30 years or more to run for rea estate, or mproved rea estate for unm-
proved rea estate
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131
29.112(b)(6)-.
Secton 112(b) (1) of the Code does not appy to property hed for
tradng purposes or for persona use.
It s the poston of the ureau that the nterest of a essee n a
producng o ease e tendng unt the e hauston of the depost con-
sttutes an nterest n rea property for Federa ncome ta purposes.
(See I. T. 3693, C. . 19 , 272, and Pamar v. ender, 2 7 U. S. 1,
Ct. D. 6 1, C. . II-1, 23 (1933) .)
In ate . Crchton. v. Commssoner ( 2 . T. . 90, acquescence,
C. . 19 2-1, 2, affrmed, 122 Fed. (2d) 1 1), t s hed that under
artce 112(b) (1)-1 of Reguatons 9 , whch artce s substantay
the same as secton 29.112(b) (1)-1 of Reguatons 111, an e change
of o, gas, and mnera rghts for an undvded one-haf of the fee n
a parce of mproved reaty was an e change of propertes of a ke
knd under secton 112(b)(1) of the Revenue ct of 1936 (dentca
to secton 112(b)(1) of the Interna Revenue Code). The Unted
States crcut court of appeas concuded that under the reguatons
and the nterpretaton theren, the dstncton ntended and made
by the statute s the broad one between casses and characters of prop-
ertes, for nstance, between rea and persona property, and that t
was not ntended to draw any dstncton between parces of rea prop-
erty however dssmar they may be n ocaton, n attrbutes and n
capactes for proftabe use.
In the Crchton case, the Unted States oard of Ta ppeas (now
The Ta Court of the Unted States) dstngushed ts decson n
Md fed O Co. v. Commssoner (39 . T. . 11 , acquescence,
C. . 1939-2, 2 ), n whch t hed that an e change of an o payment
rght for an overrdng o and gas royaty reserved from the same
ease was not an e change of property of ke knd. The oard ponted
out that an o payment was a mted nterest n the property, whereas
an overrdng royaty was to contnue so ong as o or gas mght be
produced. In other words, an o payment s a mted nterest that
s not attrbutabe to the entre natura resource n the property as
n the case of an overrdng royaty. Therefore, the decson n the
Crchton case s not regarded as affectng the concusons reached n
the Mdfed O case.
In vew of the foregong, t s hed that an e change of a producng
o ease e tendng unt the e hauston of the depost, whch ease
s hed for productve use n trade or busness or for nvestment, for
the fee nterest n an mproved ranch to be hed for productve use n
trade or busness or for nvestment consttutes an e change of property
for property of a ke knd under secton 112(b) (1) of the Interna
Revenue Code to the e tent of the ranch and and permanent mprove-
ments thereon, but not ncudng that part of the ranch property
consstng of the persona resdence, equpment, and vestock.
Secton 29.112(b) (6)-: Dstrbutons n
qudaton of subsdary corporaton.
INT RN L R NU COD
Canceaton by the parent of a subsdary s ndebtedness to t.
(See I. T. 109, page 13 .)
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29.112(b)(7)- .
132
Secton 29.112(b) (7)-: Corporate quda-
tons n caendar month n 19 , 19 1, or
19 2.
( so Sectons29.112(b) (7)-2,29.112(b) (7)-
, 29.112(b) (7)- ; Secton 113(a), Secton
29.113(a) (1 )-1; Secton 1 , Sectons
29.1 -2 and 29.1 -3.)
TITL 26 INT RN L R NU . C PT R I, SU C PT R , P RT 29.
INCOM T ; T L Y RS NDING FT R D C M R 31. 19 1
Reguatons 111 amended to conform to secton 316 of the Revenue
ct of 19 1.
Offce of Commssoner of Interna Revenue.
Washngt n 2 , D. C.
Concerned:
In order to conform Reguatons 111 26 CFR, part 29 to the
provsons of secton 316 of the Revenue ct of 19 1, approved October
2C, 19 1, reatng to eecton as to recognton of gan n certan corpo-
rate qudatons, such reguatons are amended as foows:
29.112(b) (7)- 26 CFR 29.112(b) (7)- the foowng:
S C. 316. L CTION S TO R COGNITION OF G IN IN
C RT IN CORPOR T LI UID TIONS R NU CT OF
19 1, PPRO D OCTO R 20, 19 1 .
(a) mendment of Secton 112(b)(7). Secton 112(b)(7) (reat-
ng to recognton of gan n certan corporate qudatons) s hereby
amended by strkng out n subparagraph ( ) () 19 1 and by
nsertng n eu thereof 19 1 or 19 2 .

appcabe ony to ta abe years endng after December 31, 19 1.
Par. 2. Secton 29.112(b) (7)-, as amended by Treasury Decson
6 C. . 19 1-2, 6 , approved September 1 , 19 1 26 CFR
29.112(b) (7)- , s further amended as foows:
( ) y strkng from the headng and from the secton n 19 or
19 1 , wherever n 19 or 19 1 appears theren, and by nsertng n
eu thereof the foowng: n 19 ,19 1. or 19 2 .
( ) y nsertng n the frst and thrd sentences of paragraph (b)
mmedatey after n 19 1 , wherever n 19 1 appears theren, the
foowng: or 19 2 .
Par. 3. Secton 29.112(b) (7)-2, as amended by Treasury Decson
6 26 CFR 29.112(b) (7)-2 , s further amended by nsertng n
the second parenthetca cause n the frst sentence mmedatey
after n 19 1 , the foowng: or 19 2 .
Par. . Secton 29.112(b) (7)- , as amended by Treasury Decson
6 20 CFR 29.112(b) (7)- , s further amended as foows:
( ) y nsertng n the second parenthetca cause n the frst
sentence of paragraph (b) (2) mmedatey after n 19 1 the foow-
ng : or 19 2 .
( ) y strkng from the second sentence of paragraph (b) (2)
19 2-16-13 0
T. D. 91
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133 f 29.112(b)(7)-.
the date ugust 1 ,19 1 and by nsertng n eu thereof the foow-
ng: ugust 1 , 19 0 .
Par. . Secton 29.112(b) (7)- , as amended by Treasury Decson
6 26 CFR 29.112(b) (7)- , s further amended by nsertng m-
medatey after n 19 1 , where t appears n (b) of such secton, the
foowng: or 19 2 .
Par. 6. There s nserted mmedatey precedng secton 29.113(a)
(1 )-1 26 CFR 29.113(a) (1 )-1 , the foowng:
S C. 316. L CTION S TO R COGNITION OF G IN IN C RT IN
CORPOR T LI UID TIONS - R NU CT OF 19 1,
PP O D OCTO R 20, 19 1 .

(b) ass of Property. Secton 113(a) (1 ) (reatng to bass of
property receved n certan corporate qudatons) s amended by
strkng out the Revenue ct of 10 0 and by nsertng n eu thereof
any revenue act .
appcabe ony to ta abe years endng after December 31, 19 1.
Par. 7. Secton 29.113(a) (1 ) 1, as amended by Treasury Decson
6 26 CFR 29.113(a) (1 )-1 , s further amended by nsertng n
paragraph (a)(2)() mmedatey after caendar year 19 1 , the
foowng: or 19 2 .
Par. . Secton 29.1 -2, as amended by Treasury Decson 6
26 CFR 29.1 -2 , s further amended as foows:
( ) y strkng n the headng of paragraph (b)(2) and n the
frst sentence of such paragraph 19 or 19 1 , wherever 19 or
19 1 appears theren, and by nsertng n eu thereof the foowng:
19 . 19 1, or 19 2 .
( ) y nsertng n the second parenthetca cause n paragraph
(b)(2) Cm) mmedatey after n 19 1 , the foowng: or 19 2 .
C. . 19 1-2, , approved September 20, 19 1 26 CFR 29.1 -3 ,
s further amended by strkng from the second sentence of the second
paragraph 19 or 19 1 and by nsertng n eu thereof the foow-
ng: 19 , 19 1, or 19 2 .
Inasmuch as ths Treasury Decson merey provdes for the e -
tenson of the appcabty of secton 112(b)(7) of the Interna
Revenue Code to qudatons occurrng n 19 2 and makes a tech-
nca correcton, t s found that t s unnecessary to ssue such Treasury
Decson wth notce and pubc procedure thereon under secton (a)
of the dmnstratve Procedure ct, approved une 11, 19 6, or
sub|ect to the effectve date mtaton of secton (c) of the sad ct.
(Ths Treasury Decson s ssued under authorty contaned n
26 U. S. C. 62,3791) and pursuant to the provsons of Pubc Law 1 3
( 2d Cong.), approved October 20, 19 1.)
ohn . Dunap,
pproved uy 7, 19 2.
Thomas . Lynch,
(Fed wth the Dvson of the Federa Regster uy 9, 19 2, : a. m.)
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29.11 -1.)
13
S CTION 113(b). D UST D SIS FOR D T RMINING
G IN OR LOSS: D UST D SIS
Secton 29.113(b) (1)-1: d|usted bass: Genera 19 2-17-13 9
rue. I. T. 09
INT RN L R NU COD
The cost of repantng a persona resdence mmedatey pror to ts
sae s not a proper ad|ustment to the bass of the property under sec-
ton 113(b) (1) of the Interna Revenue Code n determnng gan on
the sae.
dvce s requested whether the cost of repantng a ta payer s
persona resdence mmedatey pror to ts sae consttutes a capta
e pendture for whch an ad|ustment to the bass may be made, under
secton 113(b) (1) of the Interna Revenue Code, n determnng gan
on the sae.
Secton 113(b)(1) of the Interna Revenue Code provdes n part
as foows:
(1) Genera rue. Proper ad|ustment n respect of the property sha
n a cases be made
( ) For e pendtures, recepts, osses, or other Items, propery
chargeabe to capta account, .
In genera, e penses chargeabe to capta account ncude ony
those whch are ncurred n connecton wth the orgna acquston
of property or the subsequent enargement or permanent mprovement
thereof. (See Unon Pacfc Raroad Co. v. Unted States. 99 U. S.
02.) In I. T. 1 0 (C. . II-, 3 (1923)), t s hed that outsde
pantng, nsde pantng, and paperng of renta property are n the
nature of ordnary repars (as dstngushed from permanent m-
provements) and that the cost thereof (unke a capta e pendture)
s deductbe as an ordnary and necessary busness e pense.
ccordngy, t s hed that the cost of repantng a persona res-
dence mmedatey pror to ts sae s not a proper ad|ustment to the
bass of the property, under secton 113(b)(1) of the Interna
Revenue Code, n determnng gan on the sae.
S CTION 11 . DISTRI UTIONS Y CORPOR TIONS
Secton 29.11 -1: Dvdends. 19 2-20-13929
Ct. D. 17 9
INCOM T INT RN L R NU COD D CISION OF COURT
1. Dstrbutons by Corporatons Dvdends ffect of Oper-
atng Defct as of March 1, 191 .
In the case of a corporaton whose whoy owned subsdares had
operatng defcts as of March 1. 1013, ts earnngs subsequent to that
date need not frst be devoted to eradcatng such defcts before
becomng avaabe for dstrbuton as dvdends ta abe to recpent-
stockhoders n the years 103 , 1939, and 19 0. The words accu-
muated after February 2S, 1913 , n secton 11 (a)(1) of the
Interna Revenue Code are unambguous. They appear to wpe out
past hstory and evy a ta on ncome earned n the future and
accumuated for dstrbuton. Ta payers may not escape the com-
mon burden of ta aton on ncome currenty receved smpy because
the corporaton whch made the dstrbuton from current earnngs
had osses over 3 years ago, before the Consttuton permtted
unapportoned ta aton on ncome.
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13
29.11 -1.
2. Decson Reversed.
Decson of The Ta Court of the Unted States, 13 T. C. 9
(19 9),reversed.
3. Certorar Dened.
Petton for certorar dened on pr 21, 19 2 (3 3 U. S. 927).
Unted States Court of ppeas for the Nnth Crcut
Commssoner of Interna Revenue, pettoner, v. Grace . cham, Lea .
Ne, s M. Moore, arret . echer, and I Ue . Wcgeforth, respondents
192 Fed. (2d) 7
On pettons for revew ot the decsons of The Ta Court of the Unted States
efore eay and Pope, Crcut udges, and Fee, Dstrct udge
November , 19 1
opnon
ames ger Fee, Dstrct udge: Durng the years 193 to 19 0. both Grace
. ehara and the other respondents, who were stockhoders n the . D. and
. . Spreckes Company,1 receved dstrbutons therefrom. The partes stpu-
ated how much of the dstrbutons were to be ta ed as dvdends for each year,
presentng the souton varyng upon the answer to three questons presented to
the Ta Court. Other stpuatons covered other probems.
Ths s a revew of the decson of the Ta Court upon ony one of these
questons.
We must determne whether the operatng defcts of whoy owned subsdares
of Spreckes as of March 1, 1913, must be restored by subsequent earnngs n
determnng the amount of profts avaabe for dvdends for tu purposes, where
the dstrbuton to the ta payer was receved n the years 193 , 1939 and 19 0.
Secton 11 (a)(1), Interna Revenue Code, defnes a ta abe dvdend as a
dstrbuton by a corporaton out of ts earnngs or profts accumuated after
February 2 , 1913. Secton 11 (b) provdes aso that earnngs and profts
accumuated before March 1, 1913, may be dstrbuted ta -free after the earnngs
and profts accumuated after that date have been dstrbuted.
The anguage of the statute appears pan Gross ncome covers gans or
profts and ncome derved from any source whatever. Specfcay, ny
dstrbuton made by a corporaton to ts sharehoders out of ts
earnngs or profts accumuated after February 2 , 1913, s ta ed. n nter-
pretaton of such words n accordance wth common defnton compes us to
bod these sums pad over to the respondents were ta abe as the Commssoner
contends.
The decson mght we stop here, but the abe opnon of the Ta Court shoud
rot e treated n such cavaer fashon. No other court has had ths queston
squarey presented, and the matter shoud be carefuy revewed.
The mere fact that, as a proposton of genera corporaton aw, dvdends pad
n the face of an operatng defct are regarded as pad from capta, s of no
mportance. For corporatons organzed snce March 1, 1913, ths s a pausbe
Interpretaton and may be apped. ut here the ta on an ndvdua who has
receved a dstrbuton from a corporaton 3 years after the crtca date aone s
nvoved. If t were shown that the dentca ndvdua was nsovent as of
February 2 , 1913, t woud not be contended that he must have pad hs past
debts and be on a eve of sovency before hs ncome of the year 193 coud be
ta ed. Congress drew a ne between February 2 , 1913, and March 1, 1913.
1 erenafter caed Spreckes .
26 U. S. C. . 11 (a) (1).
20 U. S. C. . 11 (b).
26 U. S. C. . 22(a).
There are cted as cases deang wth the pont. adrn vs. Comm onrr, 2 Cr.. 9
Fed. (2d 709 ; Chapman vs. nderson, 11 Fed. Supp. 913 : Ueverng vs. Canfed, 291 . S.
163 Ct. D. 7 3. C. . III-1. 17f (193 ) . The Chapman case was a hodng on another
pont. (Whether the wrtcup on the corporate books In 192 of the vaue of the corporate
assets as of March 1, 1913, was suffcent to emnate the March 1. 1913. defct.) On
moton to dsmss the compant, a snge dstrct udse In the Southern Dstrct of New
York, hed that It was not. ven f It were on the pont here, that opnon woud have tt
weght, snce ths dspute Is not gven consderaton n that opnon, and certany th
hodng there has no bndng effect here.
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29.11 - .
13G
efore the passage of the S teenth mendment, the Supreme Court of the Unted
States had hed that a ta coud not he consttutonay eved wthout apporton-
ment. Poock vs. Farmers Loan d Trust Co., 1 U. S. 601. fter the crtca
date, ta aton of a sums receved as ncome was possbe. There was no ta
eved upon property owned or corporate surpus from ncome receved before
the crtca date. The power to ta a ncome after that date s ncontrovertbe.
nd the ntenton to burden a ncome after that date s beyond cav.
The mere statement that, upon the crtca date, the capta was mpared
shows that the property was not there. It had aready been practcay ost.
The aw does not prevent the use of earnngs to repar the oss. Snce the
money here nvoved as dstrbuted to stockhoders was n fact earned by the
corporaton snce February 2 , 1913, t s to be presumed that Congress, ntend-
ng to use ts ta ng power to the fuest e tent, ntended to ta such funds.
Dssentng opnon of udge Dsney, concurred n .by udge rnod and udge
Offer.
The use of the word accumuated, couped wth the words after February
2 , 1913, bear no such mpcatons as are attrbuted by the Ta Court, that
there can e no accumuaton of earnngs unt an mpared capta s restored.
On the contrary, these words appear to wpe out the past hstory and evy
a ta on ncome earned n the future and accumuated for dstrbuton. If the
egsatve body had ntended such an e empton, t woud have been wrtten n
cear and unambguous anguage as e emptons shoud be, and as the e emptoa
of any earnngs or profts accumuated or ncrease n the vaue of property
accrued before March 1, 1913, actuay was. .
The argument concernng the hstory of the changes of the statutory anguage,
snce ts frst enactment, has but tte effect ether way. These changes speak
wth varyng voces. The present statute s here construed n the ght of ts
anguage and the broad purpose to ta a ncome. That ta payers shoud
escape the common burden of ta aton, whch fas on the |ust and un|ust
ake on ncome currenty receved, smpy because the corporaton whch made
the dstrbuton from current earnngs had osses over 3. ) years ago, before
the Consttuton permtted nnapportoned ta aton of ncome, s nconcevabe.
The decson of the Ta Court s reversed.
Secton 29.11 - : Dstrbutons n qudaton. 19 2-20-1399-2
( so Secton 23(g), Secton 29.23(g)-.) Ct D. 17 2
INCOM T INT RN L R NU COD D CISION OF SUPR M COURT
1. Capta Gans and I bses Dstrbutons n Lqudaton
I.,atf.k Payment of udgment by Transferees of Lqudatng
Corporaton.
Pettoners, who had equa stock ownershp In a corporaton n
qudaton, reported dstrbutons receved from the corporaton n
the ta abe years 1937 to 19 0 as capta gans. In 19 , they pad,
as transferees of the assets of the corporaton, a |udgment rendered
aganst the corporaton and aganst one of them ndvduay, and
camed deductons therefor as ordnary busness osses.
ed: The nature of the oss for ta purposes arsng from the 19
payment may be cassfed by consderng a the 1937-19 quda-
ton transacton events, and the oss sustaned fas squarey wthn
the defnton of capta osses contaned n sectons 23 and 11 of the
Interna Revenue Code. The sharehoders abty as transferees
was not based on any ordnary busness transacton of thers apart
from the qudaton proceedngs.
2. Decson ffrmed.
Decson of the Unted States Court of ppeas, Second Crcut
(193 Fed. (2d) 73 ), reversng decson of The Ta Court of the
Unted States (1 T. C. 76), affrmed.
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167
1 29.11 - .
Supreme Court of the Unted States
F. Donad rrowsmth and Ruth R. auer, e ecutors of the ast w and testa-
ment of Frederck R. auer, deceased, and RutuR. auer et a., pettoners, v.
Commssoner of Interna Revenue
On wrt of certorar to the Unted States Court of ppeas for the Second Crcut
November 10, 19 2
OPINION
Mr. ustce ack devered the opnon of the Court.
Ths s an ncome ta controversy crowng out of the foowng facts as shown
by fndngs of the Ta Court. In 19: 7 two ta payers, pettoners here, decded
to qudate and dvde the proceeds of a corporaton n whch they had equa
stook ownershp. Parta dstrbutons made n 1937, 193 , and 1939 were fo-
owed by a fna one n 19 0. Pettoners reported the profts obtaned from ths
transacton, cassfyng them as capta gans. They thereby pad ess ncome ta
than woud have been requred had the ncome been attrbuted to ordnary bus-
ness transactons for proft. bout the proprety of these 1937-19 0 returns,
there s no dspute. ut n 19 a |udgment was rendered aganst the od corpora-
ton and aganst Frederck It. auer, Indvduay. The two ta payers were re-
qured to and dd pay the |udgment for the corporaton, of whose assets they were
transferees. See Phps- ones Con)- v. Parmey, 302 U. S. 233, 23 -236. Cf.
I. R. C, secton 311(a). Cassfyng the oss as an ordnary busness one, each
took a ta deducton for 100 percent of the amount pad. Treatment of the oss
as a capta one woud have aowed deducton of a much smaer amount. See
L R. C, secton 117 (b), (d)(2) and (e). The Commssoner vewed the 19
payment as part of the orgna qudaton transacton requrng cassfcaton
as a capta oss, |ust as the ta payers had treated the orgna dvdends as capta
gans. Dsagreeng wth the Commssoner the Ta Court cassfed the 19 pay-
ment as an ordnary busness oss. 1 T. C. 70. Dsagreeng wth the Ta Court
the court of appeas reversed, treatng the oss as capta. 193 Fed. (2d) 73 .
Ths atter hodng confcts wth the Thrd Crcut s hodng n Commssoner v.
Swtk, 1 Fed. (2d) 299. ecause of ths confct, we granted certorar.
U. S. .
I. R. C. secton 23 treats osses from saes or e changes of capta assets as
capta osses and I. R. C. secton 11 requres that qudaton dstrbutons
be treated as e changes. The osses here fa squarey wthn the defnton of
capta osses contaned n these sectons. Ta payers were requred to y the
|udgment because of abty mposed on them as transferees of qudaton
dstrbuton assets. nd t Is pan that ther abty as transferees was
not based on any ordnary busness transacton of thers apart from the quda-
ton proceedngs. It s not even dened that had ths |udgment been pad
after qudaton, but durng the year 19 0, the osses woud have been propery
treated as capta ones. For payment durng 19 0 woud smpy have reduced
the amount of capta gans ta payers receved durng that year.
It s contended, however, that ths payment whch woud have been a capta
transacton n 19 0 was transformed nto an ordnary busness transacton n
19 because of the we-estabshed prncpe that each ta abe year s a separate
unt for ta accountng purposes. Unted States v. Lews, 3 0 U. S. 90 Ct. D.
173 , C. . 19 1-1, 21 ; North mercan O Co. v. urnet, 2 6 U. S. 17 Ct. D.
99, C. . I-1, 293 (1932) . ut ths prncpe s not breached by consderng
a the 1937-19 qudaton transacton events n order propery to cassfy the
nature of the 19 oss for ta purposes. Such an e amnaton s not an
attempt to reopen and read|ust the 1937 to 19 0 ta returns, an acton that
woud be nconsstent wth the annua ta accountng prncpe.
The pettoner auer s e ecutor presents an argument for reversa whch
appes to auer aone. e was abe not ony by reason of beng a transferee
of the corporate assets. e was aso hed abe |onty wth the orgna
corporaton, on fndngs that he had secrety profted because of a breach of
hs fducary reatonshp to the |udgment credtor. Trounstne v. auer, Pogue
d Co., Fed, Supp. 767, 773; 1 Fed. (2d) 379, 3 2. The |udgment was
t dssouton the corporate stock wns owned by Frederck P. auer and the e ecutor
of Dnvenport Pogue s estate. The partes here now are Pogue s wdow, auer s wdow,
and the e ecutor of auer s estate.
2 2160 6 19
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I 29.117-7.1
13
aganst both auer and the corporaton. For ths reason t s contended that
the nature of auer s ta deducton shoud be consdered on the bass of hs
abty as an ndvdua who sustaned a oss n an ordnary busness transacton
for proft. We agree wth the court of appeas that ths contenton shoud not
be sustaned. Whe there was a abty aganst hm n bot capactes,
the ndvdua |udgment aganst hm was for the whoe amount. s payment
of ony haf the |udgment ndcates that both he and the other transferee were
payng n ther capactes as such. We see no reason for gvng auer a preferred
ta poston.
ffrmed.
Dssentng opnon by Mr. ustce Dougas, and dssentng opnon by Mr.
ustce ackson wth whom Mr. ustce Frankfurter |ons.
S CTION 117. C PIT L G INS ND LOSS S
Secton 29.117-1: Meanng of terms.
INT N L R NU COD
ump-sum payment receved by a grantor of mnera rghts n con-
|uncton wth hs retenton of a royaty nterest n the mnera. (See
G. C. M. 27322, page 62.)
Secton 29.117-3: ternatve ta n case of net ong-term capta
gan or oss,
INT RN L R NU COD
Lmtaton on the combned norma ta and surta provded under
secton 12(f) of the Interna Revenue Code. (See I. T. 103, page 31,
ths uetn.)
Secton 29.117-7: Gans and osses from nvoun- 19 2-2 -1396
tary conversons and from the sae or e change of I. T. 109
certan property used n the trade or busness.
( so Secton 112(b), Secton 29.112(b) (6)-.)
INT RN L R NU COD
ssets dstrbuted to the parent corporaton upon compete qu-
daton of a whoy-owned subsdary corporaton whch s ndebted
to the parent must frst be apped, at ther far market vaue,
aganst the ndebtedness to the parent, and f apprecated assets are
so apped the subsdary reazes ta abe gan to the e tent of such
apprecaton. The remanng assets of the subsdary, f any, ds-
trbuted to the parent fa wthn the purvew of secton 112(b) (6)
of the Interna Revenue Code, provded the requrements of that sec-
ton are met.
dvce s requested whether, upon compete qudaton of a whoy-
owned subsdary corporaton and concurrent canceaton of the sub-
sdary s ndebtedness to the parent, the transfer to the parent of the
assets of the subsdary may be effected under secton 112(b)(6) of
the Interna Revenue Code wthout recognton of gan.
Secton 112(b) (6) of the Code provdes n part that, where certan
requrements are met, no gan or oss sha be recognzed upon the
recept by a corporaton of property dstrbuted n compete quda-
ton of another corporaton, and that a dstrbuton sha be con-
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139
( 29.131-1.
sdered to be n compete qudaton ony f the dstrbuton by such
other corporaton s n compete canceaton or redempton of a ts
stock.
owever, where a qudatng subsdary corporaton s ndebted
to ts parent and the assets of the subsdary are dstrbuted to the
parent, so much of the assets of the subsdary as are equa n vaue
to the ndebtedness to the parent may not be consdered to be property
dstrbuted n canceaton or redempton of stock. The assets are
frst appcabe to a dscharge of the subsdary s ndebtedness to the
parent. (See Northern Coa Dock Co. v. Commssoner, 12 T. C,
2, acquescence, C. . 11) 9 1, 3, and ouston Natura Gas Corpora-
ton (Te as) v. Commssoner, 173 Fed. (2d) 61.)
ccordngy, t s hed that upon compete qudaton of a subsd-
ary corporaton and concurrent canceaton of the subsdary s ndebt-
edness to the parent, the assets of the subsdary dstrbuted to the
parent must frst be apped, at ther far market vaue, aganst such
ndebtedness. The subsdary w reaze ta abe gan upon the pay-
ment of ts ndebtedness to the parent to the e tent that the far market
vaue of the assets apped aganst the ndebtedness e ceeds the ad-
|usted bass of such assets n the hands of the subsdary. (Cf. I. T.
3316, C. . 1939-2, 1 6.) The remanng assets of the subsdary ds-
trbuted to the parent, f any, fa wthn the purvew of secton
112(b) (6) of the Interna Revenue Code, provded the requrements of
that secton are met.
SUPPL M NT C CR DITS G INST T
S CTION 131. T S OF FOR IGN COUNTRI S ND
POSS SSIONS OF UNIT D ST T S
Secton 29.131-1: nayss of credt for 19 2-16-13 1
ta es. I. T. 090
INT RN L R NU COD
The 2 percent ta mposed upon corporatons by Canada under
secton 10( ) of The Od ge Securty ct fas wthn the Unted
States concept of an ncome ta and s aowabe as a credt aganst
Unted States ncome tu to the e tent provded by secton 131 of
the Interna Revenue Code.
dvce s requested whether the 2 percent ta mposed upon corpo-
ratons by Canada under secton 10( ) of The Od ge Securty ct
quafes as an ncome ta whch may be aowed as a credt aganst
Unted States ncome ta .
Secton 10 of The Od ge Securty ct (chapter 1 , Statutes of
19 1,2d sess.) reads n part as foows:
( ) Corpobatoks. very corporaton abe to pay ta under Part I of The
Income Ta ct, other than a corporaton abe to pay ta under secton s ty-
three thereof, sha pay an Od ge Securty ta for tbe year eqm to two per
centum of ts ta abe ncome for the year.
(6) Interpretaton. Subsecton fve sha be read and construed as though
the ta mposed thereby were provded for by a provson n Part I of The Income
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29.131-1.(
1 0
Ta ct; and a the provsons of The Income Ta ct, other than secton thrty-
seven thereof, sha be read and construed as though the ta mposed by sub-
secton fve were provded for hy a provson n the sad I art I as an addton
to the ta otherwse payabe under that Part.
Secton 131 of the Interna Revenue Code provdes n part as
foows:
(a) owance of Credt. If the ta payer chooses to have the benefts of
ths secton, the ta mposed by ths chapter chapter 1 of the Code
sha be credted wth :
(1) Ctzens and domestc cow-oratons. In the case of a
domestc corporaton, the amount of any ncome ta es pad or
accrued durng the ta abe year to any foregn country
In order for a foregn ta to be aowabe as a credt aganst Unted
States ncome ta under secton 131 of the Code, supra, t must be
shown that the ta mposed by the foregn aw s a ta on ncome
wthn the Unted States concept of that term, or s a ta n eu of
an ncome ta . (See I. T. 021, C. . 19 0-2, .)
It s hed that the 2 percent ta mposed upon corporatons by
Canada under secton 10( ) of The Od ge Securty ct fas wthn
the Unted States concept of an ncome ta and s aowabe as a credt
aganst Unted States ncome ta to the e tent provded by secton
131 of the Interna Revenue Code.
Secton 29.131-1: nayss of credt for 19 2-20-13930
ta es. L T. 100
INT RN L R NU COD
The ta mposed by the government of Trndad and Tobago under
Ordnance No. 3 of 103 , as amended, fas wthn the Unted States
concept of an ncome ta and s aowabe as a credt aganst Unted
States ncome ta to the e tent provded by secton 131 of the
dvce s requested whether the ta mposed by the government of
Trndad and Tobago under Ordnance No. 3 of 193 , as amended by
Ordnances No. 2 of 19 1, No. 2 of 19 , Nos. 22 and 6 of 19 6.
Nos. 21, 2 , and 27 of 19 7, and Nos. , 9, and 30 of 19 , quafes
as an ncome ta whch may be aowed as a credt aganst Unted
States ncome ta .
Ordnance No. 3 of 193 , as amended, provdes n part as foows:
1. Ths Ordnance may be cted as the Income Ta Ordnance.

. Income ta sha, sub|ect to the provsons of ths Ordnance, be payabe at
the rate or rates specfed hereafter for each year of assessment upou the ncome
of any person accrung n or derved from the Coony or esewhere, and whether
receved n the Coony or not, n respect of
(a) gans or profts from any trade, manufacture, adventure or concern
n the nature of a trade, busness, professon, or vocaton, ;
(b) gans or profts from any empoyment, ;
(c) the annua vaue of and and mprovements thereon used by or on
behaf of the owner or used rent free by the occuper, ;
(d) dvdends, nterest, or dscounts;
(e) any penson, charge, or annuty;
(f) rents, royates, premums, and any other profts arsng from
property;
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29.131-1.
(g) any annua gans or profe not fang under any of the foregong
heads.
6. Ta sha he charged, eved, and coected for each year of assessment upon
the chargeahe Income of any person for the year Immedatey precedng the year
of assessment.

10. (1) For the purpose of ascertanng the chargeahe Income of any person,
there sha be deducted a outgongs anu e penses whoy and e cusvey ncurred
durng the year precedng the year of assessmet (sc) by such person n the
producton of the ncome, ncudng Tabuaton of deductbe tems
ncudes nterest, renta of busness property, repars, rea estate ta es, etc.
Provson s aso made n sectons 1 and 1 of the aw for deductons,
smar to e emptons under the Unted States Interna Revenue Code,
for the ta payer, hs wfe, chdren, and dependents.
foows:
(a) owance of Cckdt. If the ta payer chooses to have the benefts of
sha be credted wth:
(1) Ctzens and domestc corporatons. In the case of a ctzen of the
Unted States and of a domestc corporaton, the amount of any In-
come ta es pad or accrued durng the ta abe year to any for-
egn country
In order for a ta pad or accrued to a foregn country to be aow-
abe as a credt aganst Unted States ncome ta under secton 131
of the Code, supra, t must be shown that the ta mposed by the for-
egn aw s an ncome ta wthn the Unted States concept of that
term, or s a ta n eu of an ncome ta .
It s hed that the ta mposed by the government of Trndad and
Tobago under Ordnance No. 3 of 193 , as amended, fas wthn the
Unted States concept of an ncome ta and s aowabe as a credt
aganst Unted States ncome ta to the e tent provded by secton
131 of the Interna Revenue Code.
The soca securty ta mposed by rgentne Decree Law No.
63 )/ 6 upon remuneraton receved by empoyees covered by such
aw fas wthn the Unted States concept of an ncome ta and s
aowabe as a credt aganst Unted States ncome ta to the e tent
provded by secton 131 of the Interna Revenue Code.
dvce s requested whether the soca securty ta mposed by De-
cree Law No. ( 39 / 6 of the rgentne Repubc upon remunera-
ton receved by empoyees covered by such aw quafes as an ncome
ta whch may be aowed as a credt aganst Unted States ncome ta .
rtce 2 of rgentne Decree Law No. 639 / 6 provdes n part
that there sha be compusory ncuded n the penson pan to whch
the decree reates, wth certan e ceptons not here pertnent, the staff
renderng servces for rgentne or foregn ar carrers estabshed
n that country. rtce 12 of such decree provdes for the compu-
sory monthy contrbuton of 7 percent on the tota remuneraton
receved by empoyees covered by the Decree Law.
Secton 29.131-1: nayss of credt for
ta es.
19 2-2 -139 0
I. T. 111
INT RN L R NU COD
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29.131-7.1
1 2
foows:
(a ) owance of Credt. If the ta payer chooses to have the benefts of ths
secton, the ta mposed by ths chapter chapter 1 of the Code sha
be credted wth :
(1) Ctzens and domestc corporatons. In the case of a ctzen of the
Unted States the amount of any ncome ta es pad or
accrued durng the ta abe year to any foregn country
In order for a foregn ta to be aowabe as a credt aganst Unted
States ncome ta under secton 131 of the Code, supra, t must be
shown that the ta mposed by the foregn aw s a ta on ncome
wthn the Unted States concept of that term, or s a ta n eu of
an ncome ta . (See I. T. 090, page 139, ths uetn.)
It s hed that the ta mposed by rgentne Decree Law No. 639 / 6
upon remuneraton receved by empoyees covered by such aw fas
wthn the Unted States concept of an ncome ta and s aowabe
as a credt aganst Unted States ncome ta to the e tent provded
by secton 131 of the Interna Revenue Code.
Secton 29.131-3: Condtons of aowance of
credt.
INT RN L R NU COD
Reguatons 111 amended. (See T. D. 9 7, page 1 .)
Secton 29.131-7: Ta es of subsdary corpo- 19 2-1 -13 72
raton. I. T. 0 9
INT RN L R NU COD
For the purposes of secton 131 (b( and (f) of the Interna
Revenue Code, a ncome of a foregn subsdary of a domestc
parent, or of a foregn subsdary of the foregn subsdary, as
theren contempated, sha be deemed to have been derved from
sources wthn the foregn country or possesson of the Unted
States n whch the frst subsdary s ncorporated; and a ncome,
war-profts, and e cess-profts ta es pad or deemed to have been
pad to any foregn country or possesson of the Unted States
sha be deemed to have been pad to the government of the country
or possesson under whose aws the frst subsdary s ncorporated.
dvce s requested whether a domestc corporaton whch s entted
to the benefts of secton 131(f) of the Interna Revenue Code may
receve a credt, under secton 131(a)(1) of the Code, for ncome
ta es pad by ts foregn subsdary to a foregn country other than
that n whch the subsdary s ncorporated. Ths nqury aso rases
the questons as to what porton of the ta es w be recognzed by sec-
ton 131 (f) as havng been (or deemed to have been) pad, and to what
e tent the mtatons of secton 131 (b) w be apped to that porton
of the ta recognzed for credt.
In the nstant case, a domestc corporaton has a whoy owned
Panamanan subsdary, whch subsdary owns more than 0 percent
of the stock n a razan corporaton from whch t receves dv-
dends. The razan corporaton s sub|ect to the ncome ta m-
posed by raz upon the profts earned theren, but the dvdends
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29.131-7.
pad by t are ta ed to the recpents, such ta beng coected by
wthhodng. (See I. T. 013, C. . 19 0-1, 6 .) The Panamanan
subsdary s sub|ect to the ta mposed by Panama upon ts operatng
ncome, but no ta s mposed by Panama upon ts dvdend ncome
or upon the dvdends pad by t to ts parent company.
foows:
(a) owance of Credt. If the ta payer chooses to have the benefts of
sha be credted wth:
(1) Ctzens and domestc corporatons. In the case of a ctzen of
the Unted States and of a domestc corporaton, the amount of any ncome,
war-profts, and e cess-profts ta es pad or accrued durng the ta abe
year to any foregn country or to any possesson of the Unted States;

(b) Lmt on Credt. The amount of the credt taken under ths secton
sha be sub|ect to each of the foowng mtatons:
(1) The amount of the credt n respect of the ta pad or accrued to any
country sha not e ceed, n the case of a corporaton, the same
proporton of the ta aganst whch such credt s taken, whch the ta -
payer s norma-ta net ncome from sources wthn such country bears to
ts entre norma-ta net ncome for the same ta abe year; and
(2) The tota amount of the credt sha not e ceed, n the case
of a corporaton, the same proporton of the ta aganst whch such credt
Is taken, whch the ta payer s norma-ta net ncome from sources wthout
the Unted States bears to ts entre norma-ta net ncome for the same
ta abe year;

(f) Ta es of Foregn Corporaton.
(1) Treatment of ta es pad by foregn corporaton. For the purposes
of ths secton, a domestc corporaton whch owns at east 10 per centum
of the votng stock of a foregn corporaton from whch t receves dvdends
n any ta abe year sha be deemed to have pad the same proporton of
any ncome, war-profts, or e cess-profts ta es pad or deemed to be pad
by such foregn corporaton to any foregn country or to any possesson of
the Unted States, upon or wt respect to the accumuated profts of such
foregn corporaton from whch such dvdends were pad, whch the amount
of such dvdends bears to the amount of such accumuated profts.
(2) Foregn susdary of foregn corporaton. If such foregn cor-
poraton owns 0 per centum or more of the votng stock of another foregn
corporaton from whch t receves dvdends n any ta abe year t sha
be deemed to have pad the same proporton of any ncome, war-profts, or
e cess-profts ta es pad by such other foregn corporaton to any foregn
country or to any possesson of the Unted States, upon or wth respect
to the accumuated profts of the corporaton from whch such dvdends
were pad, whch the amount of such dvdends bears to the amount of such
accumuated profts.
In vew of the provsons of secton 131(f) of the Code, and n vew
of the fact that the razan ta n queston has been recognzed (I. T.
013, supra) as an ncome ta for the purposes of secton 131, the
razan ncome ta s approprate for the purposes of the credt
under secton 131.
Secton 119(a) (2) ( ) of the Code provdes n part that:
dvdends from a foregn corporaton sha, for the purposes of sec-
ton 131 (reatng to foregn ta credt), be treated as ncome from
sources wthout the Unted States . In the nstant case,
the dvdends receved by the domestc corporaton from ts Pana-
manan subsdary are, therefore, ncome from sources wthout the
Unted States. To the e tent that the amount of the dvdends s
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29.131-7.
1
ncudbe n the domestc corporaton s norma-ta net ncome, such
amount s aso ncudbe n the numerator of the credt-mtng frac-
ton to be apped pursuant to secton 131(b) (2) of the Code.
Secton 131(b)(1) further mts the amount of the credt n the
case of a corporaton by provdng that the ta pad or accrued to
any country sha not e ceed the same proporton of the ta aganst
whch the credt s taken whch the ta payer s norma-ta net ncome
from sources wthn such country bears to ts entre norma-ta net
ncome for the same ta abe year. The queston thus presented s
whether that porton of the dvdends receved by the domestc cor-
poraton whch was pad utmatey out of accumuated profts derved
from raz shoud, for the purposes of secton 131, be vewed as
consttutng net ncome from sources wthn Panama, or shoud be
consdered as from sources wthn raz. It s the poston of the
ureau that, for the purposes of secton 131 of the Code, the geo-
graphca source of the dvdends pad by a foregn subsdary to a
domestc parent s the country n whch the foregn subsdary s or-
ganzed, uness otherwse e pressy provded by aw. (Of. secton
119(a)(2)( ) of the Code.)
Furthermore, snce n many nstances t woud be admnstratvey
dffcut, f not mpossbe, to determne the source of the accumuated
profts from whch dvdends were pad by foregn subsdares, or
foregn subsdares of such subsdares, the ureau has adopted a
practca rue of treatng foregn ta es pad or deemed to have been
pad by a foregn subsdary of a domestc parent as havng been pad
to the foregn country n whch the frst subsdary s ncorporated.
Summarzng, t s the poston of the ureau that, for the purposes
of secton 131 (b) and (f) of the Interna Revenue Code, a ncome
of a foregn subsdary of a domestc parent, or of a foregn subsdary
of the foregn subsdary, as theren contempated, sha be deemed to
have been derved from sources wthn the foregn country or posses-
son of the Unted States n whch the frst subsdary s ncorporated;
and a ncome, war-profts, and e cess-profts ta es pad or deemed
to have been pad to any foregn country or possesson of the Unted
States sha be deemed to have been pad to the government of the
country or possesson under whose aws the frst subsdary s
ncorporated.
ppcaton of the above-stated concuson may be ustrated by the
foowng e ampe, whch s based on assumed facts:
The domestc corporaton and ts Panamanan subsdary keep ther
accounts and fe ther returns on the caendar-year bass. On anu-
ary 1, 19 1, the begnnng of the subsdary s ta abe year, t had no
accumuated profts. Durng the caendar year 19 1, ts profts from
Panamanan operatons were 90,000, and the gross amount of ts
dvdends from the razan corporaton was 10,000. Wth respect
to these amounts, the subsdary pad an ncome ta of 6, 7 to
Panama and an ncome ta of 1, 00 to raz. Durng 19 1 (ncud-
ng the frst GO days thereafter), t pad a dvdend of 91,926 to ts
parent (that beng the amount of ts net profts after payment of the
foregn ncome ta es thereon). The ta es assumed to have been
pad to Panama wth respect to ths dvdend woud be ,07 ( 6, 7
pus 1, 00). Under the formua provded by secton 131(f) of the
Code, the ta avaabe for credt by the parent (sub|ect, however,
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1
29.131-7.
to the addtona mtatons provded by secton 131(b)) woud be
7, 22.11, . e., 91,926/100,000 ,07 .
It ne t becomes necessary to appy the mtatons provded by
secton 131(b)(1) and by secton 131(b)(2) to the ta avaabe for
credt. In the case of a corporaton, the mtaton of secton
131(b) (1) s the rato of the ta payer s norma-ta net ncome from
sources wthn the country mposng the ta for whch credt s camed
to ts entre norma-ta net ncome, whereas the mtaton of secton
131 (b) (1) s the rato of the ta payer s norma-ta net ncome from
sources outsde the Unted States to ts entre norma-ta net ncome.
The ta avaabe for credt, as thus mted, w be the esser of the
amounts computed under secton 131(b)(1) or secton 131(b)(2).
For the purpose of ustratng these mtatons, t w be assumed
that the parent s norma-ta net ncome for 19 1 from a sources was
2,000,000, the dvdend receved from the Panamanan subsdary
was ts ony ncome from sources outsde the Unted States, and that
the Unted States ta (wthout regard to foregn ta credts) on the
2,000,000 was 00,000.
The mtaton of secton 131(b)(1) of the Code (wth respect to
ta es pad to Panama) woud be e pressed by a fracton the nu-
merator of whch s 91,926 and the denomnator of whch s 2,000,000.
(The amount of ths numerator woud aso, n ths nstance, be the
numerator of the fracton n the mtaton provded by secton
131(b) (2), snce the dvdend receved from the Panamanan subsd-
ary was the ony ncome from sources outsde the Unted States, and
the fracton woud therefore be the same.) The mtaton under
secton 131(b)(1) s 91,926/2,000,000 00,000 36,770. 0. Ths
beng n e cess of 7, 22.11, the fgure arrved at under the secton
131(f) formua, the amount of the credt s mted to 7, 22.11.
In vew of the foregong, t s hed that the domestc corporaton
here nvoved, whch s entted to the benefts of secton 131(f) of the
Code, may receve a credt, under secton 131(a)(1) of the Code,
computed n accordance wth the foregong, for ncome ta es pad
by ts Panamanan subsdary to raz on dvdends receved by the
Panamanan subsdary from the razan corporaton.
Secton 29.131-7: Ta es of foregn corporaton. 19 2-2 -139 1
( so Secton 29.131-3.) T. D. 9 7
INCOM T ; T L T RS GINNING FT R D C M R 31. 19 1
Reguatons 111 amended to conform to secton 332 of the Revenue
ct of 10 1.
Washngton 2 , D. C.
To Offcers and mpoyees of the nterva Revenue Servce and Others
Concerned:
On September 27, 19 2, there was pubshed n the Federa Regster
(17 F. R. 63 ) a notce of proposed rue makng to conform Regua-
tons 111 26 CFR, part 29 to secton 332 of the Revenue ct of
19 1, reatng to credt for ta es of foregn corporatons, approved
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29.131-7.1
1 6
October 20, 19 1. No ob|ecton to the rues proposed havng been
receved, the amendments set forth beow are hereby adopted.
29.131-1 26 CFR 29.131-1 the foowng:
S C. 332. CR DIT FOR T S OF FOR IGN CORPOR TIONS
(a) Foregn Subsdary of a Domestc Corporaton. ffectve wth
respect to dvdends receved by a domestc corporaton from a foregn
corporaton durng ta abe years begnnng after December 31, 19 0, the
frst sentence of secton 131(f) (1) s hereby amended by strkng out a
ma|orty and nsertng n eu thereof at east 10 per centum .
(b) Foregn Subsdary of a Foregn Corporaton. ffectve wth
respect to dvdends receved by a foregn corporaton from another
foregn corporaton n ta abe years begnnng after December 31, 19 0,
secton 113(f) (2) s hereby amended by strkng out a the votng stock
(e cept quafyng shares) and nsertng n eu thereof 0 per centum
or more of the votng stock .
(c) Cerca mendment. So much of secton 131(f) (1) as precedes
the frst sentence thereof s hereby amended to read as foows:
(f) Ta es of Foregn Corporaton.
(1) Treatment of ta es pad by foregn corporaton. .
C. . 19 2-1, 126 , approved pr , 19 2 26 CFR 29.131-3 , s
further amended by revsng the frst sentence, whch commences
wth the words For credt where ta es , of the fourth paragraph
thereof to read as foows:
For credt avaabe to a domestc corporaton wth respect to ta es pad by a
foregn corporaton, see secton 29.131-7.
C. . 19 , 206 , approved pr 19, 19 26 CFR 29.131-7 , s
( ) y revsng so much thereof as precedes the words of the
votng stock of a foregn corporaton , whch appear n the frst sen-
tence of (a) thereof, to read as foows:
Sec. 29.131-7. Ta es of Foregn Corporaton. (a) Domestc corporaton
omny stock of a foregn corporaton. In the case o a domestc corporaton
whch owns a ma|orty or, effectve wth respect to dvdends receved durng a
ta abe year begnnng after December 31, 19 0, at east 10 percent.
( ) y strkng out of the e presson pad or accrued by such
controed foregn corporaton to any foregn country , whch appears
n the frst sentence of (a) thereof, the word controed so that such
e presson w read as foows: pad or accrued by such foregn
corporaton to any foregn country .
(C) y revsng the second and thrd sentences of (a) thereof,
whch commence, respectvey, wth the words See, however, the
mtatons and f dvdends are receved , to read as foows:
If dvdends are receved from more than one such foregn corporaton, the
mtaton s to be computed separatey for the dvdends receved from each.
For other mtatons upon the amount of credt avaabe under secton 131,
see secton 29.131- .
(D) y strkng out of the ast sentence of (a) thereof a con-
troed and nsertng n eu thereof such a , so that such sentence
w read as foows:
Ta es pad or accrued by such a foregn corporaton are deemed to have been
pad by the domestc corporaton for purposes of credt ony.
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1 7
( 2 .11, Regs. 120.
( ) y revsng the headng and frst paragraph of (b) thereof
to read as foows:
(6) Foregn corporaton ownng stock of another foregn corporaton. If any
foregn corporaton comng wthn the scope of paragraph (o) hereof owns a
(e cept quafyng shares) or, effectve wth respect to dvdends receved n a
ta abe year begnnng after December 31, 10 0, 0 percent or more of the votng
stock of another foregn corporaton from whch t receves dvdends n any
ta abe year, t sha e deemed to have pad that proporton of any ncome,
war-profts, and e cess-profts ta es pad or accrued by the atter corporaton
to any foregn country or to any possesson of the Unted States, upon or wth
respect to the accumuated profts of such atter corporaton from whch such
dvdends were pad, whch the amount of such dvdends bears to the amount
of such accumuated profts. Such ta so deemed to have been pad sha then
be taken Into consderaton n determnng the amount of ncome, war-profts,
and e cess-prots ta es pad or deemed to have been pad by the former corpo-
raton to any possesson or foregn country upon or wth respect to ts own accu-
muated profts from whch the dvdends were pad by such corporaton to the
domestc corporaton.
(F) y strkng out of the second paragraph of (b) thereof the
foowng: parent ,
sectons 62 and 3791 ( 3 Stat. 32, 67; 26 U. S. C. 62, 3791) of the
Interna Revenue Code.)
ustn F. Wnke,
pproved November It), 19 2.
Thomas . Lynch,
(Fed wth the Dvson of the Federa Regster November 2 , 19 2, : a. m.)
SUPPL M NT D. R TURNS ND P YM NT OF T
S CTION 1 1. CONSOLID T D R TURNS
Secton 2 .11, Reguatons 129: Consodated 19 2-16-13 2
returns for subsequent years. I. T. 091
INT RN L R NU COD
ffated corporatons whch fed consodated Federa ncome
ta returns for ta abe years ended pror to pr 1, 19 1. may,
notwthstandng the tng of such returns, fe separate Federa
ncome ta returns for the frst ta abe year endng after March 31,
19 1.
dvce s requested whether affated corporatons whch fed con-
sodated Federa ncome ta returns for ta abe years ended pror
to pr 1,19 1, may eect to fe separate Federa ncome ta returns
for the frst ta abe year endng after March 31,19 1.
Secton 1 1(a) ot the Interna Revenue Code, as amended, provdes
n part as foows:
(a) Prvege to Fe Consodated Returns. The makng of a
consodated return sha be upon the condton that a corporatons whch at
any tme durng the ta abe year have been members of the affated group
consent to a the consodated return reguatons prescrbed under subsecton
(b) pror to the ast day prescrbed by aw for the tng of such return.
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2 .12, Regs. 129.
1
Secton 2 .11(a) of Reguatons 129, reatng to consodated ncome
and e cess profts ta returns of affated corporatons, provdes n
part as foows:
(a) Consodated returns requred for subsequent years. If a consodated
return Is made under these reguatons for any ta abe year, a consodated
return must be made for each subsequent ta abe year durng whch the affated
group remans n e stence uness (2) subsequent to the e ercse
of the eecton to make consodated returns, chapter 1 of the Code to the e tent
appcabe to corporatons, or these reguatons whch have been consented to,
have been amended and any such amendment s of a character whch makes
ess advantageous to affated groups as a cass the contnued fng of consu
(dated returns, regardess of the effectve date of such amendment, .
It s hed that the reguatons appcabe to the fng of consodated
Federa ncome ta returns have been so amended by Treasury De
cson 91 , beow, as to make ess advantageous to affated groups as a
cass the contnued fng of such returns, wthn the meanng of
secton 2 .11(a) of Reguatons 129, for ta abe years endng after
March 31,19 1. ccordngy, affated corporatons whch fed con-
sodated Federa ncome ta returns for ta abe years ended pror to
pr 1, 19 1, may, notwthstandng the fng of such returns, fe
separate Federa ncome ta returns for the frst ta abe year endng
after March 31, 19 1.
Secton 2 .12, Reguatons 129: Makng conso- 19 2-1 -13 73
dated return and fng other forms. T. D. 91
( so Sectons 2 .30, 2 .31, and 2 . , Regua-
tons 129.)
TITL 26 INT RN L R NU . C PT R I, SU C PT R , P RT 2 .
CONSOLID T D INCOM ND C SS PRO ITS T R TURNS
Reguatons 129 amended to conform to the Revenue ct of 19 1
Washngton , D. C.
Concerned:
On May 1 , 19 2, notce of proposed rue makng was pubshed n
the Federa Regster (17 F. R. 3 3) to conform Reguatons 129 26
CFR, part 2 to the Revenue ct of 19 1, approved October 20,
19 1. fter consderaton of a reevant matter presented by n-
terested persons regardng the proposed rues, the amendments to Reg-
uatons 129 set forth beow are herebv adopted.
Paragraph 1. Secton 2 .12(b) 26 CFR 2 .12(b) s amended by
strkng the perod at the end of subparagraph ( ) and nsertng n
, e cept as otherwse provded In secton 613 of the Revenue ct of 19 1. Secton
613 of that ct reates to the wthdrawa wthn 90 days after October 20, 19 1
(the date of the enactment of the ct), of consents for the frst ta abe year
endng after une 30, 19 0, wth respect to corporatons descrbed n secton
(f).
Par. 2. Secton 2 .30(a) 26 CFR 2 .30(a) s amended by nsert-
ng mmedatey after the consodated ad|usted norma-ta net n-
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1 9
2 .12, Regs. 129.
come and the consodated ad|usted corporaton surta net ncome
the foowng:
(or. for ta abe years begnnng n 10 1, the consodated 1931 ad|usted norma-
ta net ncome) .
Par. 3. Secton 2 .30(b) 26 CFR 2 30(b) s amended by add-
ng mmedatey after subparagraph ( ) the foowng:
( ) In case of mutua savngs bank conductng fe nsurance busness. If the
affated group for any ta abe year begnnng after December 31. 19 1, n-
cudes a mutua savngs bank whch, f a separate return were fed, woud be
sub|ect to the aternatve ta of secton 110(a) (reatng to a mutua savngs
bank conductng a fe nsurance busness), the provsons of secton 110(a)
sha appy to each member of the e-oup and the aternatve ta of each cor-
poraton under secton 110(a) sha be computed wth reference to the conso-
dated net ncome of the group determned wthout regard to any tems of gross
ncome or deductons propery aocabe to the busness of the fe nsurance
department of the mutua savngs bank, and wth reference to the net ncome
of such fe nsurance department determned under the provsons of secton
110(a) (2).
Par. . Secton 2 .30(c) 26 CFR 2 .30(c) s amended to read
as foows:
(c) Lmtaton on e cess profts ta . The consodated e cess profts ta
abty under secton 30(a) sha be whchever of the foowng amounts s
the esser:
(1) n amount equa to 30 percent of the consodated ad|usted e cess
profts net ncome.
(2) Whchever of the foowng s appcabe to the ta abe year:
(I) In the case of a ta abe year endng before pr 1, 19 1, an
amount equa to the e cess of 02 percent of the consodated secton
33(n) e cess profts net ncome for the ta abe year over the ta whch
woud e mposed for the ta abe year under sectons 13, 1 . and 1 ,
and suppement G. whchever are appcabe to the affated group,
computed (sub|ect to secton 10 , f appcabe, and to secton 1 1(c))
as f the amount of the consodated norma-ta net ncome and the
amount of the consodated corporaton surta net ncome (or the
amount sub|ect to the rate of ta n such suppement) were equa to
the amount of the consodated secton 33(a) e cess profts net ncome
for such year.
() In the case of the caendar year 19 1, an amount equa to the
e cess of 171 percent of the consodated secton 33(a) e cess profts
net ncome for the ta abe year over an amount whch bears the same
rato (but not n e cess of 100 percent) to the amount of the ncrease
of 2 percent provded n secton 1 1(c) n the surta abty as the
amount of the consodated secton 33(a) e cess profts net ncome
bears to the amount of the consodated corporaton surta net ncome.
() In the case of a ta abe year begnnng after March 31, 19 1,
an amount equa to the e cess of 1 percent of the consodated secton
33(a) e cess profts net ncome for the ta abe year over an amount
whch bears the same rato (but not n e cess of 100 percent) to the
ncrease of 2 percent provded n secton 1 1(c) n the surta abty
as the amount of the consodated secton 33(a) e cess profts net
Income bears to the amount of the consodated corporaton surta
net ncome.
(3) If the affated group commenced busness after uy 1, 10 , and
f the ta abe year s the frst, second, thrd, fourth, or ffth ta abe year
of the group, the amount determned under secton 30(e) for such ta abe
year wth reference to the consodated secton 33(a) e cess profts net
ncome The foowng rues sha appy for the purpose of ts subpara-
graph :
() The group sha be deemed to have commenced busness on the
earest date on whch any member commenced busness, and the frst,
second, thrd, fourth, and ffth ta abe year of the group sha be de-
termned under secton 30(e)(2)( ) wth reference to the ta abe
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S 2 .12, Regs. 129.1
1 0
year In whch the group s deemed to have commenced busness and
by appyng the rues prescrbed n secton 2 .2(f) for determnng the
ta abe years of the group.
() In determnng when any member commenced busness, and n
appyng the rues of secton 2 .2(f), the e stence and commencement
of busness of each member of the group sha be determned under
the provsons of secton 30(e)(2)( ).
() The mtaton of secton 30(e)(3) (reatng to ncome from
contracts sub|ect to a renegotaton act) sha be determned wth
reference to the aggregate of the gross Income of the severa members
of the group and wth reference to the aggregate of the gross ncome
of the severa members from the contracts and subcontracts descrbed
n such secton. For the purpose of secton 30(e) (3), the gross ncome
of the severa members sha be determned wthout regard to dv-
dends, wthout regard to gans from the sae or e change of capta
assets (not ncudng gans of the character descrbed n secton
117(|)), and wthout regard to gans of the character descrbed n
secton 117(|) f the group has a consodated secton 117(|) net gan,
and such gross ncome sha be propery ad|usted to avod dupcaton
by reason of transactons between members of the group.
Par. . Secton 2 .31(a)(3) 26 CFR 2 .31(a)(3) s amended as
( ) y changng the parenthetca e presson (not ncudng as
a thrd, fourth, or ffth precedng ta abe year any ta abe year
(not ncudng as a thrd precedng ta abe year any ta abe year be-
gnnng pror to anuary 1, 19 , uness such precedng ta abe year began
after December 31, 19 6, and uness a members of the group for such
precedng ta abe year commenced busness after December 31, 19 , and
not ncudng as a fourth or ffth precedng ta abe year any ta abe year
begnnng pror to anuary 1, 19 0)
( ) y changng the parenthetca e presson (not ncudng as
a thrd, fourth, or ffth precedng ta abe year any ta abe year
begnnng pror to anuary 1, 19 0) n subdvson () to read as
foows:
(not ncudng as a thrd precedng ta abe year any ta abe year be-
gnnng pror to anuary 1, 19 , uness such precedng ta abe year began
after December 31, 19 6, and uness the corporaton commenced busness
after December 31, 19 , and not ncudng as a fourth or ffth precedng
ta abe year any ta abe year begnnng pror to anuary 1, 19 0)
Par. 6. Secton 2 .31(a) (1 ) 26 CFR 2 .31(a) (1 ) s amended
to read as foows:
(1 ) Con odated secton 26(b) credt. The consodated secton 26(b)
credt, reatng to dvdends receved, sha be the sum of
() n amount equa to percent of the aggregate dvdends, of the
cass wth respect to whch credt s aowed by secton 26(b), receved by
the severa affated corporatons, not ncudng dvdends on the preferred
stock of a pubc utty sub|ect to the provsons of (), and not ncudng
dvdends from foregn corporatons,
() For any ta abe year for whch a percentage s specfed n secton
26(b)(2), an amount determned by appyng the percentage specfed for
the ta abe year to the aggregate dvdends receved n such year by the
severa affated corporatons on the preferred stock of a pubc utty
descrbed n secton 26(h) (ncudng ony those dvdends wth respect
to whch the credt provded n secton 26(h) for dvdends pad s aow-
abe), and
() For ta abe years begnnng after December 31, 19 0, the aggregate
of the amounts computed under secton 26(b)(3) (reatng to credt for
foows:
be:
fo
gnnng pror to anuary
fows:
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1 1
( 2 .12, Regs. 129.
dvdends receved from certan foregn corporatons) for the severa
members of the group,
but In an amount not greater than eroent of the consodated ad|usted not
Income computed wthout regard to the consodated net operatng oss deducton.
Par. 7. Secton 2 .31(a) (1 ) 26 CFR 2 .31(a) (1 ) s amended
by strkng out that part of subdvson () whch precedes (a) and
() Wth respect to a ta abe year begnnng after une 30, 19 0, and the
caendar year 10 0, an amount determned by appyng the percentage
specfed for the ta abe year n secton 20(h)(1) to the esser of
Pab. . Secton 2 .31(a) (16) 26 CFR 2 .31(a) (16) s amended
to read as foows:
(10) Consodated secton 26() credt. For ta abe years begnnng after
une 30, 10 0, and the caendar year 10 0, the consodated secton 20() credt
sha be an amount determned by appyng the percentage specfed for the
ta abe year n secton 20() to the porton of the consodated norma-ta
net ncome, computed wthout regard to ths credt, attrbutabe to those members
of the affated group whch are Western emsphere trade corporatons.
Par. 9. Secton 2 .31(a) (20) 26 CFR 2 .31(a) (20) s amended
as foows:
( ) y strkng the word and at the end of subdvson () ;
( ) y strkng the perod at the end of subdvson () and
nsertng n eu thereof , and ; and
(C) y nsertng mmedatey after subdvson () the foowng:
(v) The e cess of the consodated net ong-term capta gan over the
consodated net short-term capta oss (computed wthout regard to any
capta oss carry-over), but such e cess sha be reduced by an amount
equa to the e cess of the ta es (determned wthout regard to secton 102
and wthout regard u-, subchapter of chapter 2) on the consodated net
ncome over the ta es so determned wthout ncudng such e cess n the
consodated net ncome.
as foows:
( ) y strkng and at the end of subdvson ();
( ) y strkng the perod at the end of subdvson () and
nsertng n eu thereof , and ; and
(C) y addng mmedatey after subdvson () the foowng:
(v) The aggregate of the amounts aowabe under secton 0 (e) for
the severa members of the group.
as foows:
( ) y strkng and ( ) from that part of such secton preced-
ng () and nsertng n eu thereof: ( ), (R), and (S) ; and
( ) y nsertng mmedatey after the fgure determned and
procamed under secton 202(b) wherever appearng n subdvson
(v) the foowng: (e cept that the fgure 0. 7 sha be used for
ta abe years begnnng n 19 1) .
Par. 12. Secton 2 .31(a) (3 ) () 26 CFR 2 .31(a) (3 ) () s
(1) The amount of 2 ,000 (but no amount sha he aowed f, by reason
of secton 1 (c), no member of the group s entted to a mnmum e cess
profts credt), or
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2 .12 rgs 129.1
1 2
Par. 13. Secton 2 .31 (a) ( 3) (v) 26 CFR 2 .31(a) ( 3) (v) s
amended by nsertng mmedatey after the consodated net new
capta addton the foowng:
(or, f the affated group s sub|ect to secton 3 (g), the consodated net new
capta addton or the consodated net new bank capta addton, whchever
s greater)
Par 13a. Secton 2 .31(a) ( ) 26 CFR 2 .31(a) ( ) s amended
as foows:
( ) y nsertng mmedatey after the consodated net new
capta addton for the ta abe year n that part of such secton
precedng () the foowng:
for, f the affated group s sub|ect to secton (g), the consodated net
new capta addton or the consodated net new bank capta addton for the
ta abe year, whchever s greater)
( ) y nsertng mmedatey after the consodated net new cap-
ta addton n subdvson (| the foowng: or the consodated
net new bank capta addton, whchever s appcabe .
Par. 1 . Secton 2 .31(a) ( 9) 26 CFR 2 .31(a) ( 9) s amended
to read as foows:
( 9) Consodated e cess profts credt based on ncome. The consodated
e cess profts credt based on ncome for any ta abe year sha be the sum of
() n amount computed under secton 3 (a) wth respect to the con-
sodated average base perod net ncome for the ta abe year of the group
as f such consodated average base perod net ncome were the average
base perod net ncome of a snge corporaton,
() Tweve percent of the amount of the consodated base perod capta
addton, and
( ) Tweve percent of the consodated net capta addton for the
ta abe year (or, f the affated group s sub|ect to secton 13 (g) ( ), the
consodated net capta addton or the consodated net hank capta add-
ton for the ta abe year, whchever s greater),
mnus 12 percent of the consodated net capta reducton for the ta abe year
(or, f the affated group s sub|ect to secton 3.1(g)( ), the consodated net
capta reducton or the consodated net bank capta reducton for the ta abe
year, whchever s greater).
Par. 1 . Secton 2 .31(a) (60) 26 CFR 2 .3(a) (60) s amended
by nsertng mmedatey after or 6, the foowng: or any sub-
secton of secton 9, .
by strkng the perod at the end thereof and nsertng n eu thereof
the foowng:
; but. for ths purpose, n case the group had a ta abe year begnnng n 19 9
and endng after March 31, 19 0, there sha be substtuted for the consodated
base perod the perod of consecutve months endng March 31, 19 0, f such
substtuton resuts n a ower e cess profts ta for the ta abe year for whch
the ta s beng computed.
precedng ta abe year. from subdvson () and nsertng n eu
thereof the foowng:
consodated yeary base perod capta for the second precedng ta abe
year,
but f the affated group s sub|ect to secton 3 (f) (6), the consodated yeary
base perod bank capta sha be used n eu of the consodated yeary base
by strkng consodated
second
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2 .12, Regs. 129.
perod capta for the purpose of computng the consodated base perod capta
addton.
Pab. 1 . Secton 2 .31(a) (6 ) 26 CFR 2 .31(a) (6 ) s amended
by nsertng mmedatey after the word reduced the foowng:
(but not beow zero) .
by changng that part of such secton whch precedes () to read as
foows:
(70) Consodated net capta addton. The consodated net capta addton
for the ta abe year sha he the sura of the consodated secton 3 (g) (9)
ad|ustment, f any, and the foowng amount:
Par. 20. Secton 2 .31(a) ( 3) 26 CFR 2 .31(a) ( 3) s amended
to read as foows:
( 3) Consodated aternatve e cess profts net ncome. The consodated
aternatve e cess profts net ncome for any month sha be an amount equa
to the sum of
() The combned e cess profts net ncome for such month determned
under secton 33(b) for the severa affated corporatons other than the
affated corporatons descrbed n () and other than the affated cor-
poratons to whch () s appcabe for such month,
() In the case of any member of the affated group to whch secton
2(d), 3. , , 0, 9(a), or 9(b)(2)( ) s appcabe, one-
twefth of the average base perod net ncome separatey computed under
such secton for such member, and
() In the case of any member of the group (other than a member
descrbed n (ID) to whch secton 2(c), 2(h), or 9(b)(2)( ) s
appcabe and for whch such month s a month dentfed under secton
2(c)(3), or a month seected under secton 2(h) (2) (I ), or a month
n the ta abe year n whch the catastrophe descrbed n secton 9(1)) (1)
occurred, as the case may be. the substtute e cess profts net ncome for
such month separatey computed for such member under secton 2(c),
secton 2(h), or secton 9(b)(2)( ). as the case may be,
mnus the combned defcts n e cess profts net ncome for such month deter-
mned under secton 33(c) for the severa affated corporatons other than the
corporatons descrbed n () and other than the affated corporatons to whch
() s appcabe for such month.
Par. 21. Secton 2 .31(a) ( ) 26 CFR 2 .31(a) ( ) s amended
by strkng the parenthetca e presson (determned as f the affat-
ed group were a snge corporaton) and nsertng n eu thereof the
foowng:
(determned n the same manner as If the affated group were a snge corpora-
ton, and. If more than one percentage s appcabe, under the rues appcabe
n the case of a snge corporaton)
Par. 22. Secton 2 .31(a) 26 CFR 2 .31(a) s amended by add-
ng mmedatey after subparagraph (90) the foowng:
(91) Consodated 19 1 ad|usted norma ta net ncome of fe nsurance com-
panes. The consodated 19 1 ad|usted norma-a net ncome, n the case of an
affated group consstng of corporatons sub|ect to the ta mposed by secton
201 for ta abe years begnnng n 19 1, sha be the consodated norma ta
net ncome pus eght tmes the consodated secton 202(c) ad|ustment and
mnus the consodated reserve nterest credt, f any.
(92) Consodated reserve nterest credt. The consodated reserve nterest
credt sha be the aggregate of the reserve nterest credts of the severa mem-
bers of the affated group.
(93) Consodated net new bank capta addton. The consodated net new
bank capta addton for the ta abe year s ua be
(I) The e cess, dvded by the number of days n the ta abe year, of
the aggregate of the consodated day new capta addton for each day
2 2160 3 11
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2 .12, Regs. 120.)
1
of the ta abe year over the aggregate of the consodated day new capta
reducton for each such day, reduced (but not beow zero) by
() n amount whch bears the same rato to the consodated ncrease n
nadmssbe assets for the ta abe year as the amount computed under ()
above bears to the consodated ncrease n tota assets for the ta abe year.
(9 ) Consodated ncrease n tota assets. The consodated ncrease n to-
ta assets for the ta abe year sha be an amount determned under secton
2 .31(a) ( 2) by treatng a assets of the members of the group as nadmssbe
assets (e cept that the rue provded n secton 2 .31 (b) (2) ( v) (e) sha
be appcabe ony for the purpose of computng the consodated net bank capta
addton).
(1) ) Consodated net bank capta addton. The consodated net bank cap-
ta addton for the ta abe year sha be the sum of the consodated secton
3 (g) (9) ad|ustment, f any, and the foowng amount :
() The e cess, dvded by the number of days n the ta abe year, of the
aggregate of the consodated day capta addton for each day of the
ta abe year over the aggregate of the consodated day capta reduc-
ton for each such day, reduced (but not beow zero) by
() n amount whch bears the same rato to the consodated ncrease
n nadmssbe assets for the ta abe year as the amount computed under
() above bears to the consodated ncrease n tota assets for the ta abe
year.
(03) Consodated net bank capta reducton. The consodated net bank
capta reducton for the ta abe year sha be
( The e cess, dvded by the number of days n the ta abe year, of the
aggregate of the consodated day capta reducton for each day of the
ta abe year over the aggregate of the consodated day capta addton
for each such day, reduced (but not beow zero) by
(11) n amount whch bears the same rato to the consodated decrease
n nadmssbe assets for the ta abe year as the amount computed under
() above bears to the consodated decrease n tota assets for the ta abe
year.
(97) Consodated decrease n tota assets. The consodated decrease n
tota assets sha be an amount determned under secton 2 .31(a) (7 ) by treat-
ng a assets of the members of the group as nadmssbe assets.
(OS) Consodated yeary base perod bank capta. The consodated yeary
base perod bank capta for a ta abe year sha be the sum of
() The consodated equty capta at the begnnng of the frst day of
such ta abe year, and
() n amount equa to 7 percent of the consodated day borrowed
capta for such rst day,
reduced (but not beow zero) by the sum of
f) Seventy-fve percent of the consodated controed group ndebted-
ness for such frst day,
(v) Seventy-fve percent of the aggregate of the ad|ustments for nterest
on borrowed capta under secton 3 (f) ( ) of the severa members of the
group for such frst day, and
(v) n amount whch bears the same rato to the sum of the amounts
computed n () and (), above, reduced (but not beow zero) by the
amounts computed n () and (v), above, as the aggregate nadmss-
be assets for such frst day of the severa members of the group bears to
the aggregate admssbe and nadmssbe assets for such frst day of such
members.
(09) Consodated secton /.I- (a) )) ad|ustment. The consodated sec-
ton 3 (g) (9) ad|ustment for the ta abe year sha be
() In the case of an affated group not sub|ect to secton 3 (g) (9) ( )
(reatng to banks), whchever s the esser of
(a) The e cess of he amount computed under secton 2 .31(a) (71)
() over the amount, f any, computed under secton 2 .31(a) (71) (),or
(6) The e cess of the consodated ncrease n operatng assets over
the consodated net capta addton (computed wthout regard to the
consodated secton 3 (g)(9) ad|ustment);
() In the case of an affated group sub|ect to secton 3 (g)(9)( )
(reatng to banks), whchever s the east of
(a) The e cess of
(/) n amount whch bears the same rato to the consodated
decrease n nadmssbe assets for the ta abe year as the um of
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1
2 .12, Regs. 129.
the consodated equty capta and the consodated day borrowed
capta, both computed as of the begnnng of the frst day of the
frst ta abe year of the group endng after une 30, 19 0, bears
to the aggregate of the admssbe and nadmssbe assets of the
severa members of the group as of the begnnng of such day, over
(2) The amount, f any, computed under secton 2 .31 (a) (71) (),
or
(6) If the gr up Is sub|ect to secton 3 (g) ( ) for the purpose of
computng the consodated net bank capta reducton, the e cess of
the amount computed under secton 2 .31(a) (96) () over the amount
computed under secton 2 .31(a) (96) (), or
(c) The e cess of the consodated ncrease n operatng assets over
whchever s the greater of the consodated net capta addton or the
consodated net bank capta addton (each computed wthout regard
to the consodated secton 3 (b) (9) ad|ustment).
(100) Consodated ncrease n operatng assets. The consodated ncrease
Id operatng assets sha be the amount whch woud be determned under sec-
ton 2 .31(a) ( 2) as the consodated Increase n nadmssbe assets f the
nadmssbe assets of the members of the group conssted ony of the operat-
ng assets (as defned n secton 3 (g) (10) ( )) of the severa members of the
group.
Pah. 23. Secton 2 .31(b)(1) 26 CFR 2 .31(b)(1) s amended
as foows:
( ) y strkng and at the end of subdvson (v);
( ) y strkng the perod at the end of subdvson (v) and
nsertng n eu thereof ; and ; and
(C) y addng mmedatey after subdvson (v) the foowng:
( ) In the case of the deducton provded n secton 23(ff) (reatng
to mne e poraton e pendtures), the aowabe deducton sha be deter-
mned sub|ect to the quafcatons prescrbed n subparagraph (30) of ths
paragraph.
Par. 2 . Secton 2 .31(b) (2) ( ) (b) 26 CFR 2 .31(b) (2) ( )
(b) s amended by strkng the parenthetca e presson (ncudng
any component corporaton of any such member wthn the meanng
of secton G1) and nsertng n eu thereof the foowng:
(ncudng any component corporaton of any such member wthn the mean-
ng of secton 61, and ncudng any seng corporaton wth respect to
whch any such corporaton s a purchasng corporaton as defned n secton
7 (a))
Par. 2 . Secton 2 .31(b) (2) ( v) 26 CFR 2 .31 (b) (2) ( v)
s amended as foows:
( ) y strkng or from the headng of such secton and n-
sertng n eu thereof the foowng: W or 9 ;
( ) y strkng or 6 from the part of such secton precedng
(a) and nsertng n eu thereof the foowng: 6, or 9 ;
(C) y strkng assets; and at the end of subdvson (a) ( )
and nsertng n eu thereof the foowng: assets, and propery
ad|usted for amounts wth respect to other members of the group taken
nto account under secton 2(f) (2); and ;
(D) y nsertng mmedatey after the outstandng ndebtedness
n subdvson (a) (2) the foowng:
(other than ndebtedness descrbed n secton 2(f) (2)) ;
( ) y strkng wherever t appears n subdvson (c) and
nsertng n eu thereof the foowng: secton or 91(a) ;
(F) y nsertng mmedatey after any facty hed n subdv-
son (c) of such secton the foowng: (or, for the purpose of secton
, consdered under secton (f)(2) to have been hed) ; and
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2 .12, Regs. 129.
1 6
(G) y addng mmedatey after subdvson (e) of such secton
the foowng:
(/ ) For the purpose of appyng secton 9(a) (3), the gross ncome
sha be propery ad|usted to avod dupcaton arsng by reason of
transactons between members of the group.
(g) For the purpose of appyng secton 9(c) (e cept for the
purpose of determnng an amount computed under secton 3 (d))
deductons and e penses sha be propery ad|usted to avod dupcaton
by reason of transactons between members of the group.
Par. 26. Secton 2 .31(b) (2) 26 CFR 2 .31(b)(2) s amended
by addng mmedatey after subdvson ( v) the foowng:
( v) Mutua savngs banks, domestc budng and oan assocatons,
and cooperatve banks. In the case of a mutua savngs bank, a domestc
budng and oan assocaton, and a cooperatve bank
(a) In the computaton of tota deposts or wthdrawabe accounts
at the cose of the ta abe year for the purpose of secton 23(k) (1) ( )
(reatng to the deducton for bad debts), there sha be e cuded the
tota deposts or wthdrawabe accounts of other members of the group,
and
(6) In the computaton of the deducton provded n secton 23(r) (1)
(reatng to dvdends pad by hankng corporatons), there sha be
e cuded amounts pad to, or credted to the accounts of, other members
of the group.
Par. 27. Secton 2 .31(b) (12) (v) (c) (S) 26 CFR 2 .31(b) (12)
(v) (c)(2) s amended by strkng out the words the provsons
of secton 112(b) (7) of the Interna Revenue Code reatng to certan
compete qudatons occurrng durng some one caendar month
n 19 or 19 1 and nsertng n eu thereof the foowng:
the provsons of secton 112(b)(7) of the Interna Revenue Code
reatng to certan compete qudatons occurrng durng some one
caendar month n a year specfed n such secton
Par. 2 . Secton 2 .31(b) (13) (v) 26 CFR 2 .31(b) (13) (v)
s amended by strkng consodated orgna secton 3 (g) (7) n-
debtedness from subdvson (b) and nsertng n eu thereof the
foowng: consodated orgna controed group ndebtedness .
Par. 29. Secton 2 .31(b) (1 ) 26 CFR 2 .31(b) (1 ) s amended
as foows:
( ) y strkng ; and at the end of subdvson () and nsertng
n eu thereof a perod; and
( ) y addng mmedatey after subdvson () the foowng:
() If the consodated seected base perod s determned by substtutng
for the consodated base perod the perod of consecutve months endng
March 31, 19 0, the consodated we hted e cess profts net ncome for each
of the months anuary, February, and March of 19 0 sha be substtuted
for the consodated secton 33(b) e cess profts net ncome for each such
month.
Par. 39. Secton 2 .31(b) (1 ) 26 CFR 2 .31(b) (1 ) s amended
as foows:
( ) y strkng the words the begnnng of the consodated
base perod from subdvson (), (|( ), ()(c), (), ()(a),
() (b), and () of 6uch secton and nsertng n eu thereof the fo-
owng : the end of the consodated base perod ; and
( ) y strkng the word soey from subdvson () of such
sect 1011
Par. 31. Secton 2 .31(b) (16) 26 CFR 2 .31(b) (16) s amended
as foows:
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1 7
2 .12, Regs. 129.
( ) y strkng the words the begnnng of the consodated base
perod from subdvson () (a), () ( ), and (n) (d) of such secton,
and nsertng n eu thereof the foowng: the end of the conso-
dated base perod ;
( ) y nsertng n subdvson () (a) of such secton, mmed-
atey after the words If those members of the affated group , n
subdvson () (b) of such secton, mmedatey after the words
If those members of the group , and n subdvson () (c) of such
secton, mmedatey after the words In the case of each member of
the affated group , the foowng: whch commenced busness be-
fore the end of the consodated base perod and ; and
(C) y strkng () ( ) from subdvson () (d) of such sec-
ton and nsertng n eu thereof () (b) .
Par. 32. Secton 2 .31(b) (17) 26 CFR 2 .31(b) (17) s amended
as foows:
( ) y strkng secton 2(c), 2(d), 3, , or 6 from
subdvson () of such secton and nsertng n eu thereof the foow-
ng: secton 2(c), 2(d), 2(h), 3, , 6, 9(a), 9(b),
9(c), or 9(d) ;and
( ) y strkng Secton 2, 3, , , or 6 from subdv-
son () of such secton and nsertng n eu thereof the foowng:
Secton 2(c), 2(d), 2(h), 3, , , 0, 9(a), 9(b),
9(c), or 9(d) ;
(C) y strkng or 6 from subdvson (v) of such secton
and nsertng n eu thereof the foowng: 6, 9(a), 9(b),
9(c), or 9(d) ; and
(D) y addng mmedatey after subdvson (v) the foowng:
(v) In the case of a member of the group to whch secton 9(c) s ap-
pcabe, the e cess profts net ncome determned under secton 33(b) or
the defct n e cess profts net ncome determned under secton 33(c), as
the case may be, for any month sha ncude as an tem of e cess profts net
ncome one-twefth of the amount whch, under secton 9(c), woud be
added to the amount computed under secton 3 (d) for such corporaton.
(v) In the case of a member of the group to whch secton 9(d) s
appcabe, the e cess profts net ncome determned under secton 33(b)
for any month, and the defct n e cess profts net ncome determned under
secton 33(c) for any month, sha e computed as foows:
(a) Such computaton sha be made wthout regard to ncome, de-
ductons, osses, or other tems attrbutabe to the teevson broad-
castng busness of the corporaton, and
(b) There sha be ncuded, as an tem of e cess profts net ncome
for the month, an amount equa to one-twefth of the amount whch,
under secton 9(d), woud be added to the amount computed for such
corporaton under secton 9(d) (2) ( ).
Par. 33. Secton 2 .31(b) (1 ) () 26 CFR 2 .31(b) (1 ) () s
amended as foows:
( ) y strkng or 6 and nsertng n eu thereof the fo-
owng: 6, 9(a), 9(b)(2)( ), or 9(c) ;
( ) y strkng secton 2(c) and nsertng n eu thereof the
foowng: secton 2(c) or secton 2(h) ;
(C) y strkng secton 2(c) (1) and nsertng n eu thereof
the foowng: secton 2(c) (1) or secton 2(h) ; and
(D) y addng at the end thereof the foowng:
If the affated group Incudes any member for whch an amount computed
under secton 9(d) s ncuded n the consodated aternatve average
base perod net ncome, the porton of the consodated base perod capta
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2 .12, Regs. 129.
1
addton propery aocahe to such member sha be sub|ect to proper ad-
|ustment under secton 0(d) ( ) ( ).
Par. 3 . Secton 2 .31(b) (19-) 26 CFR 2 .31(b) (19) s amended
as foows:
( ) y strkng or from the headng of such secton and
nsertng n eu thereof the foowng: , W , or 9 dY and
( ) y nsertng mmedatey after the frst sentence thereof the
foowng:
If the affated group ncudes any member for whch an nnannt computed
under secton 9(d) Is ncuded n the consodated aternatve average base
perod net ncome, the consodated net capta addton or reducton sha be sub-
|ect to proper ad|ustment under secton 9(d)( )(C) to emnate the effect
thereon of any tems nvoved n the computaton of the consodated aternatve
average base perod net ncome.
Par. 3 . Secton 2 .31(b) (20) 26 CFR 2 .31(b) (20) s amended
as foows:
( ) y strkng In the computaton of the consodated secton
e cess profts credt, the consodated secton gross credt, and
the consodated secton nadmssbe asset ad|ustment, the foow-
ng rues sha appy n the case of any member of the affated group
descrbed n secton (c)(1)(a), (c)(1) (b), (c)(2) or (c)( )
In the computaton of the consodated secton e cess profts credt, the con-
sodated secton (b) gross amount, and the consodated secton Inadms-
sbe asset ad|ustment, the foowng rues sha appy n the case of any member
of the affated group descrbed n secton S (c) (1) ( ), (c) (1) ( ), (c) (2)
or (c) ( ).
( ) y strkng subdvsons (a) and (b) of subdvson () and
(a) The sum of
(7) The average outstandng common and preferred capta stock
accounts for the ta abe year and the average capta and earned surpus
accounts (or mnus any defcts theren) for the ta abe year, as propery
recorded on the corporate books of account of such member, determned
under the rues appcabe to the computaton of such amounts f a
separate return were fed by such member, and
(2) The average borrowed capta of such member for the ta abe
year, mnus
(b) The average for the ta abe year of the amount, as propery recorded
on the corporate hooks of account, of the stock of other members of the group
hed by such member.
Par. 36. Secton 2 .31(b) 26 CFR 2 .31 (b) s amended by addng
mmedatey after subparagraph (27) the foowng:
(2 ) Dsposa of tmber or coa
(I) Intercompany transactons. Secton 117(k)(2) (reatng to the ds-
posa of tmber or coa) sha appy to an amount receved by a mem er of
the group ony to the e tent such amount s receved by the member of the
group as a party to a transacton descrbed n secton 117(k) (2) wth persons
not members of the group.
(II) ppcaton of secton 102 and subchapter to coa royates. For
the purpose of determnng the consodated secton 102 net ncome, the
consodated subchapter net ncome, and the ta under secton 117(c) (1)
n eu of the ta Imposed by subchapter , the provsons of secton 117
(k) (2) sha not appy to any amount receved by a member of the group
upon the dsposa of coa.
(29) Speca rues n case of banks. The rues provded n paragraph (b) of
ths secton wth respect to the computaton of the consodated net new capta
addton, the consodated yeary base perod capta, the consodated net capta
addton, and the consodated net capta reducton sha aso be appcabe wth
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1 9
2 .12, Regs. 129.
respect to the computaton of the consodated net new bank capta addton,
the consodated yeary base perod bank capta, the consodated net bank capta
addton, and the consodated net bank capta reducton, respectvey.
(30) Mne e poraton e pendtures
(1) Lmtaton under secton 23( )(1). If the aggregate of the deduc-
tons, computed wthout regard to ths sentence, aowabe under secton
23 (ff) (1) to the severa members of the group e ceeds 7 ,000,
(a) The deducton under that secton aowabe to any member of the
group sha be an amount whch bears the same rato to 7 ,000 as Its
deducton computed wthout regard to ths sentence bears to the aggre-
gate of such deductons so computed for the members of the group,
e cept that,
(6 If a members of the group consent n wrtng (whch consent,
In the case of a return fed on or after September 1 , 19 2, sha be fed
wth the return, or, n the case of a return ted before September 1 ,
19 2, sha be fed not ater than September 1 , 19 2, n the same offce
n whch the return s fed), the deducton under that secton aowabe
to such member sha be the deducton under that secton computed
wthout regard to ths sentence, or such part thereof as the common
parent corporaton sha determne at the tme the consent s fed,
provded, however, that the aggregate of the deductons so aowabe
for a members of the group sha not e ceed 7 ,000.
() Lmtaton under secton 2 (ff)(S). If the mtaton provded n
secton 23(ff) (3) s appcabe to any member of the group, such mtaton
sha be deemed appcabe to a members of the group.
(31) ppcaton of secton 33 (a) (I) (It) and secton 33(b) (16). For the
purpose of appyng secton 33(a) (1) (R) and secton 33(b) (16) (whch reate
to payments from foregn sources for technca assstance)
(1) If any deducton of a member of the group, dsaowed under such
secton, conssts of a payment to another member of the group, such pay-
ment sha be consdered remuneraton descrbed n such secton to such
other member.
() foregn corporaton sha he consdered to be a reated foregn
corporaton f the members of the group, at the tme the servce or assst-
ance s rendered, own 10 percent or more of the outstandng stock of such
foregn corporaton.
(32) gbty requrements for consodated net netc bank capta addton.
n affated group sha be sub|ect to secton 3 (g) for any ta abe year f
durng such ta abe year one or more members of the group are banks (as
defned n secton 10 ) and f
() More than one-haf of the sum of
(a) The consodated equty capta for the frst day of the frst ta -
abe year of the group endng after une 30, 19 0, and
(6) Seventy-fve percent of the consodated day borrowed capta
for such frst day s propery aocabe to such banks, and
() The consodated ncrease n tota assets for the ta abe year e -
ceeds the amount determned under secton 2 .31(a) ( 7) ().
(33) ffated groups sub|ect to secton 3 (f)(6), secton 3 (g)( ), and
secton 3 (g) (9) ( ). If durng the ta abe year one or more members of
the group are banks (as defned n secton 10 ), and f more than one-haf of
the consodated average base perod net ncome s propery aocabe to such
banks, then the affated group sha be sub|ect to
() Secton 3 (f)(6) (but, n computng the ta for a ta abe year be-
gnnng before October 20. 19 1, ony f a the members of the group so eect) ;
() Secton 3 (g) ( ), provded that
(a) In the case of the consodated net bank capta addton, the
consodated ncrease n tota assets for the ta abe year e ceeds the
amount computed under secton 2 .31(a) (70) (1), and
(6) In the case of the consodated net bank capta reducton, the
consodated decrease n tota assets for the ta abe year e ceeds the
amount computed under secton 2 .31(a) (71) () ; and
() Secton 3 (g) (9) ( ).
(3 ) Rues for computaton of consodated secton 3 (g)(9) ad|ustment.
For the purpose of determnng the consodated secton 3 (g) (9) ad|ustment,
the foowng rues sha appy:
(1) The consodated secton 3 (g)(9) ad|ustment sha be sub|ect to
reducton to the e tent that the Commssoner determnes that the con-
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2 .12, Regs. 129.
160
sodated Increase In operatng assets s a resut, drecty or ndrecty, of
an Increase n ndebtedness of any member of the group (other than n-
debtedness whch consttutes borrowed capta and other than ndebtedness
from one member of the group to another member of the group).
() For the purpose of secton 2 .31(a) (99) () (a), the amount com-
puted under secton 2 .31(a) (71) () sha not be ess than the conso-
dated decrease n nadmssbe assets for the ta abe year reduced by 2
percent of the e cess of
(a) The amount computed under secton 2 .31(a) (71) () by usng
100 percent, n eu of 7 percent, of the amounts referred to n secton
2 .31(a) (73) () and (v) (reatng to borrowed capta and oans
to members of a controed group), over
(6) The amount computed under secton 2 .31 (a) (71) (1) wthout
regard to the amounts referred to n secton 2 .31 (a) (73) () and (v).
() For the purpose of determnng the e cess of the consodated n-
crease n operatng assets over the consodated net capta addton or
consodated net capta bank addton, the consodated net capta add-
ton and the consodated net bank capta addton sha be computed by
usng 100 percent, n eu of 7 percent, of the amounts referred to n secton
2 .31(a) (72) () and secton 2 .31(a) (73) () and (v) (reatng to
borrowed capta and oans to members of a controed group).
Par. 37. The foowng new secton s added mmedatey after
secton 2 . 26 CFR 2 . :
Sec. 2 . . Mne poraton pendtures. For the purpose of appyng
the mtaton provded n secton 23( )(3) (whether durng a consodated
return perod or durng a perod for whch a separate return s made, f durng
a precedng ta abe year for whch a consodated return was made or was
requred to be made by any member of the affated group for such precedng
ta abe year was aowed the deducton provded n secton 23(ff)() or made
the eecton provded n secton 23(ff) (2), each member of the affated group
for such precedng ta abe year sha be deemed to have been aowed such
deducton or to have made such eecton, as the case may be.
n sectons 62, 1 1, and 3791 of the Interna Revenue Code ( 3 Stat.
32, , 67; 26 U. S. C. 62,1 1,3791).)
corporaton entted to fe wth other corporatons a consodated
return under secton 1 1 for a ta abe year endng after March 31,
19 1, and before pr 1, 19 2, has unt uy 1 , 19 2, to fe such
return. Wth respect to most of these corporatons, ths date cannot
be e tended further n vew of statutory restrctons. The rues pre-
scrbed n ths Treasury Decson are essenta to the fng of such
consodated returns; furthermore, many of the rues prescrbed n
ths Treasury Decson wth respect to the e cess profts ta are retro-
actve n that they appy to a ta abe years endng after une 30,
19 0. Therefore, good cause s found for ssung ths Treasury De-
cson wthout regard to the effectve date mtaton of secton (c)
of the dmnstratve Procedure ct, approved une 11, 19 6.
ence, ths Treasury Decson sha be effectve upon ts fng wth
the Federa Regster for pubcaton.
ohn . Dt|nap,
pproved une 26,19 2.
Thomas . Lynch,
(Fed wth the Dvson of the Federa Regster une 27, 19 2, 11: a. m.)
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161 29.1 1-1.
Secton 2 .30, Reguatons 129: Computaton of ta .
INT RN L R NU COD
Reguatons 129 amended. (See T. D. 91 , page 1 .)
Secton 2 .31, Reguatons 129: ases of ta computaton.
INT RN L R NU COD
Secton 2 . , Reguatons 129: Mne e poraton e pendtures.
INT RN L R NU COD
Secton 29.1 1-1: Consodated ncome and e cess 19 2-1 -13912
profts ta returns of affated corporatons. T. D. 92
Secton 29.1 1-1 of Reguatons 111 amended to conform to the
Revenue ct of 19 0, the cess I rofts Ta ct of 19 0, and the
Revenue ct of 19 1.
Washngton 2 , D. C.
Concerned:
On une , 19 2, notce of proposed rue makng was pubshed n
the Federa Regster (17 F. R. 0 1) to conform secton 29.1 1-1 of
Reguatons 111 26 CFR, part 29 to the Revenue ct of 19 0,
approved September 23, 19 0, to the cess Profts Ta ct of 19 0,
approved anuary 3, 19 1, and to the Revenue ct of 19 1, approved
October 20, 19 1. No ob|ecton to the rues proposed havng been
receved wthn the 30 days foowng such pubcaton, the amend-
ments of Reguatons 111 set forth beow are hereby adopted.
29.1 1-1 -2 CFR 29.1 1-1 the foowng:
S C. 121. INCR S IN R T OF CORPOR TION INCOM
T S R NU CT OF 19 0, PPRO D S PT M R 23,
19 0 .

(f) Ta Under Consodated Returns. Secton 1 1(c) (reatng to
computaton and payment of ta on consodated returns) s hereby
amended by nsertng after the frst sentence the foowng: If the
affated group ncudes one or more western hemsphere trade corpora-
tons (as defned n secton 109), the ncrease of 2 per centum provded
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29.1 1-1.
n the precedng sentence sha be apped ony on the amount by whch
the consodated corporaton surta net ncome of the affated group
e ceeds the porton (f any) of the consodated corporaton surta net
ncome attrbutabe to the western hemsphere trade corporatons n-
cuded n such group.

S C. 123. FF CTI D T OF F RT II R NU CT OF 19 0,
PPRO D S PT M R 23, 19 0 .
The amendments made by ths part sectons 121, 122, and 123,
years endng after December 31, 19 9.
S C. 301. CONSOLID T D R TURNS C SS PROFITS T
CT OF 19 0, PPRO D NU RY 3, 19 1 .
ffectve wth respect to ta abe years endng after une 30, 19 0,
secton 1 1 of the Interna Revenue Code (reatng to consodated
returns) s hereby amended to read as foows:
S C. 1 1. CONSOLID T D R TURNS.
(a) Prvege to Ft.e Consodated Returns. n affated group
of corporatons sha, sub|ect to the provsons of ths secton, have
the prvege of makng a consodated return for the ta abe year n
eu of separate returns. The makng of a consodated return sha be
upon the condton that a corporatons whch at any tme durng the
ta abe year have been members of the affated group consent to a
the consodated return reguatons prescrbed under subsecton (b)
pror to the ast day prescrbed by aw for the fng of such return.
The makng of a consodated return sha be consdered as such consent.
In the case of a corporaton whch s a member of the affated group
for a fractona part of the year, the consodated return sha ncude
the ncome of such corporaton for such part of the year as t s a
member of the affated group.
(b) Reguatons. The Secretary sha prescrbe such reguatons
as he may deem necessary n order that the ta abty of any affated
group of corporatons makng a consodated return and of each corpora-
ton n the group, both durng and after the perod of affaton, may be
returned, determned, computed, assessed, coected, and ad|usted, n
such manner as ceary to refect the ncome- and e eess-protts-ta
abty and the varous factors necessary for the determnaton of such
abty, and n order to prevent avodance of such ta abty.
(c) Computaton and Payment of Ta . In any case n whch a
consodated return s made or s requred to be made, the ta sha be
determned, computed, assessed, coected, and ad|usted n accordance
wth the reguatons under subsecton (b) prescrbed pror to the ast
day prescrbed by aw for the fng of such return: e cept that the ta
mposed under secton 1 or secton 20 sha be ncreased by 2 per
centum of the consodated corporaton surta net ncome of the aff-
ated group of ncudbe corporatons. If the affated group ncudes
one or more Western emsphere trade corporatons (as defned n
secton 109), the ncrease of 2 per centum provded n the precedng
sentence sha be apped ony on the amount by whch the consodated
corporaton surta net Income of the affated group e ceeds the porton
(f any) of the consodated corporaton surta net ncome attrbutabe
to the Western emsphere trade corporatons ncuded n such group.
For the purposes of the ta mposed by secton 30, the sum of the e cess
profts credt and the unused e cess profts credt ad|ustment of the
affated group sha not be ncreased under the ast sentence of secton
31 to an amount n e cess of 2 ,000 for the entre group.
(d) Defnton of ffated Group . s used n ths secton, an
affated group means one or more chans of ncudbe corporatons
connected through stock ownershp wth a common parent corporaton
whch s an ncudbe corporaton f
(1) Stock possessng at east 9 per centum of the votng power
of a casses of stock and at east 9 per centum of each cass of the
nonvotng stock of each of the ncudbe corporatons (e cept the
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163
29.1 1-1.
common parent corporaton) Is owned drecty by one or more of the
other ncudbe corporatons; and
(2) The common parent corporaton owns drecty stock pos-
sessng at east 9 per centum of the votng power of a casses of
stock and at east 9 per centum of each cass of the nonvotng
stock of at east one of the other ncudbe corporatons.
s used n ths subsecton, the term stock does not ncude nonvotng
stock whch s mted and preferred as to dvdends.
(e) Defnton or Incudbe Corporaton . s used n ths
secton, the term ncudbe corporaton means any corporaton e cept
(1) Corporatons e empt from ta aton under secton 101.
(2) Insurance companes sub|ect to ta aton under secton 201
or 207.
(3) Foregn corporatons.
( ) Corporatons entted to the benefts of secton 2 1, by reason
of recevng a arge percentage of ther ncome from sources wthn
possessons of the Unted States.
( ) Corporatons organzed under the Chna Trade ct, 1922.
(6) Reguated nvestment companes sub|ect to ta under Sup-
pement .
(7) ny corporaton descrbed n secton 9, or n secton
(d), (f), and (g) (wthout regard to the e cepton n the nta
cause of secton ), but not ncudng such a corporaton whch
has made and ted a consent, for the ta abe year or any pror
ta abe year endng after une 30, 19 0, to be treated as an ncud-
be corporaton. Such consent sha be made and fed at such
tme and n such manner as may be prescrbed by the Secretary.
( ) Reguated pubc uttes descrbed n secton (d) whch
compute ther e cess profts credt under secton but not n-
cudng any such reguated pubc utty whch has made and fed
a consent, appcabe to the ta abe year, to compute ts e cess
profts credt wthout regard to secton . The consent sha be
made and fed at such tme and n such manner as may be pre-
scrbed by the Secretary. The consent sha be appcabe to the
ta abe year for whch fed and to each consecutve subsequent
ta abe year for whch a consodated return s fed.
(f) Incudbe Insurance Companes. Despte the provsons of
paragraph (2) of subsecton (e), two or more domestc nsurance com-
panes each of whch s sub|ect to ta aton under the same secton of
ths chapter sha be consdered as Incudbe corporatons for the pur-
pose of the appcaton of subsecton (d) to such nsurance companes
aone.
(g) Subsdary Formed to Compy Wth Foregn Law. In the
case of a domestc corporaton ownng or controng, drecty or n-
drecty, 100 per centum of the capta stock (e cusve of drectors
quafyng shares) of a corporaton organzed under the aws of a con-
tguous foregn country and mantaned soey for the purpose of com-
pyng wth the aws of such country as to tte and operaton of
property, such foregn corporaton may, at the opton of the domestc
corporaton, be treated for the purpose of ths chapter as a domestc
corporaton.
(h) Suspenson of Runnng of Statute of Lmtatons. If a notce
under secton 272(a) n respect of a defcency for any ta abe year s
maed to a cor oraton, the suspenson of the runnng of the statute
of mtatons, provded n secton 277, sha appy n the case of corpora-
tons wth whch such corporaton made a consodated return for such
ta abe year.
() ocaton of Income and Deductons. For aocaton of n-
come and deductons of reated trades or busnesses, see secton .
(|) Incudbe Reguated Pubc Uttes. Despte the prov-
sons of paragraph ( ) of subsecton (e), two or more reguated pubc
uttes each of whch has made and fed a consent, appcabe to the
ta abe year, to compute ts e cess profts credt under secton ony,
sba be consdered as ncudbe corporatons for the purpose of the ap-
pcaton of subsecton ( 1) to such reguated pubc uttes aone. The
consent sha be made and fed at such tme and n such manner as may
be prescrbed by the Secretary. The consent sha be appcabe to the
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29.1 1-1.
16
ta abe year for whch fed and to each consecutve subsequent ta abe
year for whch a consodated return s fed.
S C. 613. CONSOLID T D R TURN S INCLUDI L CORPOR -
TION R NU CT OF 19 1, PPRO D OCTO R 20, 19 1 .
If an affated group makng a consodated return wth respect to the
frst ta abe year of the group endng after une 30, 19 0. ncuded a
corporaton descrbed n secton (f) of the Interna Revenue Code
pursuant to the consent provded n secton 1 1(e)(7) of such Code,
such corporaton may wthdraw such consent at any tme wthn nnety
days after the enactment of ths ct. If such consent s wthdrawn
under the precedng sentence, the ta abty of the affated group
and ts severa members for the ta abe year sha be determned, as-
sessed, and coected as If such corporaton had never oned n the
makng of the consodated return.
Par. 2. Secton 29.1 1-1, as amended bv Treasury Decson 1
C. . 19 , 21 , approved February 2 , 19 26 CFR 29.1 1-1 , s
hereby further amended as foows:
( ) y changng paragraph (a) thereof to read as foows:
(a) In genera. Secton 1 1 prescrbes rues for the makng of consodated
Income and e cess profts ta returns by affated groups of corporatons. Regu-
atons 10 and Reguatons 110 are appcabe, respectvey, to the makng of
the consodated ncome ta return and the consodated e cess profts ta return
n the case of a ta abe year endng pror to anuary 1, 19 0. Reguatons 129
are appcabe to the makng of the consodated ncome and e cess profts ta
return n the case of a ta abe year endng after December 31, 19 9. The deter-
mnaton, computaton, assessment, coecton, and ad|ustment of ncome and
e cess profts ta abtes of the affated group and each member thereof
both durng and after the perod of affaton sha be made under the appcabe
provsons of such reguatons.
( ) y strkng the word and whch foows the semcoon n
subparagraph (6) of paragraph (c).
(C) y strkng subparagraph (7) from paragraph (c) and nsert-
(7) Wth respect to ta abe years begnnng after December 31, 19 3, and
endng before uy 1, 19 0, a persona servce corporaton descrbed n sec-
ton 72 (a), or a corporaton descrbed n secton 727 (e), (g), or (h) whch
wthout regard to the e cepton stated n the nta cause of secton 727
woud be e empt from the e cess profts ta mposed by subchapter of
chapter 2, e cept as otherwse provded n secton 1 1(e)(7) wth respect
to such ta abe years. s to the e cepton provded n secton 1 1(e)(7),
see the provsons of ths subsecton set forth beow;
( ) Wth respect to ta abe years endng after une 30, 19 0, a persona
servce corporaton descrbed In secton 9 or a corporaton descrbed n
secton (d), (f), or (g) whch wthout regard to the e cepton stated
In the nta cause of secton woud be e empt from the e cess profts
ta mposed by subchapter D of chapter 1, e cept as otherwse provded n
secton 1 1(e) (7). s to the e cepton provded n secton 1 1(e) (7), see
the provsons of ths subsecton set forth beow; and
(9) Wth respect to ta abe years endng after une 30, 19 0, a reguated
pubc utty corporaton descrbed n secton (d), e cept as otherwse
provded n secton 1 1(e) ( ) and secton 1 1( ). s to the e cepton pro-
vded n secton 1 1(e) ( ), see the provsons of ths subsecton set forth
beow. s to the e cepton provded In secton 1 1(|), see (g) of ths
secton.
The corporatons descrbed In secton 727 (e), (g), and (h), and n secton
(d), (f), and (g), are persona hodng companes as defned n secton 01,
certan domestc corporatons whch derve a specfed part of ther gross ncome
from sources outsde the Unted States (secton 727(g) and secton (f)),
and certan corporatons whch receve compensaton from the Unted States for
the transportaton of ma by arcraft (secton 727(h) and secton (g)).
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16
29.1 1-1.
ny corporaton whch otherwse woud not be an ncudbe corporaton under
(7) or ( ) above and secton 1 1(e)(7) may make and fe a consent for any
ta abe year begnnng after December 31, 11M3, to be treated as an ncudbe
corporaton. corporaton whch has made and ed such consent for any
ta abe year endng pror to uy 1, 19 0, sha be treated as an ncudbe cor-
poraton for the ta abe year for whch such consent s fed and for eac sub-
sequent ta abe year endng before uy 1, 1000. corporaton whch has made
and fed a coLsent for any ta abe year endng after une 30. 19 0, sha be
treated as an ncudbe corporaton for s-|eh ta abe year and for each subsequent
ta abe year. Wth respect to the subsequent ta abe years n ether such case,
such corporaton sha be deemed to be an ncudbe corporaton regardess of
whether the affated group of whch such corporaton s a member durng the
subsequent ta abe year s the same as the affated group of whch t was a
member when the consent was fed. If such corporaton s a common parent
corporaton, the makng and fng of the consodated Income ta return sha
consttute the makng and fng of ts consent under secton 1 1(e)(7). If
such corporaton s a subsdary, the fng for a ta abe year endng before
uy 1, 19 0, of ts authorzaton and consent on Forms 1122 and 1122 n the
manner prescrbed by secton 23.12(b) of Reguatons 10 and secton 33.12(b)
of Reguatons 110 sha consttute the makng and fng of such consent; the
fng for a ta abe year endng after une 30, 19 0, of ts authorzaton and
consent on Form 1122 n the manner prescrbed by secton 2 .12(b) of Regua-
tons 129 sha consttute the makng and fng of such consent. consent to
be treated as an ncudbe corporaton under secton 1 1(e) (7) cannot be wth-
drawn or revoked at any tme after the consodated return s fed for the frst
ta abe year for whch the consent s fed, e cept as otherwse provded n sec-
ton 613 of the Revenue ct of 19 1. Secton 613 of that ct reates to the wth-
drawa wthn 90 days after October 20, 19 1 (the date of enactment of that ct),
of consents for the frst ta abe year endng after une 30, 19 0, wth respect
to corporatons descrbed n secton (f).
Under secton 1 1(e)( ), any reguated pubc utty corporaton may make
and fe a consent for any ta abe year endng after une 30, 19 0, to compute ts
e cess profts credt wthout regard to secton . corporaton whch has
made and fed such consent sha be treated as an ncudbe corporaton under
secton 1 1(e)( ) for the ta abe year for whch such consent s fed and for
each consecutve subsequent ta abe year for whch a consodated return s
made or s requred to be made by the affated group of whch t was a member
at the tme such consent was fed uness t has ceased to he a member of such
group. If such corporaton s a common parent corporaton, the makng and
tng of a consodated return n whch the consodated e cess profts credt s
determned under provsons other than those of secton sha consttute the
makng and fng of ts consent under secton 1 1(e)( ). If such corporaton
s a subsdary, the fng of an authorzaton and consent on Form 1122. n the
manner prescrbed by secton 2 .12(b) of Reguatons 129, ndcatng (hereon
ts consent to compute ts e cess profts credt wthout regard to secton
sha consttute the makng and f ng of such consent. consent to be treated
as an ncudbe corporaton under secton 1 1(e)( ) cannot be wthdrawn or
revoked at any tme after the consodated return s fed for the frst ta abe
year for whch the consent s fed: however, f a separate return Is propery
fed by such a corporaton for a subsequent ta abe year, t s not thereafter
an ncudbe corporaton under secton 1 1(e) ( ) uness another consent under
such secton s made and fed.
(D) y strkng the ast sentence of (c) and nsertng n eu thereof
the foowng:
In the case of ta abe years endng before uy 1, 19 0, see sectons 72 (b)
and 727, and n the case of ta abe years endng after une : .(), 19 0, see secton
9 and secton .
( ) y strkng that part of paragraph (c) whch foows the frst
sentence and nsertng n eu thereof the foowng:
The opton to treat such foregn corporaton as a domestc corporaton must be
e ercsed at the tme of makng the consodated return, and cannot be e ercsed
at any tme thereafter. owever, n the case of ta abe years endng before
anuary 1, 19 0, the opton must be e ercsed at the tme of makng the frst
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29.1 1-1.)
166
consodated return for any ta abe year begnnng after December 31,19 1, and
endng before anuary 1, 19 0. If the foregn corporaton s ncuded or s
requred to be ncuded n the consodated return of the affated group of whch
It s a member for any ta abe year, t must be Incuded n the consodated
return for each consecutve ta abe year thereafter for whch such group makes
or s requred to make a consodated return. Furthermore, f the opton s
e ercsed at the tme of makng the frst consodated return for any ta abe year
begnnng after December 31, 19 1, and endng before anuary 1, 19 0, the for-
egn corporaton must be ncuded n the consodated return of the group for each
subsequent ta abe year endng before anuary 1, 19 0, for whch such group
makes or s requred to make a consodated return, whether or not such ta abe
year s preceded by a ta abe year for whch separate returns are made.
(F) y strkng the ast sentence of paragraph (/) and nsertng
For e ampe, f the consodated corporaton surta net ncome of an affated
group for a ta abe year s 0,000, the ncrease n the surta for such ta abe
year s 00, that s, 2 percent of 0,000. For ta abe years endng after
December 31, 19 9, f the affated group ncudes one or more Western em-
sphere trade corporatons (as defned n secton 109), the ncrease sha be
apped n the manner provded n secton 2 .30(b) (1) of Reguatons 129.
(G) y nsertng mmedatey after paragraph (/) the foowng:
( ) Consodated returns of reguated pubc uttes computng e cess profts
credt under secton . For ta abe years endng after une 30, 19 0. a regu-
ated pubc utty whch has made and fed a consent to compute ts e cess
profts credt under secton ony may be Incuded n an affated group
(wthn the meanng of secton 1 1(d)) comprsed soey of reguated pubc
utty corporatons each of whch has made and fed such a consent. If such
consent of a reguated pubc utty corporaton s fed for any ta abe year
endng after une 30, 19 0, such corporaton sha be an ncudbe corporaton
wthn the meanng of secton 1 1 (|) for the ta abe year for whch such consent
s ted and for a consecutve subsequent ta abe years for whch such affated
group of whch such corporaton Is a member makes or s requred to make a
consodated return. If such corporaton Is a common parent corporaton, the
makng and fng of a consodated return n whch the consodated e cess
profts credt s determned under the provsons of secton sha consttute
the makng and fng of ts consent under secton 1 1(|). If such corporaton
Is a subsdary, the fng of ts authorzaton and consent on Form 1122, n
the manner prescrbed by secton 2 .12(b) of Reguatons 129, ndcatng thereon
ts consent to compute ts e cess profts credt wth respect to secton ony,
sha consttute the makng and fng of such consent. consent to be treated
as an ncudbe corporaton under secton 1 1 ( ) cannot be wthdrawn or
revoked at any tme after the consodated return s fed for the frst ta abe
year for whch the consent s fed. owever, f a separate return s propery
fed by such a corporaton for a subsequent ta abe year, t s not thereafter
an ncudbe corporaton under secton 1 1 (|) uness another consent under
such secton s made and fed.
sectons 62, 1 1, and 3791 of the Interna Revenue Code ( 3 Stat, 32,
, 07; 26 U. S. C. 62,1 1, and 3791).)
Norman . Sugarma ,
pproved ugust , 19 2.
Thomas . Lynch,
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167
29.1 - .
S CTION 1 . P N LTI S
Secton 29.1 -1: Penates. 19 2-2 -139 2
Ct. D. 17 1
F D R L T S INT RN L R NU COD D CISION OF SUPR M COT
1. Penates Indctment Under Secton 1 (b), Interna Reve-
nue Code.
The anguage of secton 1 (b) of the Interna Revenue Code,
whch outaws wfu attempts to evade ta es In any manner, s
ceary broad enough to ncude fase statements made by ta payers
at a hearng before representatves of the Treasury Department for
the purpose of conceang unreported ncome. P.y enactng sect nn
3 ( ) of the Crmna Code, whch makes t unawfu to knowngy
and wfuy make any fase or frauduent statements or representa-
tons n any matter wthn the |ursdcton of any department or
agency of the Unted States, Congess dd not ntend thereby to
e cude the makng of fase statements from the scope of secton
1 (b) of the Interna Revenue Code, or to requre ta enforcement
authortes to dea dfferenty wth fase statements than wth other
methods of ta evason, ty provdng that the sanctons of secton
1 shoud be n addton to other penates provded by aw
Congress recogn zed that some methods of attemptng to evade ta es
woud voate other statutes as we.
2. Decson Reversed.
Unreported memorandum opnon of the Unted States Dstrct
Court, Dstrct of Massachusetts, reversed and cause remanded.
SPR M COCRT OF T UNIT D ST T S
The Unted States of merca, appeant, v. The eaeon rass Co., Inc., and
Maurce Fen berg
On appea from the Unted States Dstrct Court for the Dstrct of Massachusetts
November 10, 19 2
OPINION
Mr. ustce Mnton devered the opnon of the Court.
On March 16, 19 1, a one-count ndctment was returned n the Unted States
Dstrct Court for the Dstrct of Massachusetts aganst the apeees, eacon
rass Company, a corporaton, and Maurce Fenberg, ts presdent and treasurer.
The Indctment charged that n voaton of secton 1 (b) of the Interna
Revenue Code, 0 Stat. 10S , as amended, 20 U. S. C. secton 1 (b), the appe-
ees had wfuy attempted to evade ta es by makng fase statements to
Treasury representatves on October 2 , 19 , for the purpose of supportng,
ratfyng, confrmng and conceang the frauduent and ncorrect statements
and representatons made n the corporate ta return of sad eacon rass
Co., Inc., for the fsca perod endng October 31, 19 , fed on or about anuary
,19 . Secton 1 (b) provdes n pertnent part:
ny person who wfuy attempts n anu manner to evade or defeat any
tu mposed by ths chapter or the payment thereof, sha, n addton to other
pe7ates provded by aw, be guty of a feony . mphass
supped. I
The s -year mtaton perod, 3 Stat. 3 1, 3 2, as amended, 20 U. S. C. secton
37 S(a)(2), appcabe to offenses under ths statute, had e pred on a charge
for fng a fase ta return n anuary 19 , but t had not e pred on a charge
of makng fase statements to Treasury empoyees In October 19 . The dstrct
court vewed the ndctment as chargng the separate crmes of fng a fase
return and makng subsequent fase statements to Treasury representatves, and
dsmssed the ndctment as dupctous.
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29.1 -1.
16
On September 1 ,19 1, a second Indctment was returned aganst the appeees
whch repeated the charge that n voaton of secton 1 (b) they dd wfuy
and knowngy attempt to defeat and evade a arge part of the ta es due and
owng by the sad corporaton by makng certan fase and frauduent
statements and representatons, at a hearng and conference before representa-
tves and empoyees of the Unted States Treasury Department, on or about
October 2 , 19 . Reference to the aegedy fase return fred n
anuary 19 was omtted, and nstead t was charged that the fase statements
were made for the purpose of conceang addtona unreported net ncome

Secton 3 ( ) of the Crmna Code, 1 U. S. C. secton 0 (19 6 ed.) (now
1 U. S. C. (supp. ) secton 1001) makes t unawfu to knowngy and w-
fuy make any fase or frauduent statements or repre-
sentatons n any matter wthn the |ursdcton of any department
or agency of the Unted States . Obvousy, at the tmes of the ndct-
ments here, the three-year mtaton perod, 1 U. S. C. (supp. ) secton 32 2,
for voatons of ths statute had e pred as to statements made n October 19 .
The dstrct court concuded that snce secton 3 ( ) deas specfcay wth
fase statements, Congress must be presumed to have ntended that the makng
of fase statements shoud be punshabe ony under secton 3 ( ). Therefore,
n an unreported memorandum opnon, the dstrct court dsmssed the ndct-
ment on the ground that t faed to charge an offense under 26 U. S. C. secton
1 (b). We noted probabe |ursdcton of the Unted States appea taken under
authorty of 1 U. S. C. (supp. ) secton 3731.
We have before us two statutes, each of whch proscrbes conduct not cov-
ered by the other, but whch overap n a narrow area ustrated by the nstant
case. t east where dfferent proof s requred for each offense, a snge act
or transacton may voate more than one crmna statute. Unted States v.
Noveck, 273 U. S. 202, 206; averes v. Unted States, 220 U. S. 33 . Unke
secton 3 ( ), secton 1 (b) requres proof that the fase statements were
made n a wfu effort to evade ta es. The purpose to evade ta es s cruca
under ths secton. The anguage of secton 1 (b) whch outaws wfu
attempts to evade ta es n any manner s ceary broad enough to ncude
fase statements made to Treasury representatves for the purpose of concea-
ng unreported ncome. Cf. Spes v. Unted States, 317 U. S. 92, 99 Ct. D.
1 71, C. . 19 3, 103 . The queston rased by the decson beow s whether
by enactng a statute specfcay outawng a fase statements n matters under
the |ursdcton of agences of the Unted States, Congress ntended thereby to
e cude the makng of fase statements from the scope of secton 1 (b).
We do not beeve that Congress ntended to requre the ta -enforcement
authortes to dea dfferenty wth fase statements than wth other methods
of ta evason. y provdng that the sanctons of secton 1 (b) shoud be n
addton to other penates provded by aw, Congress recognzed that some
methods of attemptng to e ade ta es woud voate other statutes as we. See
Tayor v. Unted States, 179 Fed. (2d) 6 0, 6 . Moreover, snce no dstncton
s made n secton 3 ( ) between wrtten and ora statements, the reasonng
of the court beow woud be equay appcabe to fase ta returns whch are,
of course, fase wrtten statements. ut the courts of appeas have unformy
apped secton 1 (b) to attempts to evade ta es by fng fase returns. . gn
Gaunt v. Unted States, 1 -Fed. (2d) 2 , 2 ; Tayor v. Unted States, supra,
at 6 3-6 . Further support for our concuson can be found n Unted States
v. Noveck, supra, where ths ceurt re|ected the contenton that the enactment
of secton 1 (b) mpfedy repeaed the genera per|ury statute nsofar as that
statute apped to fase ta returns made under oath. Cf. Unted States v. t-
and, 312 U. S. 6, 93, 9 -96. Fnay, the enactment of other statutes e pressy
outawng fase statements n partcuar conte ts, e. g., 1 U. S. C. (supp. )
sectons 1010, 101 , negates the assumpton whch was the foundaton of the
decson of the court beow that Congress ntended the makng of fase state-
ments to be punshabe ony under secton 3 ( ).
The appeees contend tfat the acts charged consttute ony one crme of ta
evason whch was compete when the aegedy fase ta return was fed. On
the bass1 of ths contenton, appeees seek to sustan the decson beow on the
grounds that the s -year statute of mtatons had run, and that the dsmssa of
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29.1 -1.
the frst ndctment s ret |udcata and a bar to the second ndctment for the same
offense. We do not consder these questons because our |ursdcton on ths
appea s mted to revew of the dstrct court s constructon of the statute n the
ght of the facts aeged n the ndctment 1 U. S. C. (supp. ) secton 3731;
Unted States v. orden Oo., 30 , U. S. 1 , 206-207.
The |udgment of the dstrct court s reversed, and the cause s remanded for
further proceedngs not Inconsstent wth ths opnon.
Reversed.
Mr. ustce ack s of the opnon that the dstrct court reached the rght
resut and woud affrm Its |udgment
S CTION 1 . INFORM TION Y CORPOR TIONS
Secton 29.1 -1: Return of nformaton as 19 2-1 -13 6
to payments of dvdends. T. D. 91
INCOM T : T L Y RS GINNING FT R D C M R 31, 19 1
Reguatons 111 amended wth respect to the requrement that
nformaton returns he furnshed by corporatons payng dvdends.
Washngton 2 , D. C.
Others Concerned:
Secton 29.1 -1 of Reguatons 111, as amended by Treasury Dec-.
son 9 C. . 19 1-2. , approved September 20, 19 1 26 CFR
29.1 -1 , s further amended by strkng sha render an nforma-
ton return on Forms 1096 and 1099, e cept that from the frst
sentence of paragraph (a) and nsertng n eu thereof the foowng:
amountng to 10 or more durng the caendar year, sha render an nformaton
return on Forms 1090 and 1099, e cept that such 10 mnmum mtaton sha
not appy for the caendar year 19 1, and e cept that
sectons 62, 1 , and 3791 of the Interna Revenue Code ( 3 Stat. 32,
6 , 67; 26 U. S. C. 62,1 ,3791).)
ecause ths Treasury Decson reeves ta payers of a requrement
mposed by e stng reguatons t s found that t s unnecessary to
ssue ths Treasury Decson wth notce and pubc procedure thereon
under secton (a) of the dmnstratve Procedure ct, approved
une 11,19 6, or sub|ect to the effectve date mtaton of secton (c)
of that ct.
ohn . Dunap,
pproved une 2 ,19 2.
Thomas . Lynch,
(Fed wth the Dvson of the Federa Regster une 26,19 2, : a. m.)
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29.16 -1 .
170
SUPPL M NT . ST T S ND TRUSTS
S CTION 16 . MPLOY S TRUSTS
Secton 29.16 -1: mpoyees trusts.
( so Secton 29.16 -6; Secton
22(b), Secton 29.22(b) (2)- ;
Secton 23 (p), Secton 29.23 (p) -9.)
19 2-2 -139 3
IR-Mm. 71
ppcabty of sectons 16 (a) and 23(p) (1) ( ) of the Interna
Revenue Code to stock bonus, penson, proft-sharng, and annuty
pans where nonresdent benefcares are nvoved and ta abty of
dstrbutons under or pursuant to any such pan where the dstr-
butons are to a nonresdent and are based, whoy or party, on
servces rendered outsde the Unted States.
Mmeograph 2 3 (C. . I -1, 1 (102 )), I. T. 2370 (C. . I-2,
2 (1927)), I. T. 2996 (C. . -2,166 (1936)), and I. T. 3 72 (C. .
19 1-1, 2 2) modfed.
Tre sury Department,
Washngton 2 , D. C, December 1,19 2.
Concerned:
1. Numerous nqures have b en receved from tme to tme by the
ureau wth respect to (1) the quafcaton under the appcabe
provsons of sectons 16 (a) and 23(p)()( ) of the Interna Rev-
enue Code, as amended, of stock bonus, penson, proft-sharng, and
annuty pans estabshed by empoyers for ther empoyees where one
or more of the nterested partes (the empoyer, some or a of the
empoyees, or the trust or nsurance company through whch the pan
s funded), are nonresdents of the Unted States as the atter term s
defned n secton 3797(a) (9) of the Interna Revenue Code, and (2)
the ta abty of dstrbutons under or pursuant to any such pan
where such dstrbutons are to a nonresdent and are, n part at east,
on account of or wth respect to servces rendered outsde the Unted
States by the empoyee nvoved.
2. empton from ncome ta s granted by secton 16 (a) of the
Interna Revenue Code to any stock honus, penson, or proft-sharng
trust estabshed by an empoyer for hs empoyees f such trust meets
a the requrements of secton 16 (a) of the Code. It w be ap-
parent, however, when subsectons (a) and (b) of secton 16 of the
Code are read together, that ncome ta on the earnngs of an em-
poyees trust whch meets a the requrements of secton 16 (a) of
the Code s ony deferred, snce, nstead of beng due from and payabe
by the trust, the ta s mposed by secton 16 (b) upon the dstrbutees
of the trust. In that respect, secton 16 (b) provdes, n part, as
foows: The amount actuay dstrbuted or made ava-
abe to any dstrbutee by any such trust a trust quafyng under
secton 16 (a) sha be ta abe to hm, n the year n whch so ds-
trbuted or made avaabe . Itacs supped.
3. Snce t woud be mpossbe or mpractcabe to assert ta aganst
dstrbutees of nonresdent trusts wth respect to dstrbutons repre-
sentng n whoe or n part ncome from sources wthn the Unted
States, secton 16 (a) of the Code was not ntended to afford ta
e empton (1) to a nonresdent trust set up by a nonresdent empoyer
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171
29.16 -1,
or (2) to a nonresdent trust estabshed by a domestc empoyer n
whoe or n part for nonresdent aen empoyees uness the trust n-
strument n such case e pressy prohbts the nvestment of the trust
assets n any manner whch w produce ncome from sources wthn
the Unted States , as defned n secton 119 (a) and (b) of the Code.
. It does not seem, however, n vew of the provsons of sectons
1 3(b) and 211 of the Code, that a resdent stock bonus, penson or
proft-sharng trust, whether estabshed by a resdent or a nonresdent
empoyer, was ntended to be dened the rght to quafy under sec-
ton 16 (a) for ta e empton because some or a of the benefcares
under such trust are or may be nonresdent aen empoyees. Secton
16 (b) was ntended to be construed n the ght of other provsons
of the Code and of pertnent provsons of ncome ta conventons
between the Unted States and other countres.
. Ta conventons between the Unted States and other countres
have no appcaton to the ta abty of dstrbutons under ether a
quafed or a nonquafed pan (whether or not funded) to non-
resdent ctzens of the Unted States, but, n determnng the e tent
to whch a nonresdent ctzen s ta abe wth respect to any such ds-
trbuton, resort must be had not ony to secton 16 (b) of the Code
(f a trust s nvoved) but aso to sectons 22(b) (2), 116, 117, and
119 thereof. Ceary, none of that porton of the dstrbuton under a
penson, proft-sharng, or other such pan to ether a resdent or a
nonresdent ctzen wth respect to or on account of servces rendered
n the Unted States (whether the dstrbuton represents contrbu-
tons made by the empoyer, or the empoyee, or both) s ncome from
sources wthout the Unted States wthn the meanng of sectons
116(a) and 119(c) of the Code. Lkewse, that part of any dstrbu-
ton whch represents a return of the empoyee s own contrbutons
may not propery be cassed as earned ncome wthn the meanng of
secton 116(a) (3) of the Code. Wth respect to the remander of
the amount dstrbutabe under a pan to a Unted States ctzen dur-
ng years n whch he meets the quafcatons regardng resdence or
presence n a foregn country, as provded by secton 116(a) of the
Code, that porton representng the amount actuay contrbuted under
the pan by the empoyer wth respect to servces rendered by the
empoyee durng a quafed perod represents earned ncome from
sources outsde of the Unted States for purposes of secton 116(a) of
the Code. The baance of the amount dstrbuted does not consttute
ncome from sources wthout the Unted States and, accordngy, s
not e cudabe from the gross ncome of the recpent under secton
116(a) of the Code.
6. dstrbuton pursuant to ether a quafed or a nonquafed
stock bonus, penson, proft-sharng, or annuty pan (whether or not
funded) to a nonresdent who s not a ctzen of the Unted States s
ta abe to such nonresdent dstrbutee to the same e tent, but n- the
manner (that s, by wthhodng) and at the rate provded by sectons
113(b) and 211 of the Code, as t woud be ta abe to a ctzen under
ke crcumstances. owever, n the case of a dstrbuton to a non-
resdent aen who at the tme of the dstrbuton s a resdent of a
country wth whch the Unted States then has n effect a ta conven-
ton, such dstrbuton sha be ta -e empt n the Unted States f t s
so provded by the appcabe ta conventon. For e ampe, n the
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29.16 -1.
172
case of ether a quafed or a nonquafed stock bonus, penson, proft-
sharng, or annuty pan estabshed n the Unted States for em-
poyees resdent n Canada, dstrbutons to any such resdents (or
ther benefcares f they are kewse Canadan resdents) who are
not ctzens of the Unted States w be e empt from ta n the Unted
States under the provsons of the Ta Conventon and Protoco be-
tween the Unted States and Canada f the dstrbutons are n the
form of pensons or fe annutes wthn the meanng of those
terms as used n rtce I of the Conventon and paragraphs and
of the Protoco.
7. To the e tent that Mmeograph 32 3 (C. . I -1,1 (192 )) and
I. T. 2370 (C. . I-2,2 , (1927)) are nconsstent wth the foregong
n that they ndcate that the porton of a dstrbuton from or under
a stock bonus, penson, proft-sharng, or annuty pan whch does not
represent empoyer contrbutons on behaf of the empoyee nvoved
consttutes earned ncome , such rungs are herebv modfed. Lke-
wse, to the e tent that I. T. 2996 (C. . -2,166 (1936)) and I. T.
3 72 (C. . 19 1-1, 2 2) are smary nconsstent n that they nd-
cate that the part of a penson payment based on servces rendered
abroad whch does not represent contrbutons by the empoyer on
account of such foregn servces consttutes earned ncome , those
rungs are hereby modfed.
. In vew of the foregong, t s the poston of the ureau that a
dstrbuton under or pursuant to a stock bonus, penson, proft-shar-
ng, or annuty pan by a domestc trust or nsurance company to a
nonresdent ctzen or nonresdent aen s e cudabe from the gross
ncome of the recpent ony to the e tent the payment represents (a)
a return of the empoyee s own contrbutons or (b) amounts actuay
contrbuted by the empoyer on account of persona servces of the
aen empoyee rendered abroad, or on account of persona servces
of the ctzen empoyee rendered abroad durng a perod quafyng
under secton 116(a) of the Code. To the e tent such payments rep-
resent earnngs on and accretons to contrbutons of ether the em-
poyer or the empoyee, they consttute ncome from sources wthn
the Unted States and accordngy are ncudbe n gross ncome uness
e pressy e cudabe pursuant to the provsons of an ncome ta
conventon. To compute the porton of each of such payments whch
s thus ncudbe as ncome from sources wthn the Unted States,
wth respect to amounts ta abe under sectons 16 (b) or 22(b) (2) ( )
of the Code, as annuty payments, the consderaton pad for the
annuty for purposes of secton 22(b) (2) of the Code may be taken
as ncudng not ony amounts contrbuted under the pan by the
empoyee, but n addton, amounts whch represent contrbutons by
the empoyer on account of foregn servce of the empoyee, f a non-
resdent aen, or foregn servce of the empoyee durng a perod
quafyng under secton 116(a) of the Code, f the empoyee s a
ctzen. Wth respect to dstrbutons under penson, proft-sharng
or stock bonus pans whch are ta abe under secton 16 (b) of the
Code, as ong-term capta gans, the amounts contrbuted under the
pan by the empoyer on account of foregn servce of the empoyee,
f a nonresdent aen, or on account of foregn servce of the empoyee
durng a perod quafyng under secton 116(a) of the Code f the
empoyee s a ctzen, may be ncuded n computng the amounts
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173
29.16 -6.
contrbuted by the empoyee as that phrase s used n secton 16 (b)
of the Code.
9. Under the authorty contaned n secton 3791(b) of the Interna
Revenue Code, the provsons of ths mmeograph w not be nvoked
for purposes of assertng addtona ta es wth respect to amounts
receved by ta payers durng ta abe years endng pror to anuary
1, 19 2. For purposes of wthhodng of ncome ta pursuant to the
provsons of secton 1 3(b) of the Code, the provsons of ths mmeo-
graph w not be apped so as to mpose a penaty for faure to de-
duct and wthhod wth respect to amounts pad pror to anuary 1,
19 3. owever, amounts deducted and wthhed wth respect to
amounts so pad w be payabe to the Government n accordance wth
secton 1 3(c) of the Code and w not be refundabe.
T. C. tkeson,
ctng Commssoner.
Secton 29.16 -1: mpoyees trusts.
INT RN L R NU COD
Lump-sum payment receved under the cv-servce retrement and
dsabty fund by a Federa empoyee on account of separaton from
the servce. (See I. T. 102, beow.)
Secton 29.16 -6: Ta abty of benefcary 19 2-22-139
under a trust whch meets the requrements I. T. 102
of secton 16 (a).
( so Secton 29.16 -1.)
INT RN L R NU COD
Snce the cv-servce retrement tnd dsabty fund s treated as
a trust fund and meets the requrements of secton 16 (a) of the
Interna Revenue Code, as amended, that porton of a ump-sum
payment receved by a Federa cv-servce empoyee or hs bene-
fcary, on account of the empoyee s separaton from the servce,
whch e ceeds the tota amounts wthhed from hs compensaton
under the Cv Servce Retrement ct of May 29, 1930 ( 6 Stat.
6 ), as amended, s consdered, under secton 16 (b) of the Code,
as gan from the sae or e change of a capta asset hed for more
than 6 months.
dvce s requested whether that porton of a ump-sum payment
receved on account of an empoyee s separaton from the servce of
the Federa Government under the Cv Servce Retrement ct of
May 29, 1930 ( 6 Stat. 6 ), as amended, whch e ceeds the tota
amounts wthhed from hs compensaton pursuant to the provsons
of that ct, s consdered as ong-term capta gan under secton
16 (b) of the Interna Revenue Code.
Secton 16 (b) of the Interna Revenue Code provdes n part as
foows:
(b) Ta abty of enefcary. The amount actuay dstrbuted or made
avaabe to any dstrbutee by any such trust sha be ta abe to hm, n the
year n whch so dstrbuted or made avaabe, under secton 22(b) (2) as f t
were an annuty the consderaton for whch s the amount contrbuted by the
empoyee, e cept that f the tota dstrbutons payabe wth respect to any
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29.29 -1.
17
empoyee are pad to the dstrbutee wthn one ta abe year of the dstrbutee on
account of the empoyee s separaton from the servce, the amount of such ds-
trbuton to the e tent e ceedng the amounts contrbuted by the empoyee, sha
be consdered a gan from the sae or e change of a capta asset hed for more
than 6 months.
Under the provsons of secton of the ct of May 22, 1920 ( 1
Stat. 61 ), the Secretary of the Treasury of the Unted States s d-
rected to nvest portons of the cv-servce retrement and dsabty
fund n certan nterest-bearng securtes for the producton of n-
come whch sha consttute a part of such fund for the beneft of em-
poyees under the cv-servce retrement system. Such provsons
quafy the fund as a trust fund wthn the purvew of secton 16 (a)
of the Interna Revenue Code. (Of. G. C. M. 2 3 , C. . 19 7-2, 90.)
ccordngy, t s hed that snce the cv-servce retrement and dsa-
bty fund s treated as a trust fund and meets the requrements of
secton 16 (a) of the Interna Revenue Code, as amended, that por-
ton of a ump-sum payment receved by a Federa cv-servce em-
poyee or hs benefcary, on account of the empo ee s separaton from
the servce, whch e ceeds the tota amounts wthhed from hs com-
pensaton (and otherwse pad nto the fund by the empoyee) under
the Cv Servce Retrement ct of May 29, 1930 ( 6 Stat. 6 ), as
amended, s consdered, under secton 16 (b) of the Code, as gan
from the sae or e change of a capta asset hed for more than 6
months.
Secton 29.16 -6: Ta abty of benefcary
under a trust whch meets the requrements
of secton 16 (a).
INT RN L R NU COD
ppcabty of sectons 16 (a) and 23(p)()( ) of the Interna
Revenue Code to nonresdents of the Unted States. (See IR-Mm.
71, pages 170.)
SUPPL M NT M. INT R ST ND DDITIONS TO T T
S CTION 29 . DDITIONS TO T T IN
C S OF NONP YM NT
Secton 29.29 -1: ddtons to the ta . 19 2-22-139 9
T. D. 937
Reguatons 111 amended to conform to Pubc Law 907 ( 1st
Cong., 2d sess.) C. . 19 1-1,177 and to secton 103 of the Revenue
ct of 19 1, reatng to nappcabty of certan penates and add-
tons to ta .
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17
29.29 -1.
Washngton 2 , D. C.
Concerned:
In order to conform Reguatons 111 26 CFR, part 20 to Pubc
Law 907 (Sst Cong., 2d sess.) C. . 19.r -, 177 , approved anuary
2,19 1, and to secton 103 of the Revenue ct of 19 1, approved Octo-
ber 20, 19 1, such reguatons are hereby amended as foows:
29.1 -1 20 CFR 29.1 -1 the foowng:
PU LIC L W 907 Sst CONG., 2d S SS., PPRO D NU RY 2,
19 1
e t enacted )/ the Senate and ouse of Representatve of the
Unted States of merca n Congress assembed. That secton 1 of
the Interna Revenue Code (reatng to penates wth respect to faure
to fe returns, pay ta , etc.,) s amended by reetterng subsecton (e)
as subsecton (f, and by addng after subsecton (d) a new subsecton
(e) as foows:
(e) In the case of ta abe years begnnng pror to October 1, 19 0,
and endng after September 30, 19 0, the penates proscrbed by ths
secton sha not be appcabe f the ta payer faed to meet the re-
qurements of secton 29 (d)(2) (reatng to substanta underest-
mate of estmated tu ), by reason of the ncrease n norma ta and sur-
ta on ndvduas mposed by secton 101 of the Revenue ct of 19 0.

S C. 103. IN PPLIC ILITY OF C RT IN P N LTI S ND D-
DITIONS TO T R NU CT OF 19 1, PPRO D OCTO-
R 20, 19 1 .
(a) Penates fur Faure to Fe Return. Secton 1 (reatng to
penates wth respect to faure to fe returns, pay ta , etc.) Is hereby
amended by reetterng subsecton (f) as subsecton (g) and by addng
after subsecton (e) a new subsecton (f) as foows:
(f) In the case of ta abe years begnnng pror to November 1, 19 1,
and endng after October 31, 19 1, the penates prescrbed by ths sec-
ton fo. wfu faure to make decaratons of, or pay, estmated ta
sha not be appcabe to a faure to take nto account the ncrease n
rates of ta Imposed on ndvduas by the Revenue ct of 19 1.

PU LIC L W 907 Sst CONG., 2d S SS., PPRO D NU RY 2,
19 1

Sec. 2. Paragraph (2) of subsecton (d) of secton 29 of the Interna
Revenue Code Is amended by addng at the end of paragraph (2) a new
sentence readng as foows: In the case of ta abe years begnnng
pror to October 1, 19 0. and endng after September 30, 19 0, the add-
tons to ta prescrbed by ths subsecton sha not be appcabe f the
ta payer faed to meet the 0 per centum and 66 per centum requre-
ments of ths paragraph by reason of the ncrease n norma ta and sur-
ta on ndvduas mposed by secton 101 of the Revenue ct of 19 0.
S C. 103. IN PPLIC ILITY OF C RT IN P N LTI S ND D-
DITIONS TO T R NU CT OF 19 1, PPRO D OCTO-
R 20, 19 1 .

(b) ddtons to Ta . Secton 29 (d)(2) (reatng to addtons to
ta for substanta underestmates of estmated ta ) s hereby amended
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29.362-2.1
176
by addng at the end thereof a new sentence as foows: In the case
of ta abe years begnnng pror to November 1, 19 1, and endng after
October 31, 19 1, the addtons to ta prescrbed by ths subsecton sha
not be appcabe f the ta payer faed to meet the requrements of ths
paragraph by reason or the ncrease n rates of ta on ndvduas m-
posed by the Revenue ct of 1931.
Par. 3. Secton 29.29 -1, as amended by Treasury Decson
C. . 19 1-2, 1 1 , approved September 13, 19 1 26 CF 29.29 -1 ,
s further amended by addng at the end of paragraph (b) the fo-
owng new undesgnated paragraph:
In the case of ta abe years begnnng before October 1, 19 0, and endng after
September 30, 19 0, or begnnng before November 1,19 1, and endng after Octo-
ber 31, 19 1, the provsons of ths secton are sub|ect to the mtatons app-
cabe to such years provded n the amendments made to secton 29 (d) (2) by
I ubc Law 907 ( 1st Cong.) and secton 103 (b) of the Revenue ct of 10 1.
ecause of the technca nature of the amendments made by ths
Treasury Decson, t s found that t s unnecessary to ssue ths
Treasury Decson wth notce and pubc procedure thereon under
secton (a) of the dmnstratve Procedure ct, approved une
11, 19 6, or sub|ect to the effectve date mtaton of secton (c) of
sad act.
n sectons 62 and 3791 of the Interna Revenue Code ( 3 Stat. 32,
67; 26 U. S. C. 62, 3791).)
ohn . Dunap,
Thomas . Lynch,
(Fed wth the Dvson of the Federa Regster October S, 19 2, : 0 a. m.)
SUPPL M NT . R GUL T D IN STM NT COMP NI S
S CTION 362. T ON R GUL T D IN STM NT
COMP NI S
Secton 29.362-2: Method of ta aton of 19 2-26-13993
reguated nvestment companes. T. D. 9 9
( so Sectons 29.362- , 29.302-6.)
INCOM T : T L T RS GINNING FT R D C M R 31, 10 1
Reguatons 111 amended to conform to sectons 121(e) and 222
of the Revenue ct of 19 0, to secton 201 (c) and (e) of the cess
Profts Tu ct of 19 0, and to secton 121(d) of the Revenue ct
of 19 1, reatng to reguated nvestment companes.
Washngton 2 , D. C.
Others Concerned:
On September , 19. 2, notce of proposed rue makng wth respect
to amendments to conform Reguatons 111 to sectons 121(e) and 222
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177
29.362-2.
of the Revenue ct of 19 0 (P. L. 1 , 1st Cong., 2d sess.), approved
September 23, 19 0, to sectons 201 (c) and (e) of the cess Profts
Ta ct of 19 0 (P. L. 909, 1st Cong., 2d sess.), approved anuary 3,
19 1, and to secton 121(d) of the Revenue ct of 19 1 (P. L. 1 3,
2d Cong., 1st sess.), approved October 20, 19 1, reatng to reguated
nvestment companes, was pubshed n the Federa Regster (17
F. R. 0 9). fter consderaton of such reevant suggestons as
were presented by nterested persons regardng the proposas, the
amendments to Reguatons 111 26 CFR, part 29 are hereby adopted.
29.362-1 26 CFR 29.362-1 the foowng:
R NU CT OF 19 0, PPRO D S PT M R 23, 10 0 .

(e) Reguated Investment Companes.
(1) Secton 362(b)(3) (reatng to norma ta on reguated n-
vestment companes) s hereby amended to read as foows:
(3) In the case of ta abe years begnnng after une 30, 10 0,
ts Suppement net ncome a ta equa to 2 per centum of the
amount thereof. In the case of ta abe years begnnng after De-
cember 31, 10 9, and before uy 1, 19 0, there sha be eved,
coected, and pad for each ta abe year upon ts Suppement
net ncome a ta equa to 23 per centum of the amount thereof.
(2) Secton 302(b)( ) (reatng to surta on reguated nvest-
ment companes) s hereby amended to read as foows:
( ) In the case of ta abe years begnnng after une 30, 19 0,
ts Suppement surta net ncome a ta equa to 20 per centum of
the amount thereof n e cess of 2 ,000. In the case of ta abe
years begnnng after December 31, 19 9, and before uy 1, 19 0,
ts Suppement surta net ncome a ta equa to 19 per centum
of the amount thereof n e cess of 2 ,000.
(3) The amendments made by ths subsecton sha be appcabe
ony wth respect to ta abe years begnnng after December 31,19 9.

S C. 222. R GUL T D IN STM NT COMP NI S R NU
CT OF 19 0, PPRO D S PT M R 23, 19 0 .
ffectve wth respect to ta abe years endng after the date of the
enactment of-ths ct, secton 362(b) (reatng to method of ta aton of
reguated nvestment companes and sharehoders) s hereby amended
by addng at the end thereof the foowng:
( ) For the purposes of ths subsecton, any dvdend or porton
thereof decared by a company after the cose of the ta abe year
and pror to the tme prescrbed by aw for the fng of ts return
for the ta abe year (ncudng the perod of any e tenson of tme
granted for fng such return) sha, to the e tent the company so
eects n such return, be treated as havng been pad durng such ta -
abe year, but ony f dstrbuton of such dvdend s actuay made
to sharehoders n the 12-month perod foowng the cose of such
ta abe year and not ater than the date of the frst reguar dvdend
payment made after such decaraton.
S C. 201. SURT ON CORPOR TIONS C SS PROFITS T
CT OF 19 0, PPRO D NU RY 3, 19 1 .

(c) Reguated Investment Companes. Secton 362(b)( ) of such
Code Interna Revenue Code (reatng to surta on reguated nvest-
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29.362-2.
17
ment companes) s hereby amended by strkng out 20 per centum and
nsertng n eu thereof 22 per centum .

(e) ffectve Date. The amendments made by ths secton sha
be appcabe wth respect to ta abe years begnnng on or after uy 1,
19 0.
R NU CT OF 19 1, FPRO D OCTO R 20, 19 1 .

(d) Reguated Investment Companes. Secton 362(b) (reatng to
ta on reguated nvestment companes) s hereby amended by strkng
out paragraphs (3) and ( ) and nsertng n eu thereof the foowng:
(3) In the case of ta abe years begnnng after December 31,
19 0, and before pr 1, 19 1, and endng after March 31, 19 1,
ts Suppement net ncome a ta equa to 2 per centum of the
amount thereof. In the case of ta abe years begnnng after
March 31, 19 1, and before pr 1, 19 , there sha be eved, co-
ected, and pad for each ta abe year upon ts Suppement net
ncome a ta equa to 30 per centum of the amount thereof. In the
case of ta abe years begnnng after March 31, 19 , there sha be
eved, coected, and pad for each ta abe year upon ts Suppe-
ment net ncome a ta equa to 2 per centum of the amount
thereof.
( ) In the case of ta abe years begnnng after December 31,
19 0, there sha be eved, coected, and pad for each ta abe year
upon ts Suppement surta net ncome a ta equa to 22 per
centum of the amount thereof n e cess of 2 ,000.

S C. 12 . FF CTI D T R NU CT OF 19 1, PPRO D
OCTO R 20, 19 1 .
The amendments made by ths part sha be appcabe ony wth
respect to ta abe years begnnng after March 31, 19 1, and to ta abe
years begnnng on anuary 1, 19 1, and endng on December 31, 19 1,
e cept that the amendments made to sectons 362
of the Interna Revenue Code sha be appcabe to ta abe years begn-
ng after December 31, 19 0, and endng after March 31, 19 1.
C. . 19 6-2, , approved une 12, 19 6 26 CF 29.362-2 , s
( ) y strkng out that porton of the frst sentence thereof whch
foows the parenthetca phrase (reatng to records requred to be
kept for the purpose of ascertanng the actua ownershp of ts out-
standng stock), and nsertng n eu thereof the foowng:
t s ta abe-
fa) Upon ts Suppement net ncome (as defned n secton 362 (b) (1))
(1) For ta abe years begnnng before anuary 1, 19 0, at the rate of
2 percent of the amount thereof;
(2) For ta abe .years begnnng after December 31, 19 9, and before uy
1,19 0, at the rate of 23 percent of the amount thereof;
(3) For ta abe years begnnng after une 30, 19 0, and before anuary
1, 19 1, and for ta abe years begnnng after December 31,19 0, and endng
before pr 1,19 0, at the rate of 2 percent of the amount thereof;
( ) For ta abe years begnnng after December 31,19 0. and before pr
1, 19 1, and endng after March 31, 19 1, at the rate of 2 percent of th(
amount thereof;
( ) For ta abe years begnnng after March 31, 19 1, and before pr 1,
19 . at the rate of 30 percent of the amount thereof;
(6) For ta abe years begnnng after March 31, 19 , at the rate of 2
percent of the amount thereof.
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29.362-2.
(6) Upon ts Suppement surta net ncome (as defned n secton
362(b)(2))
(1) For ta abe years begnnng before anuary 1, 19-10, at te rate of
16 percent of the amount thereof;
(2) For ta abe years begnnng after December 31, 101 , and before
anuary 1, 19 0, at the rate of 1 percent of the amount thereof;
(3) For ta abe years begnnng after December 31, 1919, and before uy
1, 19 0, at the rate of 19 percent of the amount thereof n e cess of 2 ,000;
( ) For ta abe years begnnng after une 30, 19 0, at the rate of 22
percent of the amount thereof n e cess of 2 ,000.
(c) Upon the e cess of any net ong-term capta gan over the sum of the net
short-term capta oss and the amount of capta gan dvdends (as defned n
secton 302(b) (7)) pad durng the year, at the rate of 2 percent of such e cess.
( ) y nsertng: mmedatey after the ffth sentence thereof
(begnnng See secton 29.27(b)-2 ) the foowng new sentence:
For certan dstrbutons made after the cose of the ta abe year whch the
reguated nvestment company may eect to treat as pad durng the ta abe year
for purposes of secton 302(b), see secton 20.302-0.
Par. 3. Secton 29.302- 26 CFR 29.302- s amended by addng
at the end thereof the foowng new sentence:
For addtona rues appcabe to certan dstrbutons made after the cose of
the ta abe year whch may be desgnated as capta gan dvdends, see secton
29.362-6.
Par. . There s nserted mmedatey after secton 29.302- 26
CFR 29.302- the foowng new secton:
Sec. 29.362-6. Dstrbuton of Dvdends fter Cose of Ta abe Year.
ffectve wth respect to any ta abe year endng after September 23, 10 0,
secton 302(b) ( ) provdes that:
(1) n determnng under secton 362(b) whether a reguated nvestment
company dstrbutes durtg the ta abe year to ts sharehoders as ta abe
dvdends (other than capta gan dvdends) an amount not ess than 90
percent of ts net ncome for the ta abe year computed wthout regard to
net ong-term and net short-term capta gans,
(2) n computng the Suppement net ncome and the Suppement
surta net ncome, and
(3) n determnng the amount of capta gan dvdends pad durng the
ta abe year,
any dvdend (or porton thereof) decared by the company after the cose of
such ta abe year and pror to the tme prescrbed by aw for the fng of ts
return for such ta abe year (ncudng the perod of any e tenson of tme
granted for fng such return) sha, to the e tent the company so eects n such
return, be treated as havng been pad durng such ta abe year. Ths rue s
appcabe ony f dstrbuton of the entre amount of such dvdend s actuay
made to sharehoders n the 12-month perod foowng the cose of such ta abe
year and not ater than the date of the frst reguar dvded payment made after
such decaraton.
The eecton must be made n the return fed by the company for the ta abe
year. The eecton sha be made by the ta payer by treatng the dvdend (or
porton thereof) to whch such eecton appes as a dvdend pad durng the
ta abe year n computng ts Suppement net ncome and ts Suppement sur-
ta net ncome, or f the dvdend (or porton thereof) to whch such eecton ap-
pes s to e desgnated by the company as a capta gan dvdend, n computng
the amount of capta gan dvdends pad durng such ta abe year. The
eecton provded n secton 302(b)( ) may be made ony to the e tent that
the earnngs and profts of the ta abe year (computed wth the appcaton of
secton 362(a)) e ceed the tota amount of dstrbutons out of such earnngs
and profts actuay made durng the ta abe year (not ncudng dstrbutons
wth respect to whch a pror eecton has been made under secton 302(b) ( )).
The dvdend or porton thereof, wth respect to whch the reguated nvestment
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29.362-2.
1 0
company has made a vad eecton under secton 362(b) ( ), sha be consdered
as pad out of earnngs and profts of the ta abe year for whch such eecton
s made, and not out of earnngs and profts of the ta abe year n whch the
dstrbuton s actuay made. owever, the dvdend or porton thereof sub-
|ect to the eecton w be ncudbe n the gross ncome of sharehoders of the
reguated Investment company for the ta abe year n whch the dvdend s
receved by them.
ampe (1). Company, a reguated nvestment company, had a net ncome
(and earnngs or profts) for the caendar year 19 0 of 100,000. Durng that
year the company dstrbuted to sharehoders ta abe dvdends aggregatng
,000. On March 10, 10 1, the company decared a dvdend of 37,000 payabe
to sharehoders on March 20, 19 1. Such dvdend conssts of the frst reguar
quartery dvdend for 10.11 of 2 ,000 pus an addtona 12,000 representng
that part of the net ncome for 19 0 whch was not dstrbuted n 19 0. On
March 1 , 19 1, Company fes ts Federa ncome ta return and eects
theren to treat 12,000 of the tota dvdend of 37,000 tt be pad to sharehoders
on March 20, 19 1, as havng been pad durng the ta abe year 19 0. ssumng
that Company actuay dstrbutes the entre amount of the dvdend of
37,000 on March 20, 19 1, an amount equa to 12,000 thereof w be treated
for the purposes of secton 362(b) as havng been pad durng the ta abe year
19 0. Such amount ( 12,000) w be consdered a dstrbuton out of the
earnngs and profts of the company for the ta abe year 19 0. and w he treated
as a ta abe dvdend to the sharehoders for the ta abe year n whch such
dstrbuton s receved by them.
ampe (2). Y Company, a reguated Investment company, had a net ncome
(and earnngs or profts) for the caendar year 19 0 of 100,000, and for 19 1
a net ncome (and earnngs or profts) of 12 ,000. On anuary 1, 19 0, the
company had a defct n ts earnngs and profts accumuated snce February
2 , 1913, of 11 ,000. Durng the year 19 0 the company dstrbuted to share-
hoders ta abe dvdends aggregatng ,000. On March , 19 1, the com-
pany decared a dvdend of 6 ,000 payabe to sharehoders on March 31. 19 1.
On March 1 , 19 1, Y Company fes ts Federa ncome ta return n whch t
ncudes 0,000 of the tota dvdend of 6 ,000 to be pad to sharehoders on
March 31,19 1, as a dvdend pad by It durng the ta abe year 19 0. On March
31, 19 1, Y Company dstrbutes the entre amount of the dvdend of 6 ,000
decared on March , 19 1. The eecton under secton 362(b)( ) s vad ony
to the e tent of 1 ,000, the amount of undstrbuted earnngs or profts for 19 0.
The remander ( 0,000) of the dvdend pad on March 31, 19 1, may not be
the sub|ect of an eecton, but such amount w be regarded as a dstrbuton by
Y Company for the ta abe year 19 1. ssumng that the ony other dstrbu-
ton by the Y Company (urng 19 1 s a dstrbuton of 7 ,000 pad as a dvdend
on October 31, 19 1. the tota amount of the dstrbuton of 0 ,000 pad to
sharehoders on March 31, 19 1, s to e treated as ta abe dvdends to the
sharehoders. Of ths amount 1 ,000 s to be treated as dstrbuted out of the
earnngs or profts of the company for the ta abe year 19 0, and the remanng
0,000 as a dstrbuton out of the earnngs or profts for the year 19 1. The
dstrbuton of 7 ,000 on October 31, 19 1. s, of course, a ta abe dvdend out
of the earnngs and profts for the year 19 1.
dvdend (or porton thereof) wth respect to whch an eecton has been
made under secton 362(b) ( ) and whch the company desres to desgnate as a
capta gan dvdend need not be so desgnated wthn 30 days after the cose
of the ta abe year, but w be propery desgnated as a capta gan dvdend f
t s desgnated as such n a wrtten notce maed to the sharehoders at the tme
of the payment of the dvdend. Such desgnated capta gan dvdends are to
be aggregated wth the desgnated capta gan dvdends actuay pad durng
such ta abe year (not ncudng such dvdends wth respect to whch a pror
eecton has been made under secton 302(b) ( )) for the purpose of determnng
whether the aggregate of the desgnated capta gan dvdends wth respect to
such ta abe year of the company s greater than the e cess of the net ong-term
capta gan over the net short-term capta oss of the company.
fter the e praton of the tme for fng the return for the ta abe year for
whch an eecton s made under secton 362(b)( ), such eecton sha be
rrevocabe wth respect to the dvdend or porton thereof to whch t appes.
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29. 21-3.
26 U. S. C. 62,3791).)
ustn F. Wnke,
pproved November 2 , 19 2.
ohn S. Graham,
(Fed wth the Dvson of the Federa Regster December 3, 19 2, : a. m.)
Secton 29.362- : Method of ta aton of share-
hoders of reguated nvestment companes.
INT RN L R NU COD
Reguatons 111 amended. (See T. D. 9 9, page 176.)
Secton 29.362-6: Dstrbuton of dvdends
after cose of ta abe year.
INT RN L R NU COD
SUPPL M NT U. T TION OF USIN SS INCOM OF C RT IN S CTION 101
ORG NIZ TIONS
S CTION 21. IMPOSITION OF T
Secton 29. 21-3: Imposton of ta . 19 2-19-13923
T. D. 92
INCOM T ; T L Y RS GINNING FT R D C M R 1. 19 1
Ta aton of the busness ncome of certan ta -e empt organza-
tons for ta abe years begnnng after December 31,19 0.
Offce of Commssoner of Interna Revbnue,
Washngton 2 , D. C.
On anuary , 19 2, notce of proposed rue makng was pubshed
n the Federa Regster (17 F. R. 20 , n order to conform Reguatons
111 26 CFR, part 29 to part I of tte III of the Revenue ct of
19 0, approved September 23, 1960, to secton 201 (d) and (e) of the
cess Profts Ta ct of 19 0, approved anuary 3, 19 1, and to
sectons 121(e), 12 , 339, 3 7, and 3 of the Revenue ct of 19 1,
approved October 20, 19 1. fter consderaton of a such reevant
matter as was presented by nterested persons regardng the rues
proposed, the amendments to Reguatons 111 26 CFR, part 29 set
forth beow are hereby adopted. technca amendment s aso made
to 26 CFR 601.17(a), respectng forms requred of organzatons
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29. 21-3.
1 2
e empt from ta es mposed under chapter 1 of the Interna Revenue
Code.
Paragraph 1. Secton 29. 2-1, as amended by Treasury Decson
C. . 19 , , approved une 1 , 19 26 CFR 29. 2-1 , s
further amended by nsertng mmedatey after the thrd sentence
thereof the foowng:
For returns of certan corporatons, otherwse e empt from ta under secton
101 (1), (6). (7), or (1 ), whch are sub|ect to the ta mposed by secton
21(a)(1) upon ther suppement U net Income for any ta abe year begnnng
after December 31, 1930, see secton 29 21- . For returns of certan govern-
menta coeges or unverstes and corporatons whoy owned by such coeges
or unverstes, whch are sub|ect to the ta mposed by secton 21(a)(1)
upon ther suppement U net ncome for any ta abe year begnnng after
December 31, 19 1, see secton 29. 21- .
Par. 2. Secton 29. -1, as amended by Treasury Decson 3
C. . 19 1-1, 3 , 3 , approved pr 17. 19 1 26 CFR 29. -1 ,
s further amended by strkng the word very at the begnnng of
the second sentence thereof, and by nsertng n eu of such word
the foowng: In addton to such permanent books and records
as are requred under the precedng sentence wth respect to the ta
mposed by suppement U, every .
26 CFR 29.101-2 , s further amended by nsertng at the end thereof
the foowng:
(k) Suppement U ta returns.- In addton to the foregong requrements
of ths secton, certan organzatons otherwse e empt from ta under secton
101 (1), (6), (7), or (1 ), that are sub|ect to ta on suppement U net ncome,
are aso requred to f e returns on Form 990-T for ta abe years begnnng
after December 31, 19 0. See secton 29. 21- for requrements wth respect
to such returns.
Par. . Secton 29.101(1)-1 26 CFR 29.101 (1)-1 and secton
29.101 (7)- 26 CFR 29.101 (7)- are each amended by addng at
the end thereof the foowng:
For ta abe years begnnng after December 31, 19 0, organzatons otherwse
e empt from ta under ths secton are ta abe upon ther suppement U net
ncome. See sectons 21 through 2 , and the reguatons thereunder.
Par. . Secton 29.101 (6)- 26 CFR 29.101 (6)- s amended by
strkng the fourth paragraph and nsertng n eu thereof the
foowng:
Snce an organzaton e empt under secton 101(6) must be organzed and
oerated e cusvey for one or more of the specfed purposes, an organzaton
organzed or operated for the prmary purpose of carryng on a trade or bus-
ness for proft s not e empt thereunder. Thus, such an organzaton s not
e empt under secton 101(6) even though t has certan regous purposes, ts
property s hed n common, and ts profts do not nure to the beneft of n-
dvdua members of the organzaton. See secton 101 (IS) as to regous or
apostoc assocatons or corporatons. For ta abe years begnnng after
December 31, 19 0, organzatons, ncudng trusts, otherwse e empt from ta
under ths secton (other than a church, or a conventon or assocaton of
churches) are ta abe on suppement U net ncome. See sectons 21 through
2 , and the reguatons thereunder.
Par. 6. Paragraph (1 ) of secton 101 s strcken from that porton
of secton 101 whch s set forth mmedatey after secton 29.101 (13)-1
26 CFR 29.101(13)-1 , and there s nserted mmedatey after sec-
ton 29.101(13)- the foowng:
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29. 21-3.
fS C. 101. MPTIONS FROM T ON CORPOR TIONS S
M ND D Y S C. 217(a), R . CT 1939; S CS. 137(a).
16 (a), R . CT 19 2.
The foowng organzatons sha be e empt from ta aton under ths
chapter
(1 ) Corporatons organzed for the e cusve purpose of hodng
tte to property, coectng ncome therefrom, and turnng over the
entre amount thereof, ess e penses, to an organzaton whch tsef
s e empt from the ta mposed by ths chapter;
Sec. 29.101(1 )-1. Corporatons Organzed To od Tte to Property fob
empt Organzatons. For ta abe years begnnng after December 1, 19 0, a
corporaton otherwse e empt from ta under secton 101(1 ) s ta abe upon
ts suppement U net ncome f the ncome s payabe to an organzaton whch
s tsef sub|ect to the ta mposed by suppement U or f the ncome s payabe
to a church or to a conventon or assocaton of churches. Snce a corporaton
to be e empt under secton 1(11(1 ) must not engage n any busness other than
that of hodng tte to property and coectng ncome therefrom, t cannot
have unreated busness net ncome as defned n secton 22(a) other than
suppement U renta ncome descrbed n secton 23.
corporaton e empt under secton 101(1 ) cannot accumuate ncome and
retan ts e empton, but t must turn over the entre amount of such ncome,
ess e penses, to an organzaton whch s tsef e empt from ta under chapter 1
of the Interna Revenue Code.
19 0, PPRO D S PT M R 23, 19 0 .


(2) Secton 117(c) (1) s hereby amended by nsertng before and
00 the foowng: 21, .
(3) Secton 117(c)(2) s hereby amended by Insertng after
sectons 11 and 12 the foowng: (or, n the case of certan ta -
e empt trusts, n eu of the ta mposed by secton 21) .

PPRO D S PT M R 23, 19 0 .
Revenue ct of 19 0 shn be appcabe ony wth respect to ta abe
Par. . Secton 29.117-3 26 CFR 29.117-3 s amended as foows:
( ) y nsertng n the rst paragraph thereof mmedatey after
sectons 11 and 12 , n each pace where those words appear, the
foowng: (or, n the case of certan ta -e empt trusts, the ta
mposed by secton 21) .
( ) y nsertng n the second paragraph thereof mmedatey
before and 00 , n each pace where that phrase appears, the foow-
ng: 21, .
(C) y nsertng mmedatey after the second paragraph thereof
the foowng:
In appyng secton 117(c) n the case of ta -e empt trusts or organzatons
sub|ect to the ta mposed by secton 21, the ony amount whch s taken nto
account as capta gan or oss s that whch s taken nto account n computng
unreated busness net ncome under secton 22. Under secton 22, the ony
amount taken nto account as capta gan or oss s that resutng from the
appcaton of secton 117(k) (1).
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29. 21-3.
1
Par. 9. Secton 29.1 2-1, as amended by Treasury Decson 6 7
C. . 19 9-1, 9, 1 , approved February 16,19 9 26 CFR 29.1 2-1 ,
s further amended by nsertng at the end thereof the foowng:
(e) Suppement ta returns. For returns on Form 990-T by certan trusts
otherwse e empt from ta under secton 101(6), whch trusts are sub|ect to the
ta mposed by secton 21(a)(2) upon suppement U net ncome, see secton
29. 21- .
Par. 10. There s nserted mmedatey precedng secton 29.1 3 1
20 CFR 29.1 3-1 the foowng:
T IN OT R M1T O O NIZ TIONS R NU CT OF
19 0, PPRO D S PT M R 2. , 19 0 .


( ) Secton 1 3 s hereby amended by addng at the end thereof
the foowng new subsecton:
(h) Wthhodng on Certan Foregn Ta - empt Organza-
tons. In the case of Income of a foregn organzaton sub|ect to the
ta mposed by secton 21(a), the provsons of ths secton and secton
1 sha appy to rents ncudbe under secton 22 n computng ts
unreated busness net ncome, but ony to the e tent and sub|ect to
such condtons as may be provded under reguatons prescrbed by the
Secretary.

PPRO D S PT M R 23, 19 0 .
years begnnng after December 31,19 0.
Par. 11. Secton 29.1 3-1 (a), as amended by Treasury Decson
709 C. . 19 9-2, 0 , approved une 27, 19 9 26 CFR 29.1 3-1
(a) , s further amended by addng mmedatey after the s th para-
graph thereof the foowng:
The gross amount of rents p d under a suppement U ease to an organza-
ton sub|ect to the ta mposed by secton 21(a) wth respect to rents n-
cudbe under secton 22 n computng unreated busness net ncome s sub|ect
to wthhodng.
Par. 12. Secton 29.1 -1 2G CFR 29.1 -1 s amended by addng
mmedatey after the ffth paragraph the foowng:
For wthhodng n the case of rents under a suppement U ease pad to a
foregn corporaton sub|ect to the ta mposed by secton 21(a), see secton
1 3(h) and secton 29.1 3-1 (a).
Par. 13. Secton 29.217-2, as amended bv Treasury Decson 6S7
2G CFR 29.217-2 , and secton 29.23 -2 26 CFR 29.23 -2 are each
amended by nsertng at the end thereof the foowng:
(c) Suppement ta . For returns wth respect to the ta mposed by
secton 21(a) upon suppement U net ncome for any ta abe year begnnng
after December 31, 19 0, see secton 29. 21- .
Par. 1 . There s nserted mmedatey after secton 29.220-1, as
added bv Treasury Decson S93 C. . 19 2-1, 12G , approved pr
,19 2 26 CFR 29.220-1 , the foowng:
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29. 21-3.
S C. 301. INCOM OF DUC TION L, C RIT L . ND
C RT IN OT R MPT ORG NIZ TIONS R NU CT
OF 19 0, PPRO D S PT M R 23, 19 0 .


( ) Suppement s hereby amended by ddng at the end thereof
the foowng new secton:
S C. 221. FOR IGN DUC TION L, C RIT L , ND C R-
T IN OT R MPT ORG NIZ TIONS.
For speca provsons reatng to foregn educatona, chartabe,
and other e empt trusts, see secton 21(d).

PPRO D S PT M R 23, 19 0 .
The amendments made by ths part sectons 301. 302, and 303 of the
Par. 1 . There s nserted mmedatey after secton 2, 7, whch
secton s set forth mmedatey after secton 29.236-1 20 CFR
29.236-1 , the foowng:
S C. 301. INCOM OF DUC TION L, C RIT L . ND C R-
19 0, PPRO D S PT M R 23, 19 0 .


(6) Suppement I s hereby amended by addng at the end
thereof the foowng new secton :
S C. 23 . FOR IGN DUC TION L. C RIT L , ND C R-
T IN OT R MPT ORG NIZ TIONS.
For speca provsons reatng to foregn educatona, chartabe,
and certan other e empt organzatons, see secton 21(d).

19 0, PPRO D S PT M R 23, 19 0 .
The amendments made by ths part sectons 301, 302, and 303 of
the Revenue ct of 19 0 sha be appcabe ony wth respect to
ta abe years begnnng after Decemt er 31, 19 0.
Par. 16. The tte of suppement U. whch tte s set forth m-
medatey after secton 29. 0 -1 26 CFR 29. 0 -1 , s amended to
read as foows:
SUPPL M NT U T L T RS GINNING FOR
NU RY 1. 19 T M NT OF T FOR M M RS OF
RM D FORC S ON D T
Par. 17. There s nserted mmedatey after secton 29. 21-1 26
CFR 29. 21-1 the foowng:
SUPPL M NT U T L Y RS GINNING FT R D C M-
R 31, 19 0 T TION OF USIN SS INCOM OF C RT IN
S CTION 101 ORG NIZ TIONS
S C. 21. IMPOSITION OF T PPLIC L TO T L
Y RS GINNING FT R D C M R 31, 19 0 S
M ND D Y S C. 301, R NU CT OF 19 0, PPRO D
S PT M R 23, 19 0, Y S C. 201 (d) ND (e), C SS
2 2160 3 1
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S 29. 21-3.
1 6
PROFITS T CT OF 19 0, PPRO D NU RY 3, 19 1,
ND Y S CS. 121(e) ND 339(a), R NU CT OF 19 1,
Note. For effectve date of the ast cause of secton 21(a)(1),
see secton 12 of the Revenue ct of 19 1, set forth beow, and for the
effectve date of secton 21(b) (1) ( ), see secton 339(c) of the Reve-
nue ct of 19 1, set forth beow.
(a) In Genera. There sha be eved, coected, and pad for each
ta abe year begnnng after December 31, 19 0
(1) upon the suppement U net ncome (as defned n subsec-
ton (c)) of every organzaton descrbed n subsecton (b)(1),
a norma ta of 2 per centum of the suppement U net ncome, and
a surta of 22 per centum of the amount of the suppement U net
Income In e cess of 2 ,000; e cept that ( ) n the case of ta abe
years begnnng before pr 1, 19 1, and endng after March 31.
19 1, the norma ta sha be 2 per centum of the suppement U
net ncome, and ( ) n the case of ta abe years begnnng after
March 31, 19 1, and before pr 1, 19 , the norma ta sha be
30 per centum of the suppement U net ncome.
(2) upon the suppement U net ncome of every trust descrbed
In subsecton (b)(2), a norma ta computed at the rate and n
the manner provded In secton 11 and a surta computed at the
rates and n the manner provded n secton 12(b). In makng
such computatons for the purposes of ths secton, the term the
amount of the net ncome n e cess of the credts aganst net ncome
provded n secton 2 as used n secton 11 sha be read as the
amount of the suppement U net ncome and the term surta net
ncome as used n secton 12(b) sha be read as suppement U
net ncome .
(b) Organzatons Sub|ect to Ta .
(1) Organzatons ta abe as corporatons.
( ) Organzatons empt Under Secton 101 (1), (6).
(7), and (1 ). The ta es Imposed by subsecton (a)(1) sha
appy In the ease of any organzaton (other than a church,
a conventon or assocaton of churches, or a trust descrbed
n paragraph (2)) whch s e empt, e cept as provded n
ths suppement, from ta aton under ths chapter by reason
of paragraph (1), (6), or (7) of secton 101. Such ta es sha
aso appy n the case of a corporaton descrbed n secton
101(1 ) f the ncome s payabe to an organzaton whch tsef
s sub|ect to the ta mposed by subsecton (a) or to a church
or to a conventon or assocaton of churches.
( ) State Coeges and Unverstes. The ta es mposed
by subsecton (a) (1) sha appy n the case of any coege or
unversty whch s an agency or nstrumentaty of any gov-
ernment or any potca subdvson thereof, or whch s owned
or operated by a government or any potca subdvson thereof
or by.any agency or nstrumentaty of any one or more gov-
ernments or potca subdvsons. Such ta es sha aso appy
n the case of any corporaton whoy owned by one or more
such coeges or unverstes.
(2) Trusts ta abe at ndvdua rates. The ta es mposed by
subsecton (a)(2) sha appy n the case of any trust whch s
e empt, e cept as provded n ths suppement, from ta aton under
ths chapter by reason of paragraph (6) of secton 101 and whch, f
t were not for such e empton, woud be sub|ect to the provsons
of suppement .
(c) Defnton of Suppement U Net Income. The term suppe-
ment U net Income of an organzaton means the amount by whch ts
unreated busness net ncome (as defned n secton 22) e ceeds 1,000.
(d) Foregn Organzatons. The suppement U net ncome of an
organzaton descrbed n subsecton (b) (1) or (2) whch s a foregn
organzaton sha be ts suppement U net ncome derved from sources
wthn the Unted States determned n accordance wth the rues of
secton 110 and sectons 212, 213(a), 231 (c) and (d), and 232(a).
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1 7
29. 21-3.
S C. 12 . FF CTI D T R NU CT OF 19 1, PPRO D
OCTO R 20, 19 1 .
the amendments made to sectons 21 by secton
121(e) whch adds to secton 21(a) (1) the cause begnnng ; e cept
that of the Interna Revenue Code sha be appcabe to
ta abe years begnnng after December 31, 19 0, and endng after
March 31, 19 1.
S C. 339. T TION OF USIN SS INCOM OF ST T
COLL G S ND UNI RSITI S R NU CT OF 19 1,
PPRO D OCTO R 20, 1901 .

(c) ffectve Date. The amendments made by ths secton whch
adds subparagraph ( ) to secton 21(b)(1) sha be appcabe ony
wth respect to ta abe years begnnng after December 31, 19 1.
Secton 29. 21-1. reatng to abatement of ta for members of
rmed Forces on death, s set forth above mmedatey precedng secton
21 as amended by the Revenue ct of 19 0 and subsequent cts.
Sec. 29. 21-2. Secton 21 as ppcabe to Ta abe Years egnnng efore
19 and as ppcabe to Ta abe Years egnnng fter 19 0. The pro-
vsons of suppement U. and secton 21 of such suppement, for ta abe years
begnnng before anuary 1, 19 , are entrey dfferent from those appcabe for
ta abe years begnnng after December 31, 19 0. For certan ta abe years
begnnng before 19 . suppement U and secton 21 reate to the abatement of
ta for members of the rmed Forces on death. For ta abe years begnnng
after 19 0, suppement U and secton 21 reate to the mposton of ta upon
ncome of certan otherwse ta -e empt organzatons. In order to avod
confuson as to the reguatons appcabe under these two dfferent provsons
of suppement U and secton 21, the reguatons under suppement U nnd secton
21 appcabe for ta abe years begnnng before 19 (that s, the reguatons
reatng to the abatement of ta for members of the rmed Forces on death) are
contaned n secton 29. 21-1, nnd the reguatons under suppement U and secton
21 for ta abe years begnnng after 19 0 (that s, the reguatons reatng to
the Imposton of ta on the ncome of certan otherwse ta -e empt organza-
tons) are set forth In secton 29. 21-3 and the sectons of the reguatons
mmedatey foowng such secton.
Sec. 29. 21-3. Imposton of Ta . (a) Rates of ta . Secton 21(a) Im-
poses a ta , appcabe ony wth respect to ta abe years begnnng after Decem-
ber 31,19 0, upon the suppement U net ncome of certan organzatons otherwse
e empt from Federa ncome ta by reason of secton 101 (1). (0), (7), or (1 ).
ffectve ony wth respect to ta abe years begnnng after December 31, 19 1,
the ta es mposed by secton 21(a) sha aso appy n the case of any coege
or unversty whch Is an agency or nstrumentaty of any government or any
potca subdvson thereof, or whch s owned or operated by a government
or any potca subdvson thereof or by any agency or nstrumentaty of any
one or more governments or potca subdvsons, and to any corporaton whoy
owned by one or more such coeges or unverstes. Under secton 21(a)(1),
organzatons descrbed n secton 21(b)(1)( ) and n secton 29. 21- (a) (1)
are, for ta abe years begnnng after December 31, 19 0, and organzatons
descrbed n secton 21(b)(1)( ) and n secton 20. 21- (n) (2) are, for
ta abe years begnnng after December 31, 19 1, sub|ect to
(1) norma ta of 2 percent on ther suppement U net Income,
e cept that ( ) n the case of ta abe years begnnng before pr 1, 19 1,
and endng after March 31, 19 1, the norma ta sha be 2 percent
of the suppement U net ncome, and ( ) n the case of ta abe years
begnnng after March 31, 19 1, and before pr 1, 19 , the norma ta
sha be 30 percent of the suppement U net ncome, and
(2) surta of 22 percent on the amount of such ncome n e cess of
2 ,000.
Under secton 21(a)(2), trusts descrbed n secton 21(b)(2) and secton
29. 21 (6) are, for ta abe years begnnng after December 31, 19 0, sub|ect
to ta at the ndvdua rates prescrbed n sectons 11 and 12(b). For the
purpose of computng the ta mposed by secton 11 and secton 12(b), the
term the amount of the net ncome n e cess of the credts aganst net Income
provded n secton 2 , as used n secton 11, and the term surta net ncome ,
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29. 21-3.
1
as used n secton 12(b), sha each be read as suppement U net ncome . The
credt of 100 aganst net ncome provded n secton 163(a) (1) n the case of a
trust ta abe under suppement s not aowed as a credt aganst suppement
U net ncome.
(6) Defnton of suppement net ncome. The term suppement U net
ncome means the amount by whch the unreated busness net ncome (as defned
n secton 22) of an organzaton e ceeds 1,000.
Sec. 29. 21- . Organzatons Sub|ect to Ta . (a) CI) The ta es Imposed
by secton 21 (a) (1) appy n the case of any organzaton (other than a church,
a conventon or assocaton of churches, or a trust descrbed n secton 21(b) (2)
and n (6) of ths secton) whch s e empt, e cept as provded n suppement
U, from ta aton under chapter 1 by reason of paragraph (1), (C), or (7) of
secton 101. corporaton e empt from ta aton under secton 101(1 ), hodng
property for an organzaton whch tsef s sub|ect to the ta or for a church or
a conventon or assocaton of churches, s aso sub|ect to the suppement T ta
under secton 21(a)(1).
(2) The ta es mposed by secton 21(a) (1) appy n the case of any coege
or unversty whch s an agency or nstrumentaty of any government or any
potca subdvson thereof, or whch s owned or operated by a government
or any potca subdvson thereof or by any agency or nstrumentaty of any
one or more governments or potca subdvsons. Such ta es aso appy n the
case of any corporaton whoy owned by one or more such coeges or unvers-
tes. s here used, the word government ncudes any foregn government
(to the e tent not contrary to any treaty obgaton of the Unted States) and
a domestc governments (the Unted States and any of ts Terrtores or posses-
sons, any State, and the Dstrct of Coumba). ementary and secondary
schoos operated by such governments are not sub|ect to the suppement U ta .
(3) Churches and assocatons or conventons of churches are e empt from
the suppement U ta . The e empton s appcabe ony to an organzaton
whch tsef s a church or an assocaton or conventon of churches. Regous
organzatons, ncudng regous orders, f not themseves churches or assoca-
tons or conventons of churches, and a other organzatons whch are organ-
zed or operated under church auspces, are sub|ect to the suppement U ta .
whether or not they carry out a regous, educatona, or chartabe functon
approved by a church. For e ampe, an ncorporated unversty e empt from
ta under secton 101(6) s sub|ect to the suppement U ta whether or not t
was organzed by or s operated under the auspces of a church.
(6) The ta es mposed by secton 21(a)(2) sha appy n the case of any
trust whch s e empt, e cept as provded n suppement U, from ta aton under
chapter 1 by reason of paragraph (6) of secton 101 and whch, f t were not
for such e empton under secton 101(6), woud be sub|ect to the provsons of
suppement of such chapter.
Skc. 29. 21- . Provsons Generay ppcabe to Suppement U Ta .
(a) ssessment and coectons. Snce the ta es mposed by secton 21 are
ta es n|osed by chapter 1 of the Interna Revenue Code, a provsons of
aw and of these reguatons appcabe to the ta es mposed by chapter 1 are
appcabe to the assessment and coecton of the ta es mposed by secton 21.
See (6) of ths secton for the requrement as to the fng of returns. Organ-
zatons sub|ect to the ta mposed by secton 21(a)(1) are sub|ect to the
same provsons, ncudng penates, as are provded n the case of the ncome
ta of other corporatons. In the case of a trust sub|ect to the ta mposed
by secton 21(a)(2), the fducares for such trust are sub|ect to the same
provsons, ncudng penates, as are appcabe to fducares In the ease of
the ncome ta of other trusts. See sectons 2, 3, 6, and 1 2, and the regua-
tons prescrbed thereunder, wth respect to provsons appcabe to returns and
payment of ta .
(6) Returns. The return of suppement U ta sha be on Form 990-T. The
return sha e fed for each ta abe year begnnng after December 31, 19 0,
by every organzaton, otherwse e empt from ta under secton 101 (1), (6),
(7), or (1 ) and sub|ect to the suppement U ta , whch has gross ncome, n-
cuded n computng unreated busness net ncome for such ta abe year, of 1,000
or more. return sha aso be fed for each ta abe year begnnng after
December 31, 19 1, by every governmenta coege or unversty and by every
corporaton whoy owned by such a coege or unversty, whch s sub|ect to
the suppement U ta and whch has gross ncome, ncuded n computng unre-
ated busness net ncome for such ta abe year, of 1,000 or more. The fng
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1 9
29. 21-3.
of Form 990-T (oos not reeve the organzaton of the duty of fng oter
returns requred under chapter 1 of the Interna Revenue Code.
(c) Ta abe years, method of accountng, etc. The ta abe year (fsca
year or caendar year, as the case may be) of an organzaton sha be deter-
mned wthout regard to the fact that such organzaton .may have been e empt
from ta durng any pror perod. See sectons 1 and , and the reguatons
thereunder. Smary, n computng unreated busness net ncome, the determ-
naton of the ta abe year for whch an tem of ncome or e pense s taken nto
account sha be made under the provsons of sectons 1, 2, and 3, and the
reguatons thereunder, whether or not the tem arose durng a ta abe year
begnnng before, on, or after December 31, 19 0. If a method for treatng
bad debts was seected n a return of ncome (other than an nformaton return)
for a prevous ta abe year, the ta payer must foow such method n ts returns
under suppement U, uness such method s changed n accordance wth the
provsons of secton 29.23(k)-. ta payer whch has not prevousy seected
a method for treatng bad debts may, n ts frst return under suppement U, e er-
cse the opton granted n secton 29.23(k)-.
( ) Foregn ta credt. See secton 2 for provsons appcabe to the
credt for foregn ta es provded n secton 131.
S C. 22. UNR L T D USIN SS N T INCOM PPLIC L
TO T L Y RS GINNING FT R D C M R 31,
19 0 S DD D Y S C. 301, R NU CT OF 19.10. P-
PRO D S PT M R 23, 19. 0, ND S M ND D Y S CS.
339(b). 3 7, ND 3 S, R NU CT OF 19 1, PPRO D
OCTO R 20, 19 1 .
Note. For the provsons of secton 22 nserted by the amend-
ments made by sectons 339(b), 3 7. and 31 of the Revenue ct of
19 1, and for the effectve dates of such amendments, see sectons
339(c), 3 7(b), and 3 (b) of the Revenue ct of 19 1, set forth
beow.
(a) Defnton. The term unreated busness net ncome means
te gross ncome derved by any organzaton from any unreated
trade or busness (as defned n subsecton (b)) reguary carred on
by t, ess the deductons aowed by secton 23 whch are drecty
connected wth the carryng on of such trade or busness, sub|ect to
the foowng e ceptons, addtons, and mtatons:
(1) There sha be e cuded a dvdends, nterest, and annu-
tes, and a deductons drecty connected wth such ncome.
(2) There sha be e cuded a royates (ncudng overrdng
royates) whether measured by producton or by gross or net
ncome from the property, and a deductons drecty connected
wth such ncome.
(3) There sha be e cuded a rents from rea property (ncud-
ng persona property eased wth the rea property), and a deduc-
tons drecty connected wth such rents.
( ) Notwthstandng paragraph (3), In the case of a suppement
U ease (as defned n secton 23(a)) there sha be ncuded, as an
tem of gross ncome derved from an unreated trade or busness,
the amount ascertaned under secton 23(d) (1) and there sha be
aowed, as a deducton, the amount ascertaned under secton
23(d)(2).
( ) There sha be e cuded a gans or osses from the sae, e -
change, or other dsposton of property other than ( ) stock n
trade or other property of a knd whch woud propery be ncudbe
n nventory f on hand at the cose of the ta abe year, or ( ) prop-
erty hed prmary for sae to customers n the ordnary course of
the trade or busness. Ths paragraph sha not appy wth respect
to the cuttng of tmber whch s consdered, u on the appcaton of
secton 117(k) (1), as a sae or e change of such tmber.
(6) The net operatng oss deducton provded n secton 23(s)
sha be aowed, e cept that
( ) the net operatng oss for any ta abe year, the amount
of the net operatng oss carry-back or carry-over to any ta abe
year, and the net operatng oss deducton for any ta abe year
sha be determned under secton 122 wthout takng nto ac-
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29. 21-3.)
190
count any amount of ncome or deducton whch a e cuded
under ths suppement n computng the unreated busness net
ncome; and
( ) the terms precedng ta abe year and precedng ta -
abe years as used n secton 122 sha not Incude any ta abe
year for whch the organzaton was not sub|ect to the pro-
vsons of ths suppement.
(7) There sha be e cuded a ncome derved from research for
( ) the Unted States, or any of ts agences or Instrumentates,
or ( ) any State or potca subdvson thereof; and there sha
be e cuded a deductons drecty connected wth such Income.
( ) ( ) In the case of a coege, unversty, or hospta, there
sha be e cuded a ncome derved from research performed for
any person, and a deductons drecty connected wth such ncome.
( ) In the case of an organzaton operated prmary for the pur-
poses of card ng on fundamenta research the resuts of whch are
freey avaabe to the genera pubc, there sha be e cuded a
ncome derved from research performed for any person, and a
deductons drecty connected wth such ncome.
(9) ( ) In the case of any organzaton descrbed n secton
21(b) (1), the so-caed chartabe contrbuton deducton aowed
by secton 23 (q) sha he aowed (whether or not drecty connected
wth the carryng on of the trade or busness), but sha not e ceed
per centum of the unreated busness net ncome computed wthout
the beneft of ths subparagraph.
( -) In the case of any trust descrbed n secton 21(b) (2), the
so-caed chartabe contrbuton deducton aowed by secton
23(o) sha be aowed (whether or not drecty connected wth the
carryng on of the trade or busness), and for such purpose a dstr-
buton made by the trust to a benefcary descrbed n secton 23(o)
sha be consdered as a gft or contrbuton. The deducton aowed
by ths subparagraph sha not e ceed 1 per centum of the unreated
busness net ncome computed wthout the beneft of ths subpara-
graph.
If a trade or busness reguary carred on by a partnershp of whch an
organzaton s a member s an unreated trade or busness wth respect
to such organzaton, such organzaton n computng ts unreated bus-
ness net ncome sha, sub|ect to the e ceptons, addtons, and mta-
tons contaned n paragraphs (1) through (9) above, ncude ts share
(whether or not dstrbuted) of the gross ncome of the partnershp from
such unreated trade or busness and ts share of the partnershp deduc-
tons drecty connected wth such gross ncome. If the ta abe year
of the organzaton Is dfferent from that of the partnershp, the amounts
to be so ncuded or deducted n computng the unreated busness net
ncome sha be based upon the ncome and deductons of the partner-
shp for any ta abe year of the partnershp (whether begnnng on,
before, or after anuary 1, 19 1) endng wthn or wth the ta abe year
of the organzaton. In the case of an organzaton descrbed In secton
3S13(a) (2) whch s a member of a partnershp a of whose members are
organzatons descrbed n secton 3 13(a)(2), f a trade or busness
reguary carred on by such partnershp s an unreated trade or busness
wth respect to such organzaton, such organzaton sha, for ta abe
years begnnng before anuary 1, 19 , be aowed a deducton- n an
amount equa to the porton of the gross ncome of such partnershp
from such unreated trade or busness whch such organzaton s re-
qured (by a provson of a wrtten contract e ecuted by such organza-
ton pror to anuary 1, 19 0, whch provson e pressy deas wth the
dsposton of the gross ncome of the partnershp) to pay wthn the
ta abe year n dscharge of ndebtedness ncurred by such organzaton
n acqurng ts share of such trade or busness, or to rrevocaby set
asde wthn the ta abe year for the dscharge of such ndebtedness
(to the e tent that such amount-has been so pad or set asde) f ()
such partnershp was formed pror to anuary 1, 19 0, for the purpose
of carryng on such trade or busness, and () substantay a the
assets used n carryng on such trade or busness were acqured by t or
by ts members pror to such date. s used n the precedng sentence,
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29. 21-3.
the word ndebtedness does not ncude ndebtedness ncurred after
anuary 1. 19 0.
(b) Unreated Trade or usness. The term unreated trade or
busness means, n the case of any organzaton sub|ect to the ta
mposed by secton 21(a), any trade or busness the conduct of whch
s not substantay reated (asde from the need of such organzaton
for ncome or funds or the use t makes of the profts derved) to the
e ercse or performance by such organzaton of ts .chartabe, edu-
catona, or other purpose or functon consttutng the bass for ts e -
empton under secton 101 (or, n the case of an organzaton descrbed
n secton 21 (b) (1) ( ), to the e ercse or performance of any purpose
or functon descrbed n secton 101(C)), e cept that such term sha not
ncude any trade or busness
(1) n whch substantay a the work n carryng or. such trade
or busness s performed for the organzaton wthout compensa-
ton ; or
(2) whch s carred on, n the case of an organzaton descrbed
n secton 101(6) or n the case of a coege or unversty descrbed
n secton 21(b)(1)( ). by the organzaton prmary for the
convenence of ts members, students, patents, offcers, or em-
poyees ; or
(3) whch s the seng of merchandse, substantay a of
whch has been receved by the organzaton as gfts or contrbu-
tons.
The term unreated trade or busness - means, n the case of a trust
computng ts unreated busness net ncome under ths secton for the
purposes f secton 102(g) (1). any trade or busness reguary carred
on by such trust or by a partnershp of whch t s a member. If a
pubshng busness carred on by an organzaton durng a ta abe year
begnnng before anuary 1, 19 3, s, wthout regard to ths sentence,
an unreated trade or busness, but before the begnnng of the thrd
succeedng ta abe year the busness s carred on by t (or by a suc-
cessor who acqured such busness n a qudaton whch woud con-
sttute a ta -free e change under secton 112(b)(6)) n such manner
that the conduct thereof s substantay reated to the e ercse or per-
formance by such organzaton (or such successor) of ts educatona
or other purpose or functon descrbed n secton 101(C), such pubsh-
ng busness sha not be consdered, for the ta abe year, as an unreated
trade or busness.
S C. 339. T TION OF USIN SS INCOM OF ST T COL-
L G S ND UNI RSITI S R NU CT OF 19 1, P-
PRO D OCTO R 20, 19 1 .

(c) ffectve Date. The amendments made by ths secton whch
adds to secton 22(b) the phrase: (or, In the case of an organzaton
descrbed n secton 21(b)(1)( ), to the e ercse or performance of
any purpose or functon descrbed n secton 101(C)) , and nserts n
paragraph (2) thereof the phrase: or n the case of a coege or un-
versty descrbed n secton 21(b)(1)( ) sha be appcabe ony
wth respect to ta abe years begnnng after December 31, 19 1,
S C. 3 7. PU LIS ING USIN SS C RRI D ON Y T - MPT
ORG NIZ TIONS R NU CT OF 19 1, PPRO D OC-
TO R 20, 19 1 .

(b) ffectve Date. The amendment made by ths secton whch
adds to secton 22(b) the sentence begnnng: If a pubshng busness
carred on by an organzaton sha be appcabe wth re-
spect to ta abe years begnnng after December 31, 19 0, and pror to
anuary 1, 19 3.
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29. 21-3.
192
S C. 3 . D DUCTION WIT R SP CT TO C RT IN UNR -
L T D USIN SS N T INCOM R NU CT OF 19 1,

(b) ffectve Date. The amendment made by ths secton whch
adds to secton 22(a) the sentence begnnng: In the case of an or-
ganzaton descrbed n secton 3 13(a) (2) and the sentence
foowng such sentence- sha be appcabe wth respect to ta abe
years begnnng after December 31, 19 0, and pror to anuary 1, 19 .
Sec. 29. 22-1. Defnton of Unreated usness Net Income. (a) Genera
rue. The unreated busness net ncome whch s sub|ect to the suppement U ta
s the gross Income, derved by any organzaton to whch suppement U appes,
from any unreated trade or busness reguary carred on by t, ess the deduc-
tons aowed by secton 23 of the Code whch are drecty connected wth the
carryng on of such trade or busness, sub|ect to certan e ceptons, addtons,
and mtatons referred to beow. In the case of an organzaton whch reguary
carres on two or more unreated busnesses, Us unreated busness net ncome
Is the aggregate of ts gross ncome from a such unreated busnesses, ess the
aggregate of the deductons aowed wth respect to a such unreated busnesses.
For provsons generay appcabe to the computaton of unreated busness net
ncome, see secton 29. 21- , and for rues appcabe to the determnaton of the
ad|usted bass of property, see secton 29. 23-3 (a).
(6) ceptons, addtons, and mtatons. Whether a partcuar tem of
ncome fas wthn any of the e ceptons, addtons, and mtatons provded n
secton 22 sha be determned by a the facts and crcumstances of each case.
For e ampe, If a payment termed rent by the partes s n fact a return of
profts by a person operatng the property for the beneft of the ta -e empt organ-
zaton or s a share of the profts retaned by such organzaton as a partner or
a |ont venturer, such payment s not wthn the e cepton for rent. The e -
ceptons, addtons, and mtatons provded n secton 22 are as foows:
(1) Dvdends, nterest, and annutes. dvdends, nterest, and annu-
tes, and the deductons drecty connected therewth, sha be e cuded n
computng unreated busness net ncome.
(2) Royates. Royates, ncudng overrdng royates, and a deduc-
tons drecty connected wth such Income sha be e cuded n computng
unreated busness net ncome. Mnera royates sha be e cuded whether
measured by producton or by gross or net ncome from the mnera property.
owever, where an organzaton owns a workng nterest n a mnera prop-
erty, and s not reeved of ts share of the deveopment costs by the terms
of any agreement wth an operator, ncome receved from such an nterest
sha not be e cuded. In-o payments sha be treated n the same manner
as royaty payments for the purpose of computng unreated busness net
ncome.
(3) Rents. () Rents from rea property (ncudng persona property
eased wth the rea property) and the deductons drecty connected there-
wth sha aso be e cuded n computng unreated busness net ncome,
e cept that certan rents from, and certan deductons n connecton wth,
a suppement U ease (as defned n secton 2. (a)) sha be ncuded n
computng unreated busness net ncome. See sectons 29. 23-3 am
29. 23- .
() Payments for the use or occupancy of rooms or other space where
servces are aso rendered to the occupant, such as for the use or occupancy
of rooms or other quarters n hotes, boardng houses, or apartment houses
furnshng hote servces, or n tourst camps or tourst homes, or for the
use or occupancy of space n parkng ots, warehouses, or storage garages,
do not consttute rentas from rea estate. Generay, servces are con-
sdered rendered to the occupant f they are prmary for hs convenence
and are other than those usuay or customary rendered n connecton wth
the renta of rooms or other space for occupancy ony. The suppyng of
mad servce, for e ampe, consttutes such servce; whereas the furnshng
of heat and ght, the ceanng of pubc entrances, e ts, starways and
obbes, the coecton of trash, etc., are not consdered as servces rendered to
the occupant. Payments for the use or occupancy of entre prvate res-
dences or vng quarters n dupe or mutpe housng unts, of offces n an
offce budng, etc., are generay rentas from rea estate.
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29. 21-3.
( ) Gans and osses from the sae, etc., of property. There sha aso
be e cuded from the computaton of unreated busness net ncome gans
or osses from the sae, e change, or other dsposton of property other than
() stock n trade or other property of a knd whch woud propery be n-
euded n the nventory of the organzaton f on hand at the cose of the
ta abe year, or () property hed prmary for sae to customers n the
ordnary course of the trade or busness. Ths e cuson does not appy
wth respect to the cuttng of tmber whch s consdered, upon the appcaton
of secton 117(k) (1), as n sae or e change of such tmber. The e cuson
under secton 22(a)( ) appes wth respect to gans and osses from n-
vountary conversons, casuates, etc.
( ) et operatng ooses. The net operatng oss deducton provded n
secton 23(s) sha be aowed n computng unreated busness net ncome.
owever, tte net operatng oss carry-back or carry-over (from a ta abe
year for whch the ta payer s sub|ect to the provsons of suppement U)
sha be determned under secton 122 wthout takng nto account any
amount of ncome or deducton whch s not ncuded under suppement U
n computng unreated busness net ncome. For e ampe, a oss attrbut-
abe to an unreated trade or busness sha not be dmnshed by reason of
the recept of dvdend ncome. For the purpose of computng the net oper-
atng oss deducton, the terms precedng ta abe year and precedng
ta abe years as used n secton 122 sha not ncude any ta abe year for
whch the organzaton was not sub|ect to the provsons of suppement U.
Thus, f the organzaton was not sub|ect to the provsons of suppement U
for the mmedatey precedng ta abe year, the net operatng oss s not a
carry-back to any precedng ta abe year, and the net operatng oss carry-
over to succeedng ta abe years s not reduced by the net ncome for any
precedng ta abe year. net operatng oss carry-back or carry-over sha
be aowed ony from a ta abe year for whch the ta payer s sub|ect to the
provsons of suppement U.
(6) Research. (1) Income derved from research for the Unted Sates
or any of ts agences or nstrumentates or a State or potca subdvson
thereof, and a deductons drecty connected wth such ncome, sha be
e cuded n computng unreated busness net ncome.
() In the case of a coege, unversty, or hospta, a ncome derved
from research performed for any person and a deductons drecty connected
wth such ncome sha be e cuded n computng unreated busness net
ncome.
() In the case of an organzaton operated prmary for the pur ose
of carryng on fundamenta research (as dstngushed from apped research)
the resuts of whch are freey avaabe to the genera pubc, a ncome
derved from research performed for any person and a deductons drecty
connected wth such ncome sha be e cuded n computng unreated bus-
ness net ncome.
(v) For the purpose of ths secton, the term research does not ncude
actvtes of a type ordnary carred on as an ncdent to commerca or
ndustra operatons, for e ampe, the ordnary testng or nspecton of
materas or products or the desgnng or constructon of equpment, bud-
ngs, etc. The term fundamenta research does not ncude research car-
red on for the prmary purpose of commerca or ndustra appcaton.
(7) Chartabe, etc., contrbutons. () In computng the unreated
busness net ncome of a trust descrbed n secton 21(b)(2) or of an
organzaton descrbed n secton 21(b)(1), there sha be deducted from
gross Income the amount aowed by secton 2. (o) or 23(q), whchever s
appcabe, whether or not the contrbuton s drecty connected wth the
carryng on of the trade or busness. Ths deducton sha be mted to
1 percent, f computed under secton 23 (o), or percent, f computed under
secton 2. (q), of the unreated busness net ncome computed wthout
beneft of such deducton. In the case of a trust descrbed n secton
21(b)(2), dstrbutons made pursuant to the trust nstrument to a bene-
fcary descrbed n secton 2a (o) sha be treated n the same manner as
gfts or contrbutons.
() The contrbuton, whether made by a trust or other e empt organza-
ton, must be pad to another organzaton to be aowabe. For e ampe, a
unversty e empt from ta under secton 101 (( ), operatng an unreated bus-
ness, sha be aowed a deducton, not n e cess of percent of ts unreated
busness net Income, for gfts or contrbutons to another unversty for edu-
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29. 21-3.
19
catona work btt sha not be aowed any deducton for amounts e pended n
admnsterng ts own educatona program.
Sec. 29. 22-2. Organzatons That re Members of Partnershps. (a) In
genera. In the event an organzaton to whch suppement D appes s a member
of a partnershp reguary engaged n a trade or busness whch s an unreated
trade or busness wth respect to such organzaton, the organzaton sha
ncude n computng ts unreated busness net ncome so much of ts share
(whether or not dstrbuted) of the partnershp gross ncome as s derved from
that unreated busness and ts share of the deductons attrbutabe thereto. For
ths purpose, both the gross ncome and the deductons sha be computed wth
the necessary ad|ustments for the e ceptons, addtons, and mtatons referred
to n secton 22(a) and n secton 29. 22-1. For e ampe, f an e empt educa-
tona nsttuton s a partner n a partnershp whch operates a factory am f
such partnershp aso hods stock n a corporaton, the e empt organzaton sha
ncude n computng ts unreated busness net ncome ts share of the gross
ncome from the operaton of the factory, but not ts share of any dvdends
receved by the partnershp from the corporaton. If the ta abe year of the
organzaton dffers from that of the partnershp, the amounts ncuded or
deducted n computng unreated busness net ncome sha be based upon the
ncome and deductons of the partnershp for each ta abe year of the partnershp
(whether begnnng on, before, or after anuary 1, 19 1) endng wthn or wth
the ta abe year of the organzaton.
/) Speca rue. For a speca rue, appcabe ony wth respect to ta abe
years begnnng after December 31, 19 0, and pror to anuary 1, 19 , wth
respect to unreated trades or busnesses carred on n partnershp by certan
educatona organzatons descrbed n secton 3 13(a) (2), see the ast two
sentences of secton 22(a) as amended by secton 3 of the Revenue ct of
19 1.
Sec. 29. 22-3. Defnton of Unreated Trade or usness. (a) In
genera. (1) The term unreated busness net ncome as used n secton
22(a) ncudes ony ncome from an unreated trade or busness reguary
carred on. s used n secton 22(a), the term trade or busness has the
same meanng as t has n secton 23(a) (1).
(2) The ncome of an e empt organzaton s sub|ect to the suppement U
ta ony f two condtons are present wth respect to such ncome. The frst
condton s that the ncome must be from a trade or busness whch Is reguary
carred on by the organzaton. The second condton s that the trade or bus-
ness must not be substantay reated (asde from the need of the organzaton
for ncome or funds or the use t makes of the profts derved) to the e ercse
or performance by such organzaton of ts chartabe, educatona, or other
purpose or functon consttutng the bass for ts e empton under secton 101,
or, n the case of an organzaton descrbed n secton 21(b)(1) ( ) (govern-
menta coeges, etc.), to the e ercse or performance of any purpose or functon
descrbed n secton 101 (0). Whether or not an organzaton s sub|ect to the
suppement U ta sha be determned by the appcaton of these tests to the
partcuar crcumstances nvoved n each ndvdua case. See (b) of ths sec-
ton for certan e ceptons from the term unreated trade or busness .
(3) trade or busness s reguary carred on when the actvty s conducted
wth suffcent consstency to ndcate a contnung purpose of the organzaton
to derve some of ts ncome from such actvty. n actvty may be reguary
carred on even though ts performance s nfrequent or seasona.
( ) Ordnary, a trade or busness s substantay reated to the actvtes
for whch an organzaton s granted e empton f the prncpa purpose of such
trade or busness s to further (other than through the producton of ncome)
the purpose for whch the organzaton s granted e empton. In the usua ease
the nature and sze of the trade or busness must be compared wth the nature
and e tent of the actvtes for whch the organzaton s granted e empton n
order to determne whether the prncpa purpose of such trade or busness s
to further (other than through the producton of ncome) the purpose for whch
the organzaton s granted e empton. For e ampe, the operaton of a wheat
farm s substantay reated to the e empt actvty of an agrcutura coege
f the wheat farm s operated as a part of the educatona program of the
coege, and s not operated on a scae dsproportonatey arge when compared
wth the educatona program of the coege. Smary, a unversty rado
staton or press s consdered a reated trade or busness f operated prmary
as an ntegra part of the educatona program of the unversty, but Is con-
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29. 21-3.
sdered an unreated trade or busness If operated n substantay the same man-
ner as a commerca rado staton or pubshng house. trade or busness
not otherwse reated does not become substantay reated to an organzaton s
e empt purpose merey because ncdenta use s made of the trade or busness
n order to further the e empt purpose. For e ampe, the manufacture and sae
of a product by an e empt coege woud not become substantay reated
merey because students as part of ther educatona program perform cerca
or bookkeepng functons n the busness. In some cases, the busness may be
substantay reated because t s a necessary part of the e empt actvty. For
e ampe, n the case of an organzaton e empt under secton 101(6) and en-
gaged n the rehabtaton of handcapped persons, the busness of seng
artces made by such persons as a part of ther rehabtaton tranng woud
not be consdered an unreated busness snce such busness s a necessary part
of the rehabtaton program.
(6) ceptons. .Secton 22(b) specfcay states that the term unreated
trade or busness- does not ncude
(1) ny trade or busness n whch substantay a the work n carryng
on such trade or busness s performed for the organzaton wthout
compensaton; or
(2) ny trade or busness carred on by an organzaton e empt under
secton 101 (( ) or by a governmenta coege or unversty descrbed n
secton 21(b)(1)( ), prmary for the convenence of ts members,
students, patents, offcers, or empoyees; or
(3) ny trade or busness whch conssts of seng merchandse, sub-
stantay a of whch has been receved by the organzaton as gfts or
contrbutons.
n e ampe of the operaton of the frst of the e ceptons mentoned above woud
be an e empt orphanage operatng a reta store and seng to the genera pubc,
where substantay a the work n carryng on such busness s performed
for the organzaton by vounteers wthout compensaton. n e ampe of the
second mtaton woud be a aundry operated by a coege for the purpose of
aunderng dormtory nens and the cothng of students. The thrd e cepton
appes to so-caed thrft shops operated by a ta -e empt organzaton where
those desrng to hem ft such organzaton contrbute od cothes, books, fur-
nture, etc., to be sod to the genera pubc wth the proceeds gong to the e empt
organzaton.
(c) Speca rue respectng pubshng busnesses. For a speca rue, ap-
pcabe ony wth respect to ta abe years begnnng after December 31, 19 0,
and pror to anuary 1, 19 3, wth respect to pubshng busnesses carred on
by an organzaton, see secton 22(b) as amended by secton 3 7 of the Revenue
ct of 10 1.
S C. 23. SUPPL M NT U L S PPLIC L TO T L
Y RS GINNING FT R D C M R 31, 10 0 S DD D
Y S CTION 301, R NU CT OF 10 0, PPRO D S P-
T M R 23, 10 0 .
(a) Defnton of Suppement U Lease. The term suppement U
ease means a ease for a term of more than fve years of rea property
by an organzaton (or by a partnershp of whch t s a member), f at
the cose of the essor s ta abe year there s a suppement U ease
ndebtedness (as defned n subsecton (b)) wth respect to such prop-
erty. In computng the term of a ease whch contans an opton for
renewa or e tenson, the term of such ease sha be consdered as
ncudng any perod for whch such opton may e e ercsed; and the
term of any ease made pursuant to an e ercse of such opton sha
ncude the perod durng whch the pror ease was n effect. If rea
property s acqured sub|ect to a ease, the term of such ease sha be
consdered to begn on the date of such acquston. No ease sha be
consdered a suppement U ease f ( ) such ease s entered nto pr-
mary for purposes whch are substantay reated (asde from the
need of such organzaton for ncome of funds or the use t makes of the
rents derved) to the e ercse or performance by such organzaton of
ts chartabe, educatona, or other purpose or functon consttutng
the bass for ts e empton under secton 101, or ( ) the ease s of
premses n a budng prmary desgned for occupancy, and occuped,
by the organzaton. If a ease for more than fve years to a tenant s
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29. 21-3.
196
for ony a porton of the rea property, and space In the rea property
Is rented durng the ta abe year under a ease for not more than fve
years to any other tenant of the organzaton, eases of the rea property
for more than fve years sha be consdered as suppement U eases
durng the ta abe year ony f
(1) the rents derved from the rea property durng the ta abe
year under such eases represent 0 per centum or more of the tota
rents derved durng the ta abe year from the rea property; or the
area of the premses occuped under such eases represents, at any
tme durng the ta abe year, 0 per centum or more of the tota
area of the rea property rented at such tme; or
(2) the rent derved from the rea property durng the ta abe
year from any tenant under such a ease, or from a group of tenants
(under such eases) who are ( ) members of an affated group
(as denned n secton 1 1) or ( ) partners, represents more than
10 per centum of the tota rents derved durng the ta abe year
from such property; or the area of the premses occuped by any one
such tenant, or by any such group of tenants, represents at any tme
durng the ta abe year more than 10 per centum of the tota area
of the rea property rented at such tme.
(b) Suppement U Lease Indebtedness. The term suppement D
ease ndebtedness means, wth respect to any rea property eased for
a term of more than years, the unpad amount of
(1) the Indebtedness ncurred by the essor n acqurng or Im-
provng such property;
(2) the ndebtedness ncurred pror to the acquston or mprove-
ment of such property If such ndebtedness woud not have been In-
curred but for such acquston or mprovement; and
(3) the ndebtedness ncurred subsequent to the acquston or m-
provement of such property f such ndebtedness woud not have been
ncurred but for such acquston or mprovement and the ncur-
rence of such ndebtedness was reasonaby foreseeabe at the tme of
such acquston or mprovement.
Where rea property s acqured sub|ect to a mortgage or other smar
en, the amount of the ndebtedness secured by such mortgage or en
sha be consdered (whether the acquston was by gft, devse, or pur-
chase) as an ndebtedness of the essor ncurred n acqurng such prop-
erty even though the essor dd not assume or agree to pay such ndebted-
ness, e cept that where rea property was acqured by gft, bequest, or
devse pror to uy 1, 19 0, sub|ect to a mortgage or other smar en,
the amount of such mortgage or other smar en sha not be consdered
as an ndebtedness of the essor ncurred n acqurng such property.
Where rea property was acqured by gft, bequest, or devse pror to
uy 1, 19 0, sub|ect to a ease requrng mprovements n such property
upon the happenng of stated contngences, ndebtedness ncurred n m-
provng such property n accordance wth the terms of such ease sha
not be consdered as an ndebtedness for purposes of ths subsecton. In
the case of a corporaton descrbed n secton 101(1 ), a of the stock
of whch was acqured pror to uy 1,19 0, by an organzaton descrbed
n paragraph (1), (6), or (7) of secton 101 (and more than one-thrd of
such stock was acqured by such organzaton by gft or bequest), any
ndebtedness ncurred by such corporaton pror to uy 1, 19 0, and
any ndebtedness ncurred by such corporaton on or after such date n
mprovng rea property n accordance wth the terms of a ease entered
nto ppor to such date, sha not be consdered as an Indebtedness wth
respect to such corporaton or such organzaton for purposes of ths sub-
secton. In determnng the amount of the suppement U ease ndebted-
ness where ony a porton of the rea property s sub|ect to a suppement
T ease, proper aocaton to the premses covered by such ease sha be
made of the ndebtedness ncurred by the essor wth respect to the rea
property.
(c) Persona Property Leased Wth Rea Property. For the pur-
poses of ths secton, the term rea property and the term premses
ncude persona property of the essor eased by t to a essee of ts rea
estate f the ease of such persona property s made under, or n connec-
ton wth, the ease of such rea estate.
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197
29. 21-3.
(d) Treatment of Suppement U Lease Rents and Deductons. In
computng under secton 22(a) the unreated busness net ncome for
any ta abe year
(1) Percentage of rents taken nto account. Tere sha be
ncuded wth respect to each suppement U ease, as an tem of gross
ncsme derved from an unreated trade or busness, an amount whch
s the same percentage (but not n e cess of 100 per centum) of the
tota rents derved durng the ta abe year under such ease as ( )
the suppement U ease ndebtedness, at the cose of the ta abe year,
wth respect to the premses covered by such ease s of ( ) the ad-
|usted bass, at the cose of the ta abe year, of such premses.
(2) Percentage of deductons taken nto account. There sha
be aowed wth respect to each suppement U ease, as a deducton
to be taken nto account n computng unreated busness net ncome,
an amount whch s the same percentage (but not n e cess of 100
per centum) of the sum determned under paragraph (3) as the
amount determned under cause ( ) of paragraph (1) s of the
amount determned under cause (P ) of such paragraph.
(3) Deductons aowabe. The sum referred to n paragraph
(2) s the sum of the foowng deductons aowabe under secton
23:
( ) Ta es and other e penses pad or accrued durng the
ta abe year upon or wth respect to the rea property sub|ect
to the suppement I ease.
( ) Interest pad or accrued durng the ta abe year on the
suppement U ease ndebtedness.
(C) reasonabe aowance for e hauston, wear and tear
(ncudng a reasonabe aowance for obsoescence) of the rea
property sub|ect to such ease.
Where ony a porton of the rea property s sub|ect to the suppement
U ease, there sha be taken nto account under subparagraph ( ),
( ), or (C) ony those amounts whch are propery aocabe to the
premses covered by such ease.
Sec. 29. 23-1. Defnton of Suppement U Lease. (a) 7 genera. The
term suppement U ease means any ease, wth certan e ceptons dscussed
n (c) of ths secton, for a term of more than years of rea property by an
organzaton sub|ect to suppement U (or by a partnershp of whch t s a
member) f at the cose of the organzaton s ta abe year there s a suppement
U ease ndebtedness as defned n secton 23(h) and secton 29. 23-2, wth
respect to such property. For the purpose of secton 23, the term rea property
and the term premses ncude persona property of the essor ta -e empt
organzaton eased by t to a essee of ts rea estate f the ease of such persona
property s made under, or n connecton wth, the ease of such rea estate. For
amounts of suppement D rents and deductons to be ncuded n computng unre-
ated busness net ncome, see secton 29. 23-3.
(6) Speca rues. (1) In computng the term of the ease, the perod for
whch a ease may be renewed or e tended by reason of an opton contaned
theren sha be consdered as part of the term. For e ampe, a 3-year ease
wth an opton for renewa for another such perod s consdered a ease for a
term of 0 years. nother e ampe s the case of a 1-year ease wth opton of
renewa for another such term, where the partes at the end of each year renew
the arrangement. In ths case, durng the ffth year (but not durng the frst
years), the ease fas wthn the -year rue, snce the ease then nvoves
years and there s an opton for the s th year. In determnng the term of the
ease, an opton for renewa of the ease s taken nto account whether or not
the e ercse of the opton depends upon condtons or contngences.
(2) If the property s acqured sub|ect to a ease, the term of such ease sha
be consdered to begn on the date of such acquston. For e ampe, f an
e empt organzaton purchases, n whoe or n part wth borrowed funds, rea
property sub|ect to a 10-year ease whch has 3 years eft to run, and such ease
contans no rght of renewa or e tenson, the ease sha be consdered a 3-year
ease and bence does not meet the defnton of a suppement U ease n secton
23(a) and (a) of ths secton. owever, f ths ease contans an opton to
renew for a perod of 3 years or more, It s a suppement U ease.
(c) ceptons. (1) ease sha not be consdered a suppement U ease If
such ease Is entered nto prmary for a purpose whch s substantay reated
(asde from the need of such organzaton for ncome or funds, or the use t makes
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29. 21-3.
19S
of the rents derved) to the e ercse or performance by such organzaton of ts
chartabe, educatona, or other purpose or functon consttutng the bass for
ts e empton. For e ampe, where a ta -e empt hospta eases rea property
owned by t to an assocaton of doctors for use as a cnc, the rents derved
under such ease woud not be ncuded n computng unreated busness net
ncome f the cnc s substantay reated to the carryng on of hospta func-
tons. See secton 29. 22-3 for prncpes appcabe n determnng whether there
s a substanta reatonshp to the e empt purposes of an organzaton.
(2) ease s not a suppement U ease f the ease s of premses n a budng
prmary desgned for occupancy and occuped by the ta -e empt organzaton.
(3) If a ease for. more than years to a tenant s for ony a porton of the
rea property, and space n the rea property s rented durng the ta abe year
under a ease for not more than years to any other tenant of the ta -e empt
organzaton, eases of the rea pro )erty for more than years sha be con-
sdered as:suppement U eases durng the ta abe year ony f
() The rents derved from the rea preperty durng the ta abe year
under such eases represent 0 percent or more of the tota rents derved
durng the ta -abe year from the rea property; or the area of the premses
occuped under such eases represents, at any tme durng the ta abe year,
0 percent or more of the tota area of the rea property rented at such
tme; or
() The rent derved from the rea property durng the ta abe year
from any tenant under such a ease, or from a group of tenants (under
such eases) who are ether members of an affated group (as defned n
secton 1 1) or are partners, represents more than 10 percent of the tota
rents derved durng the ta abe year from such property; or the area of
the premses occuped by any one such tenant, or by any such group of
tenants, represents at any tme durng the ta abe year more than 10 percent
of the tota area of the rea property rented at such tme.
( ) The appcaton of (3), above, may be ustrated by the foowng e ampe:
In 19 1 an educatona organzaton, whch s on the caendar year bass, begns
the erecton of an 11-story apartment budng usng funds borrowed for that
purpose, and mmedatey eases for a 10-year term the frst foor to a rea
estate deveopment company to subet for stores and shops. s fast as the new
apartments are competed, they are rented out on an annua bass. t the end
of 19 6, a e cept the tenth and eeventh foors are rented. Those two foors
are competed durng 19 7 and rented out. ssume that for 19 1 and each
subsequent ta abe year through 19 6, and for the ta abe year 1960, the gross
renta for the frst foor represents more than 10 percent of the tota gross rents
derved durng the ta abe year from the budng. Under ths set of facts the
10-year ease of the frst foor woud be consdered to be a suppement U ease
for a e cept the ta abe years 19 , 19 9, and 1961.
Sec. 29. 23-2. Suppement U Lease Indebtedness. (a) Defnton. The
term suppement U ease ndebtedness means, wth respect to any rea property
eased by a ta -e empt organzaton for a term of more than years, the unpad
amount of:
(1) The ndebtedness ncurred by the essor ta -e empt organzaton n
acqurng or mprovng such property;
(2) The ndebtedness ncurred by the essor ta -e empt organzaton
pror to the acquston or mprovement of such property f such ndebtedness
woud not have been ncurred but for such acquston or mprovement; and
(3) The ndebtedness ncurred by the essor ta -e empt organzaton sub-
sequent to the acquston or mprovement of such property f such ndebted-
ness woud not have been ncurred but for such acquston or mprovement
and the ncurrence of the ndebtedness was reasonaby foreseeabe at the
tme of such acquston or mprovement.
See (f) of ths secton wth respect to subsdary corporatons.
(b) ampes. The rues of (a), above, respectng suppement U eases aso
cover certan cases where the eased property tsef s not sub|ect to an ndebted-
ness. For e ampe, they appy to cases such as the foowng:
ampe (1). unversty pedges some of ts Investment securtes wth a
bank for a oan and uses the proceeds of such oan to purchase (ether drecty
or through a subsdary corporaton) a budng, whch budng s sub|ect to a
ease that then has more than years to run. Ths woud be an e ampe of a
suppement U ease ndebtedness ncurred pror to the acquston of the prop-
erty whch woud not have been ncurred but for such acquston.
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29. 21-3.
ampe (2). If the budng tsef n e ampe (1), above, s ater mortgaged
to rase funds to reease the pedged securtes, the ease woud contnue to be
a suppement U ease.
ampe (3). If a scentfc organzaton mortgages ts aboratory budng
to repace workng capta used n remodeng another one of ts budngs or
a budng hed by ts subsdary corporaton, whch other budng s free of
ndebtedness and s sub|ect to a ease that then has more than years to run,
the ease woud be a suppement U ease nasmuch as the ndebtedness though
ncurred subsequent to the mprovement of such property woud not have been
ncurred but for such mprovement, and the ncurrence of the ndebtedness was
reasonaby foreseeabe when, to make such mprovement, the organzaton re-
duced ts workng capta beow the amount necessary to contnue current
operatons.
(c) Lease of part of property. Where ony a porton of the rea property s
sub|ect to a suppement U ease, proper aocaton of the ndebtedness appcabe
to the whoe property must be made to the premses covered by the ease.
(tf) Property acqured sub|ect to en. Where rea property s acqured
sub|ect to a mortgage or smar en, whether the acquston be by gft, be-
quest, devse, or purchase, the amount of the ndebtedness secured by such mort-
gage or en s a suppement U ease ndebtedness (uness (c) (1) of ths secton
appes) even though the essor does not assume or agree to pay the ndebtedness.
For e ampe, a unversty pays 100,000 for rea estate vaued at 300,000 and
sub|ect to a 200,000 mortgage. For the pu pose of the suppement D ta , the
resut s the same as f 200,000 of borrowed funds had been used to buy the
property.
(e) ceptons. (1) Where rea property was acqured by gft, bequest, or
devse, pror to uy 1, 19 0, sub|ect to a mortgage or other smar en, the
amount of such mortgage or other smar en sha not be consdered as an
ndebtedness of the efsnr ta -e empt organzaton ncurred n acqurng such
property. n ndebtedness not otherwse covered by ths e cepton s not
brought wthn the e cepton by reason of a transfer of the property between a
parent and ts subsdary corporaton.
(2) Where rea property was acqured by gft, bequest, or devse, pror to
uy 1, 19 0, sub|ect to a ease requrng mprovements n such property upon
the happenng of stated contngences, ndebtedness ncurred n mprovng such
property n accordance wth the terms of such ease sha not be consdered as
ndebtedness descrbed n secton 23(b) and n ths secton. n ndebtedness
not otherwse covered by ths e cepton s not brought wthn the e cepton by
reason of a transfer of the property between a parent and ts subsdary
corporaton.
(3) In the case of a corporaton descrbed n secton 101(1 ), a of the
stock of whch was acqured pror to uy 1, 10 0. by an organzaton descrbed
n paragraph (1), (6). or (7), of secton 101 (and more than one-thrd of such
stock was acqured by such organzaton by gft or bequest), any ndebtedness
ncurred by such corporaton pror to uy 1, 10 0. and any ndebtedness ncurred
by such corporaton on or after such date n mprovng rea property n accord-
ance wth the terms of a ease entered nto pror to such date, wth respect to
ether such secton 101(1 ) corporaton or such secton 101 (1), (6), or (7)
organzaton, sha not be consdered an ndebtedness descrbed n secton 23(b)
and n ths secton.
(f) Subsdary corporatons. The provsons of secton 23 are appcabe
whether or not a subsdary corporaton of the type e empt under secton 101 (1 )
s avaed of n makng the suppement U ease. For e ampe, assume a parent
organzaton borrows funds to purchase reaty and sets up a separate secton
101(1 ) corporaton as a subsdary to hod the property. Such subsdary
corporaton eases the property for a perod of more than years, coects the
rents and pays over a of the ncome, ess e penses, to the parent organzaton,
the parent organzaton beng abe for the ndebtedness. Under these assumed
facts, the ease by the secton 101(1 ) subsdary corporaton woud be a suppe-
ment U ease wth respect to such subsdary corporaton, and the renta ncome
woud be sub|ect to the ta , whether or not the subsdary tsef assumes the
ndebtedness and whether or not the property s sub|ect to the ndebtedness.
Sec. 29. 23-3. Treatment of ent Fkom Suppement U Lease. (a) Genera
rue. There sha be ncuded wth respect to each suppement U ease, as an
tem of gross Income derved from an unreated trade or busness, an amount
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29. 21-3.
200
whch s the same percentage (hut not In e cess of 100 percent) of the tota rents
derved durng the ta abe year under such ease as
(1) The amount of the suppement U ease ndebtedness at the cose of
the ta abe year of the essor ta -e empt organzaton, wth respect to the
premses covered by such ease. Is of
(2) The ad|usted bass of such premses at the cose of such ta abe year.
The bass (unad|usted) of property s determned under secton 113(a), and the
ad|usted bass of property s determned under secton 113(b). The determna-
ton of the ad|usted bass of property s not affected by the fact that the organza-
ton was e empt from ta for pror ta abe years. Proper ad|ustment must be
made under secton 113(b) for the entre perod snce the acquston of the
property. Thus, ad|ustment must be made for deprecaton for a pror ta abe
years whether or not the organzaton was e empt from ta for any of such years.
Smary, for ta abe years durng whch the organzaton s sub|ect to suppe-
ment U, the fact that ony a porton of the deducton for deprecaton s taken
nto account under secton 23(d) does not affect the amount of the ad|ustment
for deprecaton.
(6) ampes. In each of the foowng e ampes It s assumed that the ta -
payer makes ts returns under suppement U on the bass of the caendar year, and
that the ease s not substantay reated to the purpose for whch the organ-
zaton s granted e empton from ta .
ampe (1). ssume that a M -e empt educatona organzaton purchased
property In 19 1 for 000,000, usng borrowed funds, and eased the budng for a
perod of 20 years. ssume further that the ad|usted bass of such budng
at the cose of 19 1 s 00,000. If, at the cose of 19 1, 200,000 of the ndebted-
ness ncurred to acqure the property remans outstandng, snce ths s two-
ffths of the ad|usted bass of the budng at the cose of 19 1, two-ffths of the
gross renta receved from the budng durng 19 1 sha be ncuded as an tem
of gross ncome n computng unreated busness net ncome. If, at the cose
of a subsequent ta abe year, the outstandng ndebtedness s 100,000 and the
ad|usted bass of the budng s 00,000, one-fourth of the gross renta for
such ta abe year sha be ncuded as an tem of gross ncome n computng
unreated busness net ncome for such ta abe year.
ampe (2). ssume that a ta -e empt organzaton owns a -story bud-
ng, that n 19 1 t borrows 100,000 whch t uses to mprove the whoe budng,
and that t thereafter In 19 1 rents the frst foor of the budng under a 6-year
ease at a renta of ,000 a year. The second, thrd, and fourth foors of the
budng are eased on a yeary bass durng 19 1. ssume, aso, that the ad|usted
bass of the rea property at the end of 19 1 (after refectng the e pendtures for
mprovng the budng) s 200,000, aocabe equay to each of the stores.
Under these facts, ony one-fourth of the rea property s sub|ect to a suppement
U ease. The percentage of the rent under such ease whch s taken nto account
s determned by the rato whch the aocabe part of the suppement ease
ndebtedness bears to the aocabe part of the ad|usted bass of the rea property,
that s, the rato whch one-fourth of the 100,( ) of suppement II ease ndebt-
edness outstandng at the cose of 19 1, or 2 ,000, bears to one-fourth of the
ad|usted bass of the suppement U ease premses at the cose of 19 1. or 0,000.
The percentage of rent whch s suppement U ease ncome for 19 1 s, there-
fore, one-haf (the rato of 2 ,000 to 0,000) of ,000, or 2,000, and ths
amount of 2,000 s consdered an tem of gross ncome derved from an unre-
ated trade or busness.
Sec. 29. 23- . Percentage of Deductons Taken Into ccount. (a) The
same percentage s used n determnng both the porton of the rent and the
porton of the deductons taken nto account wth respect to the suppement U
ease n computng unreated busness net ncome. See secton 29. 23-3 for the
determnaton of such percentage. Such percentage s appcabe ony to the sum
of the foowng deductons aowabe under secton 23:
(1) Ta es and other e penses pad or accrued durng the ta abe year upon
or wth respect to the rea property sub|ect to the suppement U ease;
(2) Interest pad or accrued durng the ta abe year on the suppement D
ease ndebtedness;
(3) reasonabe aowance for e hauston, wear and tear (ncudng a
reasonabe aowance for obsoescence) of the rea property sub|ect to such
ease.
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201
29. 21-3.
Where ony a porton of the rea property s sub|ect to the suppement U ease,
there sha be taken nto account ony those amounts of the above-sted deduc-
tons whch are propery aocabe to the premses covered by suc ease.
(6) The deductons aowabe under secton 23(d) and under (u) of ths
secton wth respect to a suppement U ease are not mted by the amount
ncuded n gross ncome wth respect to the rent from such ease, but any e cess
of such deductons over such gross ncome sha be apped aganst other tems
of gross Income n computng unreated busness net ncome ta abe under secton
21(a).
ampe. ssume the same facts as those n e ampe (1) of secton
29. 23-3(6). ssume aso that for 19 1 the organzaton pays ta es of ,000
on the property, nterest of 6,000 on ts suppement U ease ndebtedness, and
that the deprecaton aowabe for 19 1 under secton 23(1) s 10,000. Under
the facts set forth n e ampe (1) of secton 29. 23-3(6) and n the precedng
sentence, the deductons to be taken nto account for 19 1 n computng unreated
busness net ncome woud be two-ffths of the tota of the deductons of 20,000,
that s, ,000.
S C. 2 . T S OF FOR IGN COUNTRI S ND POSS SSIONS
OF T UNIT D ST T S PPLIC L TO T L Y RS
GINNING FT R D C M R 31, 19 0 S DD D Y
S CTION 301, R NU CT OF 19 0, PPRO D S PT M R
23, 19 0 .
The amount of ncome, war-profts, and e cess-profts ta es mposed by
foregn countres or possessons of the Unted States sha- be aowed
as a credt aganst the ta of an organzaton sub|ect to the ta mposed
by secton 21(a) to the e tent provded n secton 131; and n the case
of the ta mposed by secton 21(a), the term norma-ta net ncome
and the term net ncome as used n secton 131 sha be read as
suppement U net ncome .
Par. 1 . The statement of procedure contaned n F. R. Doc.
6-1 3 7. appearng at page 177 -22, part II, secton 1, of the ssue
for September 11,19 6, as amended (26 CFR, part 601; 1 F. R. 2063,
1 F. R. 6 ), s hereby further amended by changng the part of
secton 601.17 Forms-(a)Descrpton reatng to Form 900 to read as
foows:
Form 990. Informaton return of organzatons e empt from ncome ta
(other than under see. 101(6), I. R. C, for accountng perods begnnng after
December 31, 19 9).
Form 990- . Informaton return of certan organzatons e empt from ncome
ta under sec. 101(6), I. R. C, to be used for accountng perods begnnng after
December 31. 19 9.
Form 990-1 . empt organzaton busness ncome ta return, to be fed
by organzatons sub|ect to ta under suppement U of chapter 1, I. R. C.
62).)
ohn . Dunap,
pproved ugust 2 . 19 2.
Thomas . Ltnch,
(Fed wth the Dvson of the Federa Regster September 2, 19 2, : 1 a. m.)
2 2160 3 1
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0. 37- , Regs. 130. 202
S CTION 23. SUPPL M NT U L S
Secton 29. 23-3: Treatment of rent from
Suppement U ease.
INT RN L R NU COD
ass of property ad|usted for deprecaton sustaned n pror ta -
abe years. (See G. C. M. 27 91, page 221, and I. T. 106, page 130.)
SU C PT R D. C SS PROFITS T
P RT I. R T ND COMPUT TION OF T
S CTION 30. IMPOSITION OF T
Secton 0. 30-2, Reguatons 130: Rate of ta .
INT RN L R NU COD
S CTION 37. IN ST D C PIT L CR DIT
Secton 0. 37- . Reguatons 130: Defnton 19 2-2G-1399
of equty capta. T. D. 9 2
TITL 26 INT RN L R NU C PT R 1. SU C PT R . P RT 0.
C SS PROFITS T S; T L Y RS NDING FT R UN 30. 10 0
Reguatons 130 nmended to conform to the provsons of Pubc
Law 1( 0, ghty-second Congress C. . 19.|1-2, 3 2 , approved
October 10, 19 1, reatng to equty capta of secton 20 nsurance
companes.
Washngton 2 , D. C.
Concerned:
On October 1, 19 2, notce of proposed rue makng w th respect to
reguatons under secton 37(c) of the Interna Revenue Code, as
amended by Pubc Law 1C6, ghty-second Congress fC. . 19 1-2,
3 2 . approved October 10,19 1, was pubshed n the Federa Regster
(17 F. R. 092). No ob|ecton to the rues havng been receved, the
amendments of Reguatons 130 set forth beow are hereby adopted.
0. 37-1 the foowng:
PU LIC L W 166 ( 2d CONG.), PP O D OCTO R 10, 19 1
e t enacted by the Senate and ouse of Representatves of the Unted
States of merca n Congress assembed. That secton 37(c) of the
Interna evenue Code s amended by strkng out (other than mutua
and other than fe or marne) and nsertng n eu thereof ta abe
under the provsons of secton 20 .
Sec. 2. The amendment made by secton 1 sha have the same effect
as If t had been a part of the sad secton 37(c) on anuary 3, 19 L
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203
0. 0-1, Regs. 130.
Par. 2. The frst sentence of (b) ( ) of secton 0. 37- of- Regu-
atons 130 s amended by deetng the parenthetca phrase (other
than mutua and other than fe or marne) and nsertng n eu
thereof ta abe under the provsons of secton 20 . Such sentence
as amended w read as foows:
In the case of an nsurance company ta abe under the provsons of secton 20 ,
the equty capta sha ncude 0 percent of ts reserves requred by aw, e cept
the reserve for unearned premums used n computng borrowed capta under
secton 39 (b) (2).
secton 62 and 3791 of the Interna Revenue Code ( 3 Stat. 32, 67;
26 U. S. C. 62,3791).)
ohn S. Graham,
pproved December 2,19 2.
Thomas . Lynch,
S CTION 0. CORPOR TIONS NG G D IN MINING
OF STR T GIC MIN R LS
Secton 0. 0-1, Reguatons 130: Corpora- 19 2-1 -13913
tons whch mne strategc mneras. T. D. 923
C SS PROFITS T ; T L Y RS FT R UN 30, 19 0
Reguatons 130 amended to refect aowance of benefts of secton
0 of the Interna Revenue Code to ncome from certan mneras
n addton to those sted n secton 0(b) (1).
Washngton 2 , D. C.
Reguatons 130 26 CFR, part 0 are amended as foows:
Paragraph 1. There s nserted mmedatey foowng the words
n secton 0(b) as they appear n the parenthetca cause n the
frst sentence of secton 0. 0-1 (a) 26 CFR 0. 0-1 (a) the foow-
ng: and n (e) of ths secton so that, as amended, such sentence
sha read as foows:
If a domestc corporaton Is engaged n mnng a strategc mnera (as dt fned
n secton 0(b) and n (e) of ths secton) wthn the Unted States, the
porton of ts ad|usted e cess profts net ncome attrbutabe to such mnng
s e empt from e cess profts ta .
Par. 2. Secton 0. 0-1 (e) 26 CFR 0. 0-(e) s redesgnated
as secton 0. 0-1 (f), and there s nserted mmedatey foowng
secton 0. 0-1 (d) 26 CFR 0. 0-1 (d) the foowng:
(e) In addton to the mneras defned n secton 0(b) as strategc mneras
the foowng mneras have been certfed, on the date ndcated, to the Secretary
as beng wthn such defnton:
(1) On May 23, 19 1, bock steatte tac;
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0. 3-2, Regs. 130.)
20
(2) On November , 19 1, rare earths (metas of successve atomc num-
bers begnnng wth anthanum 7 and e tendng through utecum 71 of
the perodc tabe) conformng to Natona Stockpe Specfcaton -33, as
revsed December 12, 19 0.
Ths Treasury Decson merey sets forth the mneras certfed to
the Secretary of the Treasury by other Government agences and
the dates of such certfcatons. ccordngy, t s found unnecessary
to ssue ths Treasury Decson wth notce and pubc procedure
thereon under secton (a) of the dmnstratve Procedure ct,
approved une 11, 19 6, or sub|ect to the effectve date mtaton of
secton (c) of sad ct.
n sectons 62 and 3791 ( 3 Stat. 32, 07; 26 U. S. C. 62, 3791).)
ohn . Dunap,
pproved ugust , 19 2.
Thomas . Ltnch,
S CTION 3. NONT L INCOM FROM C RT IN
MINING ND TIM R OP R TIONS, ND FROM
N TUR L G S PROP RTI S
Secton 0. 3-2, Reguatons 130: Defntons. 19 2-26-1399
( so Sectons 0. 3-3, 0. 3- .) T. D. 9 3
TITL 20 INT RN L R NU . C PT R I. SU C PT R . P RT 0.
C SS PROFITS T ; T L Y RS NDING FT R UN 30. 19 0
Reguatons 130 amended to carfy e tent to whch mnera prop-
ertes may be aggregated under secton 3(a) (10) of the Interna
Revenue Code for pur oses of determnng nonta abe ncome from
e empt e cess output, to carfy reguatons reatng to secton
3(b) (2) and ( ) of the Code, and to refect addton of certan
mneras to those sted n secton 3 (a) (13), (b) (2), and (b) ( )
of the Code by the Revenue ct of 19 1.
Washngton 2 , D. C.
Concerned:
On ugust 2G, 19 2, notce of rue makng, carfyng certan pro-
vsons of Reguatons 130, reatng to nonta abe ncome from certan
mnng operatons and to refect certan provsons of the Revenue ct
of 19 1, approved October 20, 19 1, was pubshed n the Federa
Regster (17 F. R. 77 9). fter consderaton of a reevant matters
presented by nterested persons regardng the rues proposed, the
amendments to Reguatons 130 26 CFR, part 0 set forth beow
are hereby adopted.
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20
0. 3-2, Regs. 130.
0. 3-1 26 CF 0. 3-1 , the foowng:
S C. 1 . NONT L INCOM FROM C RT IN MINING
PROP RTI S TITL , R NU CT OF 19 1, PPRO D
OCTO R 20, 19 1 .
Secton 3 (reatng to nonta abe ncome from e empt e cess out-
put) s hereby amended as foows:
(a) y amendng the frst sentence of subsecton (a) (13) thereof
to read as foows: The term unt net ncome means the amount as-
certaned by dvdng the net ncome (computed wth the aowance for
depeton) from the coa, ore, suphur, potash, metaurgca grade me-
stone, chemca grade mestone, or tmber recovered from the mnera
property, or tmber bock, as the case may be, durng the ta abe year
by the number of unts of such mnera or tmber recovered from such
property n such year.
(b) y nsertng mmedatey after the words coa mnng property
In subsecton (b) (2) thereof the foowng: , or of a suphur, potash,
metaurgca grade mestone, or chemca grade mestone mnera
property, .
(c) y strkng out so much of subsecton (b) ( ) as precedes the
second sentence and nsertng n eu thereof the foowng:
( ) Certan propertes not n operaton durng norma
perod. For any ta abe year, the nonta abe ncome from e empt
e cess output of a meta or coa mnng property, of a suphur,
potash, metaurgca grade mestone, or chemca grade mestone
mnera property, of a tmber bock, or of a natura gas property,
whch was not n operaton durng- the norma perod, sha be an
amount equa to one-thrd of the net ncome for such ta abe year
(computed wth the aowance for depeton) from such property
or tmber bock, as the case may be.
S C. 23. FF CTI D T OF TITL TITL , R NU
CT OF 19 1, PPRO D OCTO R 20, 19 1 .
the amendments made by ths tte ncudng secton 1
sha be appcabe ony wth respect to ta abe years endng after une
30, 19 0.
Par. 2. Secton 0. 3-2(g) 26 CFR 0. 3-2(g) s amended to
read as foows:
(g) ternatve computaton of e empt e cess output for more than one
mnera property. (1) Secton 3(a) (10) provdes that where more than one
mnera property (as defned n (f) of ths secton) Is owned or operated by a
producer or essor (as defned n (a) (1) and (2) of ths secton), such producer
or essor may eect to treat the mnera propertes as one property for the
purpose of appyng secton 3(b)(1). If the ta payer eects under secton
3(a) (10), such propertes sha be aggregated and treated as one property
to the e tent provded under the rues set forth n (m) (2) and (3) of ths
secton. In the case of a ta payer makng the eecton under secton 3(a) (10),
a coa or mnera property not n operaton durng the norma perod (see
secton 3 (a)( ) and (d) of ths secton) sha be ncuded wth such prop-
ertes whch were n operaton durng the norma perod to the e tent such
property whch was not n operaton durng the norma perod may be so ncuded
under the rues set forth n (m) (2) and (3) of ths secton.
(2) In the case of a ta payer makng the eecton under secton 3(a) (10),
the net ncome from the coa or mnera property sha be computed n a manner
smar to that descrbed n (|) of ths secton wth respect to a mnera property
as f the propertes aggregated under (1) above were a mnera property, e cept
that the amount of depeton aowed n the computaton of such net ncome
sha be the sum of the amounts computed accordng to sectons 23(m) and
11 , and the reguatons thereunder.
(3) The eecton pursuant to secton 3(a) (10) sha be made n a statement
attached to Schedue P (Form 1120) accompanyng the ncome ta return, fed
on or before the ast day requred by aw for the tng of such return, for the
ta abe year for whch the eecton s beng made. The ast day requred by
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0. 3-2, Regs. 130.
206
aw for fng of such return Incudes the ast day of the perod of any e tenson
of tme granted for such fng. Such eecton must be made for each ta abe year
for whch the benefts of secton 63(a) (10) are camed and such an eecton
does not precude the ta payer fr |m eectng for a subsequent year to compute
nonta abe ncome from e empt e cess output by treatng the mnera propertes
as separate propertes under the rues set forth n (f) of ths secton. If the
ta payer has faed so to eect or desres to change Its eecton, such eecton or
change n eecton may. suh|eet to the approva of the Commssoner, be made by
the ta payer fng wth the Commssoner of Interna Revenue, Washngton 2 ,
D. C, wthn the perod of mtatons for the fng of cams for credt or refund
wth respect to the year or years nvoved, a notce of ts eecton or change n
eecton accompaned by a recomputaton of ts ncome and e cess profts ta es
for such years If the recomputat n resuts n an overpayment for any of such
years, the ta payer shoud te a cam for refund on Form 3 n accordance
wth the provsons of secton 322
Par. 3. Secton 0. 3-2(m) 26 CFR 0. 3-2(m) s amended as
foows:
( ) y strkng the word ore wherever appearng n subpara-
graph (1) of such secton and by nsertng n eu thereof the foow-
ng: mnera .
( ) y addng the foowng new sentence at the end of subpara-
graph (2) of such secton:
coa property not n operaton durng the norma perod (see secton 3(a) ( )
and (d) of ths secton) sha be ncuded wth propertes whch were n opera-
ton durng the norma perod to the e tent such propertes whch were not n
operaton durng the norma perod may be so ncuded under the rues set forth
above.
(C) y amendng subparagraph (3) of such secton to read as
foows:
(3) For the purpose of secton 3(a) (13) and secton 3(b) (2), a mnera
property sha ncude the aggregate of a tracts or parces of and contanng
mnera deposts n whch economc nterests were owned, and from whch mn-
eras were e tracted, by the ta payer at any tme after the begnnng of the
norma perod (e cudng, however, any tract or parce of and n whch an
economc nterest was acqured, and from wnch mneras were e tracted, by
any. other person subsequent to the ast date of ownershp and operaton by the
ta payer) to the e tent that such tracts or parces of and were operated by the
ta payer as an operaton unt, regardess of whether the economc nterest n
one tract or parce of and dffered from that n another. The mnera property
of a essor s the tract or parce of and contanng mnera deposts n whch an
economc Interest s owned by the essor. It need not necessary be coe tensve
wth the mnera property n the case of the producer. mnera property not
In operaton durng the norma perod (see secton 3 (a)( ) and (d) of ths
secton) sha be ncuded wth propertes whch were n operaton durng the
norma perod to the e tent such propertes whch were not n operaton durug
the norma perod may be so ncuded under the rues set forth above.
(D) y amendng subparagraph ( ) of such secton to read as
foows:
( ) The net ncome (computed wth the aowance for depeton) from the coa
or the mnera recovered from the mnng property durng a ta abe year for
whch the benefts of secton 3(b) (2) are camed sha e the net ncome from
the mnng property from whch such coa or mnera s recovered, computed n a
manner smar to that descrbed n (|) of ths secton wth respect to a mnera
property as f such mnng property were a mnera property, e cept that the
amount of depeton aowed n the computaton of such net ncome sha be the
sum of the amounts computed accordng to sectons 23(m) and 11 , and the
reguatons thereunder.
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207 0. 63- , Regs. 130.
( ) y strkng the word ore wherever appearng n subpara-
graph (13) of such secton and by nsertng n eu thereof the foow-
ng: mnera .
Par. . Secton 0. 3-3(b) 20 CFR 0. 3-3(b) s amended as
foows:
( ) y strkng the headng of such secton whch reads Meta
and coa mne . and nsertng n eu thereof Mnes n operaton dur-
ng norma perod .
( ) y nsertng mmedatey after subparagraph ( ) of such sec-
ton the foowng new subparagraph:
( ) The computaton of nonta abe ncome from e empt e cess output n the
case of those mnera propertes, n addton to meta or coa mnng propertes,
whch are referred to n secton 3(b) (2) sha he made n a manner consstent
wth that set forth n (1) through ( ) above.
Par. . Secton 0. 3- 26 CFR 0. 3- , s amended as foows:
( ) y strkng the headng of such secton whch reads Mnes
1M R PROP RTI S, ND N TUR L G S PROP RTI S NOT IN OP R TION
durng N( rma ferod. and by nsertng n eu thereof the foowng:
Certan propertes not n operaton durng norma perod. .
( ) y nsertng mmedatey after coa mnng property,
wherever appearng n such secton the foowng: certan other mn-
era propertes referred to n secton 3(b) ( ), .
sectons 02 and 3791 of the Interna Revenue Code ( 3 Stat. 32, G7:
26 U. S. C. 62, 3791).)
ustn F. Wnke,
pproved December 2, 19 2.
Thomas . Ltnc,
Secton 0. 3-3, Reguatons 130: Nonta abe
ncome from e empt e cess output.
nterna revenue code
Secton 0. 3- , Reguatons 130: Certan prop-
ertes not n operaton durng norma perod.
INT RN L R NU COD
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29. 1-3.) 20
SU C PT R . T ON S LF- MPLOYM NT INCOM
S CTION 1. D FINITIONS
Secton 29. 1-2: Sef-empoyment ncome.
INT RN L R NU COD
Dstrbutve share of ncome of a nonprofessona member of a
partnershp engaged n the practce of dentstry. (See I. T. 007,
beow.)
Secton 29. 1-3: Trade or busness. 19 2-1 -1391
( so Secton 29. 1-2.) I. T. 097
INT RN L R NU COD
The dstrbutve share of Income of a member of a partnershp
whch s engaged n the practce of dentstry, even though such
member s not a dentst, does not consttute sef-empoyment ncome
wthn the meanng of secton 1(b) of the Interna Revenue Code.
dvce s requested whether the dstrbutve share of ncome of a
nonprofessona member of a partnershp whch s engaged n the
practce of dentstry consttutes sef-empoyment ncome wthn the
meanng of secton 1(b) of the Interna Revenue Code.
Secton 1 of the Interna Revenue Code, defnng certan terms
reatng to the ta on sef-empoyment ncome, provdes n part as
foows:
(u) Net arnngs From Sef- mpoyment. The term net earnngs from
sef-empoyment means the gross ncome derved by an ndvdua from any
trade or busness carred on by such ndvdua, ess the deductons aowed by
ths chapter chapter 1 of the Code whch are attrbutabe to such trade or
busness
(b) Sef- mpoyment Income. The term sef-empoyment ncome means
the net earnngs from sef-empoyment derved by an ndvdua dur-
ng any ta abe year hegnnng after December 31, 19 0
(c) Trade or usness. The term trade or busness, when used wth refer-
ence to sef-empoyment ncome or net earnngs from sef-empoyment, sha
have the same meanng as when used n secton 23, e cept that such term sha
not ncude

( ) The performance of servce by an ndvdua n the e ercse of hs
professon as a dentst or the performance of such
servce by a partnershp.
Secton 29. 1-3(/) of Reguatons 111 provdes n part that n the
case of a partnershp engaged n the practce of any of the professons
e cuded from the term trade or busness by the provsons of
secton 1(c)( ) of the Code, supra, the partnershp sha not be
consdered as carryng on a trade or busness for the purpose of the
ta on sef-empoyment ncome, and none of the dstrbutve shares
of the ordnary net ncome or the ordnary net oss of such partnershp
sha be ncuded n computng net earnngs from sef-empoyment
of any member of the partnershp. On the other hand, where a
partnershp s engaged n a trade or busness not wthn any of the
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209
29. 01-1.
e cuded professons each partner must ncude hs dstrbutve share
of the ordnary net ncome or the ordnary net oss of such partner-
shp n computng hs net earnngs from sef-empoyment, rrespec-
tve of whether such partner s aso engaged n the practce of one
or more of such e cuded professons and contrbutes hs professona
servces to the partnershp.
From the foregong, t s apparent that the nature of the servces
performed by the partnershp as such, and not the nature of the
servces contrbuted to the partnershp by an ndvdua member
thereof, determnes whether any partner s dstrbutve share of part-
nershp ncome consttutes sef-empoyment ncome.
ccordngy, t s hed that the dstrbutve share of ncome of a
member of a partnershp whch s engaged n the practce of den-
tstry, even though such member s not a dentst, does not consttute
sef-empoyment ncome wthn the meanng of secton 1(b) of
the Interna Revenue Code.
C PT R 2. DDITION L INCOM T S
SU C PT R . P RSON L OLDING COMP NI S
S CTION 01. D FINITION OF P RSON L
OLDING COMP NY
Secton 29. 01-1: Defnton of persona 19 2-17-13 96
hodng company. T. D. 921
( so Secton 02, Secton 29. 02-1.)
TITL 26 INT RN L R NU C PT R I, SU C PT R . P RT 29.
Reguatons 111 amended to conform to Pubc Law 6 0 ( 1st Cong.,
2d sess.) C. . 10 0-2, 21 , reatng to defnton of persona hodng
company, and to secton 223 of the Revenue ct of 19 0 ( 1st Cong.,
2d sess.), reatng to persona hodng company ncome.
Washngton 2 , D. G.
Concerned:
On March 1 , 19 2, notce of proposed rue makng wth respect to
amendments to conform Reguatons 111 to Pubc Law 6 0 ( 1st
Cong., 2d sess.) C. . 19 0-2, 21 , approved ugust 9, 19 0, reatng
to defnton of persona hodng company, and to secton 223 of the
Revenue ct of 19 0 ( 1st Cong., 2d sess.), approved September 23,
19 0, reatng to persona hodng company ncome, was pubshed n
the Federa Regster (17 F. R. 2231). No ob|ecton to the rues pro-
posed havng been receved, the amendments of Reguatons 111 26
CFR, part 29 set forth beow are hereby adopted.
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29. 01-1.
210
29. 01-1 26 CFR 29. 01-1 the foowng:
PU LIC L W 6S0 ( 1st CONG., 2d S SS.), PPRO D UGUST 9,
19 0
e t enacted by the Senate and ouse of Representatves of the Unted
States of merca n Congress assembed, That secton 01(b) (6) of the
Interna Revenue Code s amended to read as foows:
(0) ( ) censed persona fnance company under State super-
vson. SO per centum or more of the gross ncome of whch s awfu
nterest receved from oans made to ndvduas n accordance wth
the provsons of appcabe State aw f at east 60 per centum of
such gross ncome s awfu nterest () receved from ndvduas
each of whose ndebtedness to such company dd not at any tme dur-
ng the ta abe year e ceed n prncpa amount the mt pre-
scrbed for sma onns by such aw (or, f there s no such mt,
00), and () not payabe n advance or compounded and computed
ony on unpad baances, and f the oans to a person, who s a share-
hoder n such company durng the ta abe year by or for whom 10
per centum or more n vaue of ts outstandng stock s owned d-
recty or ndrecty (ncudng n the case of an ndvdua, stock
owned by the members of hs famy as defned n secton 03(a) (2)),
outstandng at any tme durng such year do not e ceed ,000 n
prncpa amount; and
( ) endng company, not otherwse e cepted by secton
01(b), authorzed to engage n the sma oan busness under one
or more State statutes provdng for the drect reguaton of such
busness, SO per centum or more of the gross ncome of whch s aw-
fu nterest, dscount or other authorzed charges () receved from
oans maturng n not more than thrty-s months made to n-
dvduas n accordance wth the provsons of appcabe State aw,
and () whch do not, n the case of any ndvdua oan, e ceed
n the aggregate an amount equa to smpe nterest at the rate of 3
per centum per month not payabe n advance and computed ony
on unpad baances, f at east 60 per centum of the gross ncome
s awfu nterest, dscount or other authorzed charges receved
from ndvduas each of whose ndebtedness to such company dd not
at any tme durng the ta abe year e ceed n prncpa amount the
mt prescrbed for sma oans by such aw (or, f there s no suc
mt, 00), and f the deductons aowed to such company under
secton 23(a) (reatng to e penses), other than for compensa-
ton for persona servces rendered by sharehoders (ncudng mem-
bers of the sharehoder s famy as descrbed n secton 03(a) (2))
consttute 1 per centum or more of ts gross ncome, and the oans
to a person, who s a sharehoder n such company durng the ta -
abe year by or for whom 10 per centum or more n vaue of ts out-
standng stock s owned drecty or ndrecty (ncudng n the case
of an ndvdua, stock owned by the members of hs famy as defned
n secton 03(a) (2)), outstandng at any tme durng such year do
not e ceed ,000 n prncpa amount.
Sec. 2. That secton 01(b) of the Interna Revenue Code s amended
by addng at the end thereof the foowng new paragraph :
( ) fnance company, actvey and reguary engaged n the busness
of purchasng or dscountng accounts or notes recevabe or nsta-
ment obgatons, or makng oans secured by any of the foregong or
by tangbe persona property, at east SO per centum of the gross n-
come of whch g derved from such busness n accordance wth the pro-
vsons of appcabe State aw or does not consttute persona hodng
company ncome as defned n secton 02, f 60 per centum of the gross
ncome s derved from one or more of the foowng casses of transac-
tons :
( ) Purchasng or dscountng accounts or notes recevabe, or
nstament obgatons evdenced or secured by contracts of con-
dtona sae, chatte mortgages, or chatte ease agreements, ars-
ng out of the sae of goods or servces n the course of the trans-
feror s trade or busness;
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211
29. 01-1.
( ) Makng oans, maturng n not more than thrty-s months,
to, and for the busness purposes of, persons engaged n trade or
busness, secured by
() accounts or notes recevabe, or nstament obgatons,
descrbed n subparagraph (a) above:
() warehouse recepts, bs of adng, trust recepts, chat-
te mortgages, baments, or factor s ens, coverng or evdenc-
ng the borrower s nventores;
() a chatte mortgage on property used n the borrower s
trade or busness;
e cept oans to any snge borrower whch for more than nnety
days n the ta abe year of the company e ceed 1 per centum of
the average funds empoyed by the company durng such ta abe
year;
(C) Makng oans, In accordance wth the provsons of appca-
be State aw, secured by chatte mortgages on tangbe persona
property, the orgna amount of each of whch s not ess than the
mt referred to n, or prescrbed by, subsecton (b) (6) ( ) (|), and
the aggregate prncpa amount of whch owng by any one borrower
to the company at any tme durng the ta abe year of the company
does not e ceed . ,000; and
(D) If 30 per centum or more of the gross ncome of the company
Is derved from one or more of the casses of transactons descrbed
n subparagraphs ( ), ( ) and (C) of ths paragraph, purchasng,
dscountng, or endng upon the securty of, nstament obgatons
of ndvduas where the transferor or borrower acqured such
obgatons ether n transactons of the casses descrbed n sub-
paragraphs ( ) and (C) of ths paragraph or as a resut of oans
made by such transferor or borrower n accordance wth the pro-
vsons of causes () and () of paragraph t( ) or of causes
() and () of paragraph (C) ( ) of ths subsecton, f the funds
so supped at a tmes bear an agreed rato to the unpad baance
of the assgned nstament obgatons, and documents evdencng
such obgatons are hed by the company;
provded that the deductons aowabe under subsecton 23(a) (reatng
to e penses), other than compensaton for persona servces rendered
by sharehoders (ncudng members of the sharehoder s famy as
descrbed n secton 03(a)(2)), consttute 1 per centum or more of
the gross ncome, and that oans to a person who Is a sharehoder n
such company durng such ta abe year by or for whom 10 per centum
or more n vaue of Us outstandng stock s owned drecty or ndrecty
(ncudng n the case of an ndvdua, stock owned by members of
hs famy as defned n secton 03(a)(2)) outstandng at any1 tme
durng such year do not e ceed ,000 n prncpa amount.
Par. 2. Secton 29. 01-1 26 CFR 29. 01-1 s amended as foows:
( ) y strkng therefrom the frst sentence of the second para-
graph and nsertng n eu thereof the foowng:
Secton 01(b) provdes that the term persona hodng company does not
ncude corporatons e empt from ta aton under secton 101, a bank as defned
n secton 10 , a fe nsurance company, a surety company, a foregn persona
hodng company as defned n secton 331, and a oan or nvestment corporaton
as defned n secton 01(b) (7). For ta abe years endng on or before ugust
9, 19 0, such term aso does not ncude a censed persona fnance company, as
defned n secton 01(b) (0) pror to amendment by Pubc Law 0 0, ghty-frst
Congress, second sesson, approved ugust 9, 19 0. For ta abe years endng
after ugust 9, 19 0, the term persona hodng company does not ncude
a censed persona fnance company as defned n secton 01(b) (0) ( ), a end-
ng company as defned n secton 01(b) (0) ( ), or a fnance company (whether
or not prevousy cassfed as a persona hodng company) as defned n secton
01(b)( ).
( ) y strkng from the second paragraph the words such a
corporaton (appearng n the sentence begnnng If, for any pror
ta abe year ) and nsertng n eu thereof a oan or nvestment
corporaton as defned n secton 01(b) (7) .
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29. 02-1.
212
S C. 223. P RSON L OLDING COMP NY INCOM R NU
CT OF 19 0, PPRO D S PT M R 23, 19 0 .
Secton 02(f) of the Interna Revenue Code (reatng to use of
corporaton property by a sharehoder) sha not appy wth respect to
rents receved durng ta abe years endng after December 31, 19 ,
and before anuary 1, 19 0, f such rents were receved for the use by
the essee, n the operaton of a bona tde commerca, Industra, or
mnng enterprse, of property of the ta payer.
Par. . Secton 29. 02-1(0) 2G CFR 29. 02-1(9) s hereby
amended by addng at the end thereof the foowng new sentence:
See aso secton 223 of the Revenue ct of 19 0, whch provdes that secton
02(f) sha not appy to rents receved durng ta abe years endng after
December 31, 19 , and before anuary 1, 19 0, f such rents were receved for
the use by the essee, n the operaton of a bona fde commerca, ndustra, or
mnng enterprse, of property of the corporaton.
26 U.S.C. 62,3791).)
ohn . Dunap,
pproved uy 21,19 2.
Thomas . Lynch,
(Fed wth the Dvson of the Federa R.-gster uy 2 , 19 2, : 2 a. m.)
S CTION 02. P RSON L OLDING COMP NY INCOM
Secton 29. 02-1: Persona hodng company ncome.
INT RN L R NU COD
Reguatons 111 amended. (See T. D. 921, page 209.)
SU C PT R . C SS PROFITS T
P RT I
C SS PROFITS T COUNCIL
19 2-19-1391
IR-Mm. 19
Redeegaton of secton 722 settement authorty to technca
advsors.
U. S. Treasury Department,
Washngton , D. C, ugust 1 , 19 2.
Concerned:
1. Purpose. The purpose of ths mmeograph s to prescrbe pro-
cedure whereby the Coordnator of the cess Profts Ta Counc may
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213
29. 02-1.
redeegate to cess Profts Ta Counc technca advsors settement
authorty n respect to ssues arsng under secton 722 of the Interna
Revenue Code n cases docketed n The Ta Court of the Unted States.
2. Ob|ectve of Redeegaton. The admnstraton of secton 722 of
the Code havng progressed to the stage where the cess Profts Ta
Counc has made determnatons n a but a few cases, the prncpa
obgaton of the ureau s now concerned wth those camants who
have fed pettons wth the Ta Court seekng revew of such de-
termnatons. perence wth standard-ssue cases docketed n the
Ta Court has demonstrated that there are substanta benefts to pet-
toners and to the ureau n decentrazed settement authorty. The
ob|ectve of the redeegaton of settement authorty n secton 722
cases, accordngy, s to secure such benefts; by provdng procedures
as smar to those estabshed for standard-ssue cases as s practcabe.
3. ssgnment of cess Profts Ta Counc Technca dvsors.
In each ppeate Staff Dstrct (and n the ppeate Dvson of each
Dstrct estabshed under Reorganzaton Pan No. 1 of 19 2, C. .
19 2-1, 227) n whch the Coordnator of the cess Profts Ta
Counc fnds the voume of docketed secton 722 cases warrants such
acton, the fu-tme servces of one or more cess Profts Ta Counc
technca advsors w be avaabe for the purpose of representng the
Commssoner n the settement of the secton 722 ssues n such cases.
In other areas, the coordnator w make avaabe for such purpose, to
the e tent warranted by the crcumstances, the servces of one or more
technca advsors from the Counc s Washngton staff.
. Redeegaton of uthorty to Technca dvsors. The Coord-
nator may redeegate to any ce s Profts Ta Counc technca
advsor hs fna authorty to represent the Commssoner n respect
to a ssues arsng under secton 722 of the Code n any case docketed
n the Ta Court. ach redeegaton to a technca advsor sha be
appcabe to ether: (a) a partcuar cass of cases, n whch event the
cass of cases sha be defned to ncude a cases n whch the bass of
settement nvoves a constructve average base perod net ncome not
n e cess of a stated amount for any ta abe year, the stated amount
to be at east 0,000; or (b) a partcuar case, n whch event the
redeegaton may be made rrespectve of the amount of the construc-
tve average base perod net ncome nvoved. ach redeegaton sha
be n wrtng, addressed to a named technca advsor, and sha be n
whchever of the foowng forms s approprate:
(a) Redeegaton appcabe to a partcuar cass of cases:
Redeegaton of Secton 722 Settement uttorty to Technca dvsor
Name . Date
Tte
ddress
Pursuant to the authorty vested n me as Coordnator of the cess Profts
Ta Counc, and partcuary by Mn. 6 00 (C. . 19 2-1, 1 0) dated pr 2 ,
19 2:
ffectve mmedatey and unt further notce, or so ong as you hod your
present offce as Technca dvsor, cess Profts Ta Counc, you are hereby
authorzed to e ercse, n your own name, the authorty to represent the Com-
mssoner n the settement of a ssues arsng under secton 722 of the Interna
Revenue Code n any case, docketed n The Ta Court of the Unted States,
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129. 02-1. 21
assgned to yon In whch the bass of settement does not nvove a constructve
average bnse perod net ncome n e cess of for any ta abe year.
Ths document s the evdence of your authorty n the matter.
Coordnator, cess Profts Ta Counc.
(b) Redeegaton appcabe to a partcuar case:
Redeegaton of Secton 722 Settement uthorty to Technca dvsob
Name Date
Tte
ddress
In re: Pettoner
Docket No.
Pursuant to the authotv vested n me as Coordnator of the cess Profts
Ta Counc, and partcuary by Mn. 6 00 (C. P . 19 2-1, 1 0) dated pr 2 ,
19 2:
ffectve mmedatey and unt further notce, or so ong as you hod your
present offce as Technca dvsor, cess Profts Ta Counc, you are hereby
authorzed to e ercse, n your own name, the authorty to represent the Com-
mssoner n the settement of a ssues arsng under secton 722 of the Interna
Revenue Code n the desgnated case.
Ths document s the evdence of your authorty n the matter.
Coordnator, cess Profts Ta Counc.
. Counc Members. Nothng n ths mmeograph sha be con-
strued to mt n any manner the authorty of the Coordnator to
desgnate a Counc member to make the fna determnaton n re-
spect to the secton 722 ssues n any case. The present practce of
desgnatng one or more Counc members to represent the Comms-
soner, n the fed, n connecton wth each Ta Court caendar on
whch secton 722 cases are set for tra w be contnued to the e -
tent settement authorty has not been redeegated otherwse.
6. Settement Negotatons. Settement negotatons n the fed
n docketed secton 722 cases w be carred on by technca advsors
(or Counc members, as the case may be) generay n the same manner
and sub|ect to the same rues and practces as obtan n smar nego-
tatons by the ppeate Dvson n standard-ssue cases. Whe con-
sderaton may be gven to an offer of settement whch fary refects
the strengths and weaknesses of the opposng vews, no settement w
be countenanced based upon nusance vaue of the case to ether party.
The concurrence of the authorzed representatve of the Chef Counse
n the fed w be secured before any settement s made fna.
ohn . Du ap,
Commssoner.
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21 Regs. 112, 3 .736(a)-3.
S CTION 730(a). R LI F FOR INST LLM NT SIS
T P Y RS ND T P Y RS WIT INCOM FROM
LONG-T RM CONTR CTS: L CTION TO CCRU
INCOM
Reguatons 112, Secton 3 .736(a)-3: Computaton 19 2-19-13919
of ncome on straght accrua bass. Ct. D. 17 7
e cess profts ta nterna revenue code decson of cou|t
1. Instament ass. T.v paykb ecton to Report Income on
ccrua ass Lmtaton on Deducton fob Chartabe
Contrbutons.
Ta payer, whch reguary reported ncome from nstament saes
on the nstament bass, as provded for n secton (a). of the
Interna Revenue Code, but whch eected, under secton 736(a) of
the Code to report such ncome on the accrua bass for e cess profts
ta purposes, s mted n ts deducton for-chartabe contrbutons
under secton 23(q) of the Code to percent of ts net ncome as
computed under the accrua method of accountng. consderaton
of the anguage of the statute provdng for an eecton by nsta-
ment seers to use the accrua method of accountng for e cess
profts ta purposes, as we as the ob|ectves of the statute, ceary
sustan the reasonabeness of secton 3 .730(a)-3 of Reguatons 112
here appcabe.
2. Decson ffrmed.
Decson of The Ta Court of the Unted States, 1 T. C. 91
(10 0), affrmed.
Unted States Court of ppeas for the S th Crcut
Leo ahn Furnture Company, pettoner, v. Commssoner of Interna Revenue,
respondent
19 Fed. (2d) 0
On petton to revew the decson of The Tn Court of the Unted States
efore cks, Chef udge; Mc ster and Mer, Crcut udges
pr , 19 2
OPINION
Mc ster. Crcut udge. Ths case presents a snge ssue of aw: whether,
for e cess profts ta purposes, pettoner s deducton for chartabe contrbutons
s propery mted to percent of ts net ncome, as fnay determned, on the
nstament bass of accountng, or to percent of ts net ncome, as fnay deter-
mned, on the accrua bass. The Ta Court hed that the amount of such
deducton was mted to percent of ts net ncome, computed on the accrua
bass; and pettoner seeks revew n ths court.
Pettoner s engaged n the reta furnture busness, reguary makng saes
on the nstament pan. It used the nstament method of accountng, n whch
a proporton of the tota proft s reported ony n the years when nstament
payments are actuay receved. Secton (a) of the Interna Revenue Code.1
Ths was the method of accountng permtted under the statute and adopted
by the ta payer, and whch t used durng the ta abe year n reportng ts
ncome for norma and surta purposes under chapter I.
fter Congress had enacted an e cess profts ta aw n 19 0, however, It
appeared that a hardshp woud resut to ta payers on the above-mentoned
nstament bass, due to the fact, among other consderatons, that the Federa
Reserve oard had ncreased the amount of down payments requred, whe
shortenng the perod on nstament contracts; that, on account of the shftng
1 26 D. S. C. ., secton (19 f ed.)
26 U. S. C. ., sectons 1, et seq.
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Regs. 112, 3 .73G(a)-3. 216
of busness to war contracts, nstament seers usng the nstament bass of
accountng were e perencng an ncrease of such ncome durng the e cess
profts ta years, whe the seng costs deductbe n the year of the saes were
not avaabe as offsets aganst the ncreased ncome. ccordngy, Congress
afforded a form of reef to such nstament bass ta payers by permttng them,
under certan condtons and n accordance wth the reguatons to be pro-
mugated by the Commssoner of Interna Revenue, to make nn eecton, for
purposes of the e cess profts ta , to compute ncome from nstament saes on
the accrua bass. Such eecton, when made, was to be rrevocabe e cept
that t coud ater be abandoned under certan condtons and ta payers who
made the eecton were to use the accrua method ony for e cess profts ta
purposes. They were st to report ther ncome on the nstament bass fur
purposes of the ta es mposed by chapter I.
Pettoner eected to compute ts ncome from nstament saes on the accrua
bass for purposes of the e cess profts ta . In order to ascertan the amount
of a ta payer s e cess profts ta , t s necessary to compute ts ad|usted e cess
profts net ncome, as t s upon that tem that the ta s mposed. The
ad|usted e cess prof s net ncome s the e cess profts net ncome mnus a
specfc e empton consstng of the e cess profts credt (based ether on the
base perod earnngs or nvested capta) and any unused e cess profts credt.
Pettoner, therefore, had two norma ta net ncomes one, computed under
one accountng method, for ncome ta under chapter I; and the other, computed
under a dfferent method, for e cess profts ta .
The controversy before us turns on the queston whether the ta payer whch
reguary reports ts ncome from nstament saes on the nstament bass, as
provded for n secton (a) of the Interna Revenue Code, but whch eected,
under secton 736(a) of the Interna Revenue Code, to report such ncome on
the accrua bass for purposes of the e cess profts ta , s entted to compute ts
ad|usted e cess profts net ncome by camng a deducton for chartabe con-
trbutons under secton 23 q) of the Code n an amount n e cess of percent
of ts ncome, as computed under the accrua method of accountng. The ta -
payer, notwthstandng ts eecton to use the accrua method of accountng for
e cess profts ta purposes, cams the rght to compute ts ad|usted e cess profts
net ncome by deductng such chartabe contrbutons to the e tent that they
woud e ceed percent of ts net ncome, computed on the nstament bass.
Pettoner contends that f Congress ntended that, for the purpose of com-
putng e cess profts ta , deductons for chartabe contrbutons shoud be
mted to percent of net ncome, computed n a manner other than that pro-
vded for ncome ta purposes, t woud have so provded. It s, therefore,
argued by pettoner that snce the bass of computaton whch t uses for ncome
ta purposes s the nstament bass, that such bass shoud be used wth respect
to deductons for chartabe purposes n computng e cess profts ta , n spte
of the fact that the ta payer had eected to use the accrua method of accountng
for e cess profts ta purposes.
We do not agree wth pettoner s contenton. In the frst pace, the appcabe
reguatons secton 3 .736(a)-3 of Treasury Reguatons 112 nsofar as here
pertnent, provdes:
ny deductons under secton 23 whch are mted to a percentage of net
ncome computed wthout regard to such deductons, as for e ampe, the
deducton for chartabe contrbutons whch s aowed by secton 23(q)
sha be determned on the bass of such net ncome wth ncome from n-
stament saes determned upon the straght accrua bass, and not on the
bass of such net ncome for the purposes of the ncome ta under Chap-
ter 1.
The foregong reguatons govern the precse queston before us, and, f vad,
must contro determnaton of the ssue.
It s cear that the purpose of the statute whch permts a ta payer, engaged
n seng on the nstament pan, and reportng Its ncome on the nstament
bass, to eect to report such ncome on the accrua bass for purposes of the
e cess profts ta , was to pace such nstament seers on an equa footng
wth other ta payers who were on an accrua bass, so far as the determnaton
of the e cess profts ta s concerned. mbre s ome Furnshngs, Inc., v.
2f IT. R. C. secton 736(a (10 0 cd.)
20 U. S. C. ., secton Tn d( n cd.)
26 U. S. C. ., secton 23 U9 6ed.)
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217
36 7.
Commssoner, 1 9 Fed. (2d) 60 (O. . ) ; Commssoner v. echt Co., 163 Fed.
(2d) 19 (C. . ). The contenton advanced by pettoner woud contravene
the purpose of the statute. For the use of Instament accountng, after pettoner
had eected the accrua method for e cess profts ta purposes, woud resut In
a deducton of more than percent of the amount of Its net ncome on whch the
e cess profts ta s utmatey based; and ths woud be a greater deducton than
aowed to ta payers on the accrua bass. In order that nstament seers
be on an equa footng wth other ta payers on an accrua bass, whch was
the purpose of the statute, t s necessary that both nstament seers who have
eected to use the accrua method as provded by statute, and ta payers on the
accrua bass compute ther ad|usted e cess profts net ncome by the accrua
method of accountng. consderaton of the anguage of the statute provdng
for an eecton by nstament seers to use the accrua method of accountng
for e cess profts ta purposes, as we as the ob|ectves of the statute, ceary
sustan the reasonabeness of the Treasury reguatons here appcabe.
In accordance wth the foregong, the decson of the Ta Court s affrmed.
C PT R 36. COLL CTION
SU C PT R . G N R L PRO ISIONS
S CTION 36 7. P YM NT Y UNIT D ST T S NOT S
ND C RTIFIC T S OF IND T DN SS
19 2-21-139 0
T. D. 93
TITL 26 INT N L R NU C PT R I, SU C PT R . P RT 3.
CC PT NC OF C RT 1N TR SURY O LIG TIONS IN P YM NT OF INCOM
ND PROFITS T S
Treasury Decson 703 C. . -2. 2 (1936) amended
Washngton 2 , D. C.
Others Concerned:
In order to refect the changes made necessary by paragraph of
Department Crcuar No. 1 , as amended May 13, 19 2 31 C. F. R.
309. ; 17 F. R. 61 , reatng to acceptance before maturty of Treas-
ury bs n payment of ncome and profts ta es, rtce 1 of Treasury
Decson 703 C. . -2, 2 (1936) , approved November 3,1936,
as made appcabe by Treasury Decson C. . 1939-1 (Part 1),
396 , approved February 11, 1939 26 C. F. R., Cum. Supp., page 76 ,
codfed n 26 C. F. R., part 3 (193 ed.), as secton 3. 6- , s hereby
Secton 1. Treasury certfcates of ndebtedness, Treasury nates, and Treasury
bs n payment of ncome and profts ta es. (a) Treasury certfcates of n-
debtedness and Treasury notes (not ncudng nterm recepts ssued by Federa
Reserve banks n eu of defntve certfcates or defntve notes) the maturty
dates of whch are the 1 th day of any caendar month may be tendered at
par or doar face amount, pus accrued nterest, f any, payabe wth the prncpa
(not represented by coupons attached), n payment of ncome and profts ta es
payabe under the provsons of the Interna Revenue Code, but ony f (1) such
certfcates or notes, accordng to the e press terms of ther Issue, are made
2 2160 3 1
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36 7.
21
acceptabe In payment of such ncome and profts ta es, and (2) such ta es for
whch the certfcates or notes are tendered n payment become due on the same
date as that on whch such certfcates or notes mature.
nterest coupons attached to Treasury certfcates of ndebtedness and
Treasury notes sha be detached by the ta payer before such certfcates or
notes are tendered n payment of ta es.
(6) Treasury bs of any seres (not ncudng nterm recepts ssued by
Federa Reserve banks n eu of defntve bs) may be tendered at or before
maturty at maturty vaue n payment of ncome and profts ta es payabe under
the provsons of the Interna Revenue Code, due on the date on whch the bs
mature or a specfed pror date, but ony f such bs, accordng to the e press
terms of ther ssue, are made acceptabe n payment of such ncome and profts
ta es due on that date.
(c) Recepts gven by the coector or drector of Interna Revenue for Treas-
ury certfcates of ndebtedness. Treasury notes, or Treasury bs receved n
payment of ncome or profts ta es as provded n ths secton sha contan
an adequate descrpton of such certfcates, notes, or bs, ncudng a statement
of the par vaue or doar face amount thereof and accrued nterest, f any,
payabe wth the prncpa (not represented by.coupons attached), and sha
show that they are tendered by the ta payer and receved by the coector or
drector, sub|ect to no condton, quafcaton, or reservaton whatsoever, n
payment of no more than an amount of ta es equa to such par vaue or doar
face amount and accrued nterest, f any, payabe wth the prncpa (not repre-
sented by coupons attached). ny certfcate, note, or b offered n payment
of ncome or profts ta es under the provsons of the Interna Revenue Code
sub|ect to any condton, quafcaton, or reservaton, or for any greater amount
than the par vaue or doar face amount thereof and accrued nterest, f any,
payabe wth the prncpa (not represented by coupons attached) sha not be
deemed to be duy tendered and sha be returned to the ta payer.
d) For the purpose of savng ta payers the e pense of transmttng such
Treasury certfcates of ndebtedness, Treasury notes, or Treasury bs to the
offce of the coector or drector of Interna Revenue n whose dstrct the ta es
are payabe, ta payers desrng to pay ncome and profts ta es by such certf-
cates, notes, or bs acceptabe n payment of ta es may depost such certfcates,
notes, or bs wth a Federa Reserve bank or branch, sub|ect to the condton
that the Federa Reserve bank ssue a recept n the name of the coector or
drector of Interna Revenue, coverng the par or doar face amount of the
certfcates, notes, or bs, and accrued nterest, f any, payabe wth the prnc-
pa (not represented by coupons attached), and statng on the face of the
recept that the securtes represented thereby are hed by the bank for redemp-
ton and appcaton of proceeds n payment of ncome or profts ta es due on
a specfed date by the ta payer named theren.
ecause ths Treasury Decson e tends to ta payers the prvege
of appyng specfed Treasury bs at maturty vaue n payment of
ncome or profts ta es due pror to the maturty date of such bs, t
s hereby found that t s unnecessary to ssue ths Treasury Decson
wth notce and pubc procedure thereon under secton (a) of the
dmnstratve Procedure ct, approved une 11, 1916, or sub|ect to
the effectve date mtaton of secton (c) of sad act.
Ths Treasury Decson sha be effectve upon ts fng for pub-
caton n the Federa Regster.
n sectons 36 7 and 3791 of the Interna Revenue Code ( 3 Stat. 7,
67; 26 U. S. C. 36 7, 3791).)
ohn . Dunap,
pproved September 2 , 19 2.
Thomas . Lynch,
(FUed wth the Dvson of the Federa Regster September 30,19 2, : a. m.)
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219 3779
C PT R 37. T M NTS, CR DITS, ND R FUNDS
S CTION 3779. T NSIONS OF TIM FOR P YM NT OF
T S Y CORPOR TIONS P CTING C RRY- C S
( so Secton 37 0.) 19 2-2 -13969
T. D. 9 3
TITL 26 INT RN L R NU C PT R I, SU C PT R . P RT 7 -
T NSIONS OF TIM FOR P YM NT OF T S Y CORPOR TIONS P CTING
C RRY- C S, ND T NT TI C RRY- C D USTM NTS
Treasury Decson 9 C. . 19 0-1, 209 amended to conform
to secton 30 (a), (b), and (g) of the cess Pn fts Ta ct of
19 0.
Washngton 2 , D. C.
Concerned:
On September 6, 19 2, a notce of proposed rue makng was pub-
shed n the Federa Regster 17 F. R. 07 to conform the regua-
tons prescrbed by Treasury Decson 0 C. . 19 6-1, 209 ,
approved February 27, 19 6 26 CFR, part 7 , to sectons 3779
and 37 0(a) of the Interna Revenue Code, as amended by secton
30 (a), (b), and (g) of the cess Profts Ta ct of 19 0, approved
anuary 3, 19 1. No ob|ecton to the rues proposed havng been
receved wthn the 30 days foowng such pubcaton, the
amendments set forth beow are hereby adopted.
Paragraph 1. The paragraph whch reads Pursuant to the above-
quoted provsons of the a d|ustment ct of 19 , the foowng
reguatons are hereby prescrbed: , whch paragraph mmedatey
precedes secton 7 .0, s strcken and there s nserted n eu thereof
the foowng:
S C. 30 . T C NIC L M NDM NTS C SS PROFITS T
CT OF 19 0, PPRO D NU RY 3, 19 1 .
(a) Secton 3779 of the Interna Revenue Code (reatng to e tensons
of tme for payment of ta es by corporatons e pectng carry-backs)
Is hereby amended by strkng 710(c)(3) where It appears n sub-
secton (b) and nsertng n eu thereof 32(c) , and by strkng the
words four equa where they appear n subsectons (c), (g), and
().
(b) Secton 37 0(a) of such code (reatng to tentatve carry-back
ad|ustments) s hereby amended by strkng 710(c) (3) and nsertng
n eu thereof 32(c) .

(g) The amendments made by ths secton sha be appcabe wth
respect to ta abe years endng after une 30, 19 0.
Pursuant to the above-quoted provsons of aw, the foowng
reguatons are hereby prescrbed:
Pae. 2. Secton 7 .2 s amended by nsertng 711(a) (2) (L), and
33(a) (1) ( ) n eu of and 711(a)(2) (Lf n the ast sentence
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37 0.
220
of the thrd paragraph thereof, so that such sentence w read as
foows:
In determnng the net operatng oss deducton, the ad|ustments requred by
sectons 122(c), 711(a) (1) ( ), 711(a) (2) (L), and 33(a)(1) ( ) are kewse
to be made.
Par. 3. Secton 7 . s amended by strkng four equa nsta-
ments. from the frst sentence thereof and nsertng n eu thereof
nstaments as provded n secton 6(b). , so that such sentence
w read as foows:
If an e tenson of tme reates to ony part of the ta , the tme for payment of the
remander of the ta sha be consdered to be the dates on whch payments woud
have been requred f such remander had been the ta and the ta payer had
eected to pay the ta n nstaments as provded n secton 6(b).
Par. . Secton 7 . s amended by strkng from the second sen-
tence thereof the words four equa , so that such sentence w read
as foows:
The tme for payment of such amount sha be the dates on whch payments
woud have been requred f there had been no e tenson wth respect to such
amount and the ta payer had eected under secton 6(b) to pay the ta n
nstaments.
Par. . Secton 7 .9 s amended by strkng the words four equa
from the second sentence thereof, so that the part of such sentence
whch precedes (a) thereof w read as foows:
The nterest, whch s to be coected as part of such amount, s to be computed
from the dates on whch payments woud have been requred f there had been
no e tenson, and the ta payer had eected under secton 6(b) to pay the ta
n nstaments, at the foowng rates:
Par. 6. Secton 7 .11 s amended by nsertng 711(a) (2) (L), and
33(a) (1) ( ) n eu of and 711(a) (2) (L) n the ast sentence of
the second paragraph thereof, so that such sentence w read as foows:
In computng the net operatng oss deducton for purposes of determnng any
such ncrease or decrease, proper ad|ustments as requred by sectons 122(c),
711(a) (1) ( ), 711(a) (2) (L), and 33(a) (1) ( ) are to be made.
3791).)
ohn . Dt|nap,
pproved October 31,19 2.
ohn S. Graham,
(Fed wth the Dvson of the Federa Regster November , 19 2, : a. m.)
S CTION 37 0. T NT TI C RRY- C D USTM NTS
INT RN L R NU COD
Reguatons wth respect to tentatve carry-back ad|ustments, Treas-
ury Decson 9 (C. . 19 6-1, 209) amended. (See T. D. 9 3,
page 219.)
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221 111, rt. 61, Regs. 7 .
INCOM T RULINGS. P RT II
R NU CT OF 193 ND PRIOR R NU CTS
SU TITL . G N R L PRO ISIONS
P RT II. COMPUT TION OF N T INCOM
S CTION 111. D T RMIN TION OF MOUNT OF G IN
O LOSS
rtce 61, Reguatons 7 : Determnaton 19 2-23-139 6
of the amount of gan or oss. G. C. M. 27 91
( so Secton 23, Secton 29. 23-3.)
R NU CT OF 102
In the case of an organzaton whch was e empt from ta for a
pror perod and subsequenty became sub|ect to ta , n computng
the amount of gan or oss from the sae or e change of property
hed durng a or part of the perod that t was e empt, the bass
Shoud be reduced by the amount of deprecaton sustaned wth re-
spect to the property for the perod hed whe the ta payer was
e empt.
G. C. M. 10 7 (C. . I-2,10 (1932)) revoked.
Reconsderaton has been gven to G. C. M. 10 7 (C. . I-2, 10 ,
(1932)) n the ght of the reguatons under Suppement U of the
Interna Revenue Code (whch reate to the mposton of ta for
ta abe years begnnng after December 31, 19 0, n respect of ncome
of certan otherwse ta -e empt organzatons) partcuary secton
29. 23-3 of Reguatons 111, as added by T. D. 92 (page 1 1, ths
uetn), approved ugust 2 , 19 2.
In G. C. M. 10 7, supra, t s hed that where an organzaton de-
rves ta abe gan from the sae of ts property the bass shoud not
be reduced by the amount of deprecaton sustaned wth respect to the
property for the perod durng whch the ta payer occuped the status
of an e empt organzaton. The ssue n G. C. M. 10 7, supra,
reatng to the aowance of deprecaton n the determnaton of gan
or oss upon the sae, e change, or other dsposton of property does
not arse n the appcaton of Suppement U, snce such gan or oss s
e cuded by secton 22(a) ( ) of the Code n computng unreated
busness net ncome . owever, the aowance of deprecaton does
arse n computng the amount of renta ncome to be ncuded n
unreated busness net ncome derved from a Suppement U ease.
In computng such amount t s necessary to determne the ad|usted
bass of the property sub|ect to the ease and to make a reasonabe
aowance for deprecaton.
Secton 29. 23-3 of Reguatons 111, reatng to the treatment of
rent from Suppement U ease, provdes that the determnaton of
the ad|usted bass of property s not affected by the fact that the
ta payer was e empt from ta for pror years. Therefore, the cost
or other bass of property of an organzaton sub|ect to the provsons
of Suppement U must be dmnshed by the amount of deprecaton
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111, rt. 61, Rega. 7 .
222
sustaned pror to the begnnng of the frst ta abe year n whch t
became sub|ect to Suppement U, regardess of whether the organza-
ton was e empt from ta durng any pror year.
Snce G. C. M. 10 7, supra, s n confct wth secton 29. 23-3 of
.Reguatons 111, t s hereby revoked. ccordngy, n the case of an
organzaton whch was e empt from ta for a pror perod and sub-
sequenty became sub|ect to ta , n computng the amount of gan
or oss from the sae or e change of property hed durng a or part
of the perod that t was e empt, the bass shoud be reduced by the
amount of deprecaton sustaned wth respect to the property for the
perod hed whe the ta payer was e empt. pproprate ad|ustments
shoud aso be made wth respect to deprecaton for the perod the
property was hed whe the ta payer was not e empt.
G. C. M. 10 7 (C. . I-2,10 (1932)) revoked.
Chares W. Davs,
Chef Counse, ureau of Interna Revenue.
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ST T ND GIFT T S
ST T T
S CTION 11. GROSS ST T
Secton 1.13, Reguatons 10 : Property of 19 2-23-139
decedent at tme of death. T. D. 9 0
( so Secton 1. 9.)
ST T T UND R C PT R 3 OF T INT RN L R NU COD . S
M ND D
Reguatons 10 amended to conform to the provsons of secton
60 (a) of the Revenue ct of 10 1, ghty-second Congress, frst
sesson.
Washngton 2 , D. C.
Concerned:
In order to conform Reguatons 10 26 CFR, part 1 to secton
60 (a) of the Revenue ct of 19 1, approved October 20, 19 1, such
reguatons are hereby amended as foows:
Paragraph 1. There s nserted mmedatey precedng secton 1. 9
26 CFR 1. 9 the foowng:
S C. 60 . ST T ND GIFT T TR TM NT OF UNIT D
ST T S ONDS LD Y C RT IN NONR SID NT LI NS
(a) state Ta . ffectve wth respect to estates of decedents dyng
after February 10, 1939, secton 61 (reatng to the computaton of the
net estate of a decedent nonresdent not a ctzen of the Unted States)
s hereby amended by addng at the end thereof the foowng new
subsecton:
(c) Unted States onds. For the purposes of subsecton (a), the
vaue of the gross estate (determned as provded n secton 11) of a
decedent who was not engaged n busness n the Unted States at the
tme of hs death
(1) sha not ncude obgatons ssued by the Unted States
pror to March 1, 19 1; and
(2) sha ncude obgatons ssued by the Unted States on or
after March 1, 19 1, but ony f the decedent ded after the date
of the enactment of the Revenue ct of 19 1.
Par. 2. Secton 1.13 26 CFR 1.13 s amended as foows:
( ) y nsertng mmedatey after ta aton, are n the frst
sentence of the ffth paragraph the word generay , and
( ) y strkng the second sentence of such ffth paragraph and
owever, secton 61(c), as added by 60 (a) of the Revenue ct of 19 1, provdes
that, n case of a decedent who was a nonresdent not a ctzen of the Unted
(223)
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I 1.17, Regs. 10 .
22
States and not engaged n busness n the Unted States at the tme of hs death,
the vaue of the gross estate sha not ncude obgatons ssued by the Unted
States pror to March 1, 19 1. Secton 61(c) further provdes that the gross
estate of such a decedent sha ncude obgatons ssued by the Unted States
on or after March 1, 19 1, but ony f the decedent ded after October 20, 19 1,
the date of the Revenue ct of 19 1.
Par. 3. Secton 1. 9 26 CFR 1. 9 s amended by nsertng m-
medatey foowng the second sentence thereof the foowng:
For ncuson n the gross estate of obgatons of the Unted States n the case
of nonresdents who are not ctzens of and not engaged n busness n the Unted
States, see secton 1.13.
ecause of the technca nature of the amendments made heren t
s found that t s unnecessary to ssue ths Treasury Decson wth
notce and pubc procedure thereon under secton (a) of the dmn-
stratve Procedure ct, approved une 11, 19 6, or sub|ect to the
effectve date mtaton of secton (c) of sad act.
(Ths Treasury Decson s ssued pursuant to the authorty con-
taned n secton 3791 of the Interna Revenue Code ( 3 Stat. 67;
26 U. S. C. 3791).)
ohn . Dunap,
Thomas . Lynch,
(Fed wth the Dvson of the Federa Regster October 17,19 2, : 3 a. m.)
Secton 1.17, Reguatons 10 : Transfers 19 2-22-139 0
ntended to take effect at or after the dece- T. D. 936
dent s death.
( so Sectons 1.1 and 1.19.)
TITL 26 INT RN L R NU C PT R I, SU C PT R . P RT 1.
M ND D
Reguatons 10 amended to conform to sectons 00 , 609, and
610 of the Revenue ct of 19 1, ghty-second Congress, frst
sesson.
Washngton 2 , D. C.
Concerned:
In order to conform Reguatons 10 26 CFR, part 1 to sectons
60 , 609, and 610 of the Revenue ct of 19 1 ( 2d Cong., 1st sess.),
approved October 20, 19 1, such reguatons are amended as foows:
Paragraph 1. There s nserted mmedatey after secton 01 of
the Revenue ct of 19 0 ( 1st Cong., 2d sess.) and precedng secton
302(c) of the Revenue ct of 1926 (as orgnay enacted), whch
precedes secton 1.1 26 CFR 1.1 , the foowng:
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22
1.17, Regs. 10 .
S C. 60 . TR NSF RS WIT INCOM R S R D R NU
CT OF 19 1, PPRO D OCTO R 20, 19 1 .
Secton 7(b) of the ct entted n ct to amend certan provsons
of the Interna Revenue Code , approved October 2 , 19 9 ( 63 Stat.
9 ), s hereby amended by strkng out anuary 1, 19 0 and nsertng
n eu thereof anuary 1, 19 1 .
S C. 609. TR NSF RS T ING FF CT T D T R NU
CT OF 19 1, PPRO D OCTO R 20, 19 1 .
ffectve wth respect to estates of decedents dyng after February 10,
1939, secton 7(b) of the ct entted n ct to amend certan provsons
of the Interna Revenue Code , approved October 2 , 19 9 (63 Stat.
9 ), s hereby amended by strkng out the word sentence and nsert-
ng n eu thereof two sentences and by nsertng mmedatey preced-
ng the ast sentence thereof the foowng sentence: The provsons of
secton 11(c) (1) (C) of such code sha not appy to a transfer made
pror to September , 1916. The provsons of secton 7(c) of such
ct, as amended, sha not appy to an overpayment resutng from the
appcaton of ths secton.
Par. 2. Secton 1.17, as amended by Treasury Decson 906 C. .
19 2-1, 1 , approved May 27, 19 2 26 CFR 1.17 , s further
amended as foows:
( ) y nsertng n the frst sentence of (a) after of whch he
has made a transfer the foowng after September 7, 1916 .
( ) y addng at the end of (a) the foowng: The provsons of
secton 11(c)(1)(C) are not appcabe to a transfer made before
September , 1916.
(C) y strkng from the frst sentence of (c) (whether made
before or after the enactment of the Revenue ct of 1916) .
Par. 3. Secton 1.1 , as amended by Treasury Decson 3 C. .
19 1-1, 72 , approved March , 19 1 26 CFR 1.1 , s further
amended bv strkng out anuary 1, 19 0 , wherever t appears
theren, and nsertng n eu thereof, anuary 1,19 1 .
Par. . Secton 1.19, as amended by Treasury Decson 3 26
CFR 1.19 s further amended by strkng therefrom anuary 1,
19 0 , wherever t appears theren, and nsertng n eu thereof
anuary 1, 19 1 .
Par. . There s nserted mmedatey precedng secton 1.2 26
CFR 1.2 the foowng:
S C. 610. R RSION RY INT R STS IN C S OF LIF IN-
SUR NC R NU CT OF 19 1, PPRO D OCTO R
0, 19 1 .
If refund or credt of any overpayment resutng from the appcaton
of secton 03 of the evenue ct of 19 0 wns prevented on October 2 ,
19 0, by the operaton of any aw or rue of aw (other than secton 3760
of the Interna Revenue Code, reatng to cosng agreements, and other
than secton 3761 of such Code, reatng to compromses), refund or
credt of such overpayment may, nevertheess, be made or aowed f
cam therefor was ted after October 2 , 19 9, and on or before October
2 , 19 0.
ecause of the technca nature of the amendments made heren,
t s found unnecessary to ssue ths Treasury Decson wth notce
and pubc procedure thereon under secton (a) of the dmnstra-
tve Procedure ct, approved une 11,19 6, or sub|ect to the effectve |
date mtaton of secton (c) of sad act.
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1. , Regs. 10 . 226
26 U. S. C. 3791).)
ohn . Dunap,
Thomas . Lynch,
(Fed wth the Dvson of the Federa Regster October , 19 2, : 0 a. m.)
S CTION 12. N T ST T
Secton 1. , Reguatons 10 : Transfers for 19 2-26-13996
pubc, chartabe, regous, etc., uses. T. D. 9
( so Secton 1. .)
TITL 26 INT RN L R NU C PT R I. SU C PT R . P RT 1.
M ND D
Reguatons 10 amended to conform to certan provsons of
parts 1, II, and III of tte III of the Revenue ct of 19 0.
Washngton 2 , D. C.
Concerned:
On September , 19 2, notce of proposed rue makng, regardng
certan estate ta provsons of the Revenue ct of 19 0, approved
September 23, 19 0, was pubshed n the Federa Regster (17 F. R.
020). No ob|ectons to such rues havng been receved, the amend-
ments set forth beow necessary to conform Reguatons 10 to such
provsons are hereby adopted.
Paragraph 1. There s nserted mmedatey precedng secton 1.
26 CFR 1. the foowng:
S C. 302. MPTION OF C RT IN ORG NIZ TIONS FOR P ST
Y RS R NU CT OF 19 0, PPRO D S PT M R 23,
19 0 .
(a) Tbade ob usness Not Unreated. For any ta abe year be-
gnnng pror to anuary 1, 19 1, no organzaton sha be dened e emp-
ton under paragraph (1), (6), or (7) of secton 101 of the Interna
Revenue Code on the grounds that t s carryng on a trade or busness
for proft f the ncome from such trade or busness woud not be ta -
abe as unreated busness ncome under the provsons of Suppement
U of the Interna Revenue Code, as amended by ths ct, or f such trade
or busness s the renta by such organzaton of ts rea property (n-
cudng persona property eased wth the rea property).
(b) Perod of Lmtatons. In the case of an organzaton whch
woud otherwse be e empt under secton 101 of the Interna Revenue
Code were t not carryng on a trade or busness for proft, the fng
of the nformaton return requred by secton (f) of the Interna
Revenue Code (reatng to returns by ta -e empt organzatons) for
any ta abe year begnnng pror to anuary 1,19 1, sha be deemed to
be the fng of a return for the purposes of secton 27 of the Interna
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227
1. , Regs. 10 .
Revenue Code (reatng to perod of mtaton upon assessment and
coecton). In the case of such an organzaton whch was, by the pro-
vsons of secton (f) of the Internn Revenue Code, specfcay not
requred to fe such nformaton return, for the purposes of the pre-
cedng sentence a return sha be deemed to have been fed at the tme
when such return shoud have been fed had t been so requred. The
provsons of ths subsecton sha not appy to a ta abe year of such
an organzaton wth respect to whch, pror to September 20, 19 0, (1)
any amount of ta was assessed or pad, or (2) a notce of defcency
under secton 272 of the Interna Revenue Code was sent to the ta payer.
(c) Dena of Deductons. gft or bequest to an organzaton
pror to anuary 1, 19 1, for regous, chartabe, scentfc, terary, or
educatona purposes (ncudng the encouragement of art and the pre-
venton of cruety to chdren or anmas) otherwse aowabe as a
deducton under secton 12(d), 61(a) (3), of the
Interna Revenue Code, may not be dened under such sectons f a dena
of e empton to such organzaton for the ta abe year of the organza-
ton n whch such gft or bequest was made s prevented by the prov-
sons of subsectons (a) or (b) of ths secton.
S C. 162. N T INCOM INT RN L, R NU COD S
M ND D Y S CTION 321, R NU CT OF 19 0, P-
PRO D S PT M R 23, 19 0 .
The net ncome of the estate or trust sha be computed n the same
manner and on the same bass as n the case of an ndvdua, e cept
that
(a) Sub|ect to the provsons of subsecton (g), there sha be aowed
as a deducton (n eu of the deducton for chartabe, etc., contrbu-
tons authorzed by secton 23(o)) any part of the gross ncome, wthout
mtaton, whch pursuant to the terms of the w or deed creatng
the trust, s durng the ta abe year pad or permanenty set asde for
the purposes and n the manner specfed n secton 23(o), or s to be
used e cusvey for regous, chartabe, scentfc, terary, or educa-
tona purposes, or for t.e preventon of cruety to chdren or anmas,
or for the estabshment, acquston, mantenance or operaton of a
pubc cen.etery not operated for proft. Where any amount of the
ncome so pad or set asde s attrbutabe to gan from the sae or
e change of capta assets hed for more than 6 months, proper ad-
|ustment of the deducton otherwse aowabe under ths subsecton
sha be made for any deducton aowabe to the trust under secton
23(ee) ;

(g) Rues fob ppcaton of Subsecton (a) n the Case of
Tbusts.

(2) Opebatons of Tbusts.
( ) Lmtaton on chartabe, etc., deducton. The amount
otherwse aowabe under subsecton (a) as a deducton sha
not e ceed 1 per centum of the net ncome of the trust (com-
puted wthout the beneft of subsecton (a)) f the trust has
engaged n a prohbted transacton, as defned n subparagraph
( ) of ths paragraph.
( ) Prohbted transactons. For the purposes of ths para-
graph the term prohbted transacton means any transacton
after uy 1, 19 0, n whch any trust whe hodng Income or
corpus whch has been permanenty set asde or s to be used
e cusvey for chartabe or other purposes descrbed n sub-
secton (a)
() ends any part of such ncome or corpus, wthout
recept of adequate securty and a reasonabe rate of In-
terest, to;
() pays any compensaton from such ncome or corpus,
n e cess of a reasonabe aowance for saares or other
compensaton for persona servces actuay rendered, to;
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1. , Regs. 10 .
22
( I) makes any part of ts servces avaabe on a prefer-
enta bass to;
(v) uses such ncome or corpus to make any substan-
ta purchase of securtes or any other property, for more
than an adequate consderaton n money or money s worth,
from;
(v) ses any substanta part of the securtes or other
property comprsng such ncome or corpus, for ess than
an adequate consderaton n money or money s worth, to;
or
(v) engages n any other transacton whch resuts n
a substanta dverson of such Income or corpus to;
the creator of such trust; any person who has made a substan-
ta contrbuton to such trust; a member of the famy (as
defned n secton 2 (b)(2)(D)) of an ndvdua who s the
creator of the trust or who has made a substanta contrbuton
to the trust; or a corporaton controed by any such creator
or person through the ownershp, drecty or ndrecty, of
0 per centum or more of the tota combned votng power of
a casses of stock entted to vote or 0 per centum or more of
the tota vaue of shares of a casses of stock of the corpo-
raton.
(C) Ta abe years affected. The amount otherwse aow-
abe under subsecton (a) as a deducton sha be mted as
provded n subparagraph ( ) ony for ta abe years subse-
quent to the ta abe year durng whch the trust s notfed by
the Secretary that t has engaged In such transacton, uness
such trust entered nto such prohbted transacton wth the
purpose of dvertng such corpus or ncome from the purposes
descrbed n subsecton (a), and such transacton nvoved a
substanta part of such corpus or Income.
(D) Future chartabe, etc., deductons of trusts dened de-
ducton under subparagraph (C). If the deducton of any trust
under subsecton (a) has been mted as provded n ths
paragraph, such trust, wth respect to any ta abe year foow-
ng the ta abe year n whch notce s receved of mtaton
of deducton under subsecton (a), may, under reguatons pre-
scrbed by the Secretary, fe cam for the aowance of the
unmted deducton under subsecton (a), and f the Secretary,
pursuant to such reguatons, s satsfed that such trust w not
knowngy agan engage n a prohbted transacton, the mta-
ton provded n subparagraph ( ) sha not be appcabe wth
respect to ta abe years subsequent to the year n whch such
cam s fed.
( ) Dsaowance of certan chartabe, etc., deductons.
No gft or bequest for regous, chartabe, scentfc, terary,
or educatona purposes (ncudng the encouragement of art
and the preventon of cruety to chdren or anmas), other-
wse aowabe as a deducton under secton 12(d),
61(a) (3), sha be aowed as a deducton f made
In trust and; n the ta abe year of the trust n whch the gft
or bequest s made, the deducton aowed the trust under
subsecton (a) Is mted by subparagraph ( ). Wth respect
to any ta abe year of a trust n whch such deducton has
been so mted by reason of enterng nto a prohbted trans-
acton wth the purpose of dvertng such corpus or ncome from
the purposes descrbed n subsecton (a), and such transacton
nvoved a substanta part of such ncome or corpus, and whch
ta abe year s the same, or pror to the, ta abe year of the
trust n whch such prohbted transacton occurred, such deduc-
ton sha be dsaowed the donor ony f such donor or (f such
donor s an Indvdua) any member of hs famy (as defned
In secton 2 (b)(2)(D)) was a party to such prohbted
transacton.
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229
IS 1. , Regs. 10 .
(F) Defnton. For the purposes of ths paragraph the term
gft or bequest means any gft, contrbuton, bequest, devse,
egacy, or transfer.
(3) Cross reference. For dsaowance of certan chartabe,
etc., deductons otherwse aowabe under subsecton (a), see sec-
ton 3 13.

S C. 322. FF CTI D T OF P RT II R NU CT OF 19 0,
PPRO D S PT M R 23, 19 0 .
The amendments made by ths part secton 321, nsertng subsecton
(g) n secton 162 of the Interna Revenue Code sha be appcabe ony
wth respect to ta abe years begnnng after December 31, 19 0, e cept
that subsecton (g) (2) ( ) of secton 162 of the Interna Revenue Code,
added by secton 321(a) of ths ct, sha appy ony wth respect to
gfts or bequests (as defned n secton 162(g)(2)(F) of the Interna
Revenue Code) made on or after anuary 1, 19 1.

S CTION 101(6) ND D DUCT I ILITY OF CONTRI UTIONS
PPRO D S PT M R 23, 19 0 .
Chapter 3 s hereby amended by nsertng at the end thereof the
foowng new sectons:
S C. 3 13 R UIR M NTS FOR MPTION OF C RT IN
ORG NIZ TIONS UND R S CTION 101(6) ND FOR D DUCT-
ILITY OF CONTRI UTIONS M D TO SUC ORG NIZ -
TIONS.
(a) Organzatons to Whch Secton ppes. Ths secton sha
appy to any organzaton descrbed n secton 101(6) e cept
(1) a regous organzaton (other than a trust) ;
(2) an educatona organzaton whch normay mantans a
reguar facuty and currcuum and normay has a reguary en-
roed body of pups or students n attendance at the pace where
ts educatona actvtes are reguary carred on;
(3) an organzaton whch normay receves a substanta part
of Its support (e cusve of ncome receved n the e ercse or per-
formance by such organzaton of ts chartabe, educatona, or other
purpose or functon consttutng the bass for ts e empton under
secton 101(6)) from the Unted States or any State or potca
subdvson thereof or from drect or ndrect contrbutons from the
genera pubc;
( ) an organzaton whch s operated, supervsed, controed, or
prncpay supported by a regous organzaton (other than a
trust) whch s tsef not sub|ect to the provsons of ths secton;
and
( ) an organzaton the prncpa purposes or functons of whch
are the provdng of medca or hospta care or medca educaton
or medca research.
(b) Prohbted Transactons. For the purposes of ths secton, the
term prohbted transacton means any transacton n whch an organza-
ton sub|ect to the provsons of ts secton
(1) ends any part of ts ncome or corpus, wthout the recept of
adequate securty and a reasonabe rate of nterest, to;
(2) pays any compensaton, n e cess of a reasonabe aowance
for saares or other compensaton for persona servces actuay
rendered, to;
(3) makes any part of ts servces avaabe on a preferenta
bass to;
( ) makes any substanta purchase of securtes or any other
property, for more than adequate consderaton n money or money s
worth, from;
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f 1. , Regs. 10 .
230
( ) ses any substanta part of Its securtes or other property,
for ess than an adequate consderaton n money or money s worth,
to; or
(6) engages n any other transacton whch resuts n a substan-
ta dverson of ts ncome or corpus to;
the creator of such organzaton (f a trust) ; a person who has made a
substanta contrbuton to such organzaton; a member of the famy
(as defned n secton 2 (b) (2) (D)) of an ndvdua who s the creator
of such trust or who has made a substanta contrbuton to such organ-
zaton ; or a corporaton controed by such creator or person through
the ownershp, drecty or ndrecty, of 0 per centum or more of the
tota combned votng power of a casses of stock entted to vote or 0
per centum or more of the tota vaue of shares of a casses of stock of
the corporaton.
(c) Dena op empton to Oboanzatons ngaged n Prohbted
Transacton.
(1) Genera rue. No organzaton sub|ect to the provsons of
ths secton whch has engaged n a prohbted transacton after uy
1,19 0, sha be e empt from ta aton under secton 101 (6).
(2) Ta abe years affected. n organzaton sha be dened
e empton from ta aton under secton 101(6) by reason of para-
graph (1) ony for ta abe years subsequent to the ta abe year
durng whch t s notfed by the Secretary that t has engaged n a
prohbted transacton, uness such organzaton entered nto such
prohbted transacton wth the purpose of dvertng corpus or In-
come of the organzaton from ts e empt purposes, and such trans-
acton nvoved a substanta part of the corpus or ncome of such
organzaton.
(d) Future Status of Organzaton Dened empton. ny
organzaton dened e empton under secton 101(6) by reason of the
provsons of subsecton (c), wth respect to any ta abe year foowng
the ta abe year n whch notce of dena of e empton was receved,
may, under reguatons prescrbed by the Secretary, fe cam for e -
empton, and f the Secretary, pursuant to such reguatons, s satsfed
that such organzaton w not knowngy agan engage n a prohbted
transacton, such organzaton sha be e empt wth respect to ta abe
years subsequent to the year n whch such cam s fed.
(e) DI LL0W NC OF C RT IN C RIT L , TC., D DUCTIONS. No
gft or bequest for regous, chartabe, scentfc, terary, or educa-
tona purposes (ncudng the encouragement of art and the preventon
of cruety to chdren or anmas), otherwse aowabe as a deducton
under secton 12(d), 61(a) (3), sha be aowed
as a deducton f made to an organzaton whch, n the ta abe year
of the organzaton n whch the gft or bequest s made, Is not e empt
under secton 101(6) by reason of the provsons of ths secton. Wth
respect to any ta abe year of the organzaton for whch the organza-
ton s not e empt pursuant to the provsons of subsecton (c) by reason
of havng engaged n a prohbted transacton wth the purpose of dvert-
ng the corpus or ncome of such organzaton from ts e empt purposes
and such transacton nvoved a substanta part of such corpus or n-
come, and whch ta abe year s the same, or pror to the, ta abe year
of the organzaton n whch such transacton occurred, such deducton
sha be dsaowed the donor ony f such donor or (f such donor s an
ndvdua) any member of hs famy (as defned n secton 2 (b)-
(2) (D)) was a party to such prohbted transacton.
(f) Defnton. For the purposes of ths secton, the term gft or
bequest means any gft, contrbuton, bequest, devse, egacy, or transfer.
.
PPRO D S PT M R 23, 19 0 .

(e) mendment of Secton 12(d). Secton 12(d) s hereby
subsecton, see sectons 3 13 and 162(g) (2).
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231
1. , Regs. 10 .
(f) mendment of Secton 61(a). Secton 61(a)(3) Is hereby
paragraph, see sectons 3 13 and 162(g) (2).

S C. 333. FF CTI D T S R NU CT OF 19 0, P-
PRO D S PT M R 23, 19 0 .
Subsectons (c) and (d) of secton 3 13 of the Interna
Revenue Code, added by secton 331 of ths ct, sha appy wth respect
to ta abe years begnnng after December 1, 19 0, and subsecton (e)
of secton 3 13 of the Interna Revenue Code sha appy ony wth re-
spect to gfts or bequests (as defned n secton 3 13 of the Interna
Revenue Code) made on or after anuary 1. 19 1.
Par. 2. Secton 1. , as amended bv Treasury Decson 906
C. . 19 -2-1,1 , approved May 27,19 2 26 CFR 1. , s further
amended as foows:
( ) y changng the headng thereof to read, as foows: Trans-
fers for Pubc, Chartabe, Regous, tc., Uses. (a) In
genera ;
( ) y strkng the word Deducton at the begnnng of the frst
sentence and nsertng n eu thereof the foowng: cept as other-
wse provded n (h) of ths secton, deducton ; and
(C) y addng at the end of (a) the foowng:
(6) Dsaowance of certan chartabe, etc., deductons. In the case of a
decedent dyng on or after anuary 1, 19 1. no deducton whch woud otherwse
be aowabe under (a) of ths secton for the vaue of property transferred by
the decedent durng hs fetme or by w for regous, chartabe, scentfc,
terary, or educatona purposes (ncudng the encouragement of art and the
preventon of cruety to chdren or anmas) sha be aowed f (1) the transfer
s made n trust and, for ncome ta purposes for the ta abe year of the trust
n whch the transfer s made, the deducton otherwse aowabe to such trust
under secton 162(a) s mted by secton 162(g) (2) ( ) by reason of the trust
havng engaged n a prohbted transacton descrbed n secton 162(g)(2)( ) ;
or (2) the transfer s made to an organzaton sub|ect to secton 3 13 whch, for
ts ta abe year n whch the transfer s made, s not e empt from ncome ta
under secton 101(6) by reason of havng engaged n a prohbted transacton
descrbed n secton 3 13(b).
For the purpose of secton 162(g)(2)( ) and secton 3 13(e), the term
transfer ncudes any gft, contrbuton, bequest, devse, egacy, or other
dsposton. In appyng such sectons for estate ta purposes, a transfer,
whether made before, on or after anuary 1, 19 1, and whether made durng
the decedent s fetme or by w, sha be consdered as havng been made at
the moment of the decedent s death.
Reguatons 111, reatng to the ncome ta , contans the rues for the deter-
mnaton of the ta abe year of the trust for whch the deducton under secton
162(a) s mted by secton 162(g)(2) and for the determnaton of the ta abe
vear of the organzaton for whch an e empton s dened under secton 3 13(c).
See sectons 29.162-3(6) and 29.3 13-1 of Reguatons 111. Such ta abe year
must begn after December 31, 19 0. Generay, such ta abe year s a ta abe
year subsequent to the ta abe year durng whch the trust or organzaton
has been notfed by the Commssoner that t has engaged n a prohbted
transacton. owever, If the trust or organzaton after December 31, 19 0,
and durng or pror to the ta abe year entered nto the prohbted transacton
for the purpose of dvertng ts corpus or ncome from the purposes descrbed n
secton 162(a) or from ts e empt purposes, as the case may be, and such
transacton nvoves a substanta part of such ncome or corpus, then the deduc-
ton of the trust under secton 162(a) for such ta abe year s mted by secton
162(g) (2), or the e empton of the organzaton for such ta abe year s dened
under secton 3 13(c), whether or not the organzaton has prevousy receved
notfcaton by the Commssoner that t s engaged n a prohbted transacton.
In certan cases, the mtaton of secton 162(g) may be removed or the
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1. 0, Regs. 10 .
232
e empton may be renstated for certan subsequent ta abe years under the
rues set forth n sectons 29.162-3(6) and 29.3 13-2, of Reguatons 111
In cases n whch pror notfcaton by the Commssoner s not requred n
order to mt the deducton of the trust under secton 162(g)(2) or to deDy
e empton of the organzaton under secton 3 13, the deducton otherwse
aowabe under (a) of ths secton sha not be dsaowed n respect to transfers
made durng the same ta abe year of the trust or organzaton n whch such
prohbted transacton occurred or n a pror ta abe year uness the decedent
or a member of hs famy was a party to the prohbted transacton. For the
purpose of the precedng sentence, the members of the decedent s famy ncude
ony hs brothers and ssters, whether by whoe or haf bood, spouse, ancestors,
and nea descendants.
Par. 3. Secton 1. 26 CFR 1. s amended by addng at the
end thereof the foowng:
For further mtatons n the case of transfers by decedents dyng on or
after anuary 1, 19 1, see secton 1. (6), reatng to transfers to trusts and
organzatons engaged n a prohbted transacton descrbed n sectons
162(g) (2) ( ) or 3 13(b).
secton 3791 of the Interna Revenue Code ( 3 Stat. 67; 26 U. S. C.
3791).)
ustn F. Wnke,
pproved November 21,19 2.
Thomas . Lynch,
(Fed wth the Dvson of the Federa Regster November 2 , 19 2, : 0 a. m.)
S CTION 63. PROP RTY WIT OUT T
UNIT D ST T S
Secton 1. 0, Reguatons 10 : Stus of 19 2-1 -13 7
property. T. D. 916
ST T T UND R C PT R 3 OF T INT RN L R NU COD , S
M ND D
Reguatons 10 amended to conform to Pubc Law 7 9 ( 1st
Cong., 2d sess.) C. . 19 0-2, 2 7 and secton 60 of the Revenue
ct of 19 1.
Washngton 26, D. C.
In order to conform Reguatons 10 26 CFR, part 1 to Pubc
Law 7 9 ( 1st Cong., 2d sess.) C. . 19 0-2, 2 7 , approved Sep-
tember 1,19 0, and to secton 60 of the Revenue ct of 19 1 (Pubc
Law 1 3, 2d Cong.), approved October 20, 19 1, such reguatons
are hereby amended as foows:
Paragraph 1. There s nserted mmedatey precedng secton 1. 9
26 CFR 1. 9 the foowng:
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233
1. 0, Regs. 10 .
PU LIC L W 7 9 ( 1st CONG., 2d S SS.), PPRO D S PT M R
1, 19 0
Resoved by the Senate and ouse of Representatves of the Unted
States of merca n Congress assembed. That secton 63 of tbe In-
terna Revenue Code (reatng to property wthout the Unted States) Is
amended by addng at the end thereof the foowng new subsecton:
(c) Works of rt on Loan for hbton. Works of art owned
by a nonresdent not a ctzen of the Unted States mported nto the
Unted States soey for e hbton purposes, oaned to the Trustees of
the Natona Gaery of rt for such purpose, and, at the tme of the
death of the owner, on e hbton, or en route to or from e hbton,
ether n the Natona Gaery of rt or n such other pubc gaery or
museum as the Trustees of the Natona Gaery of rt may haTe
desgnated.

Sec. . The amendments made by secton 1 of ths |ont resouton
sha be appcabe ony wth respect to estates of decedents dyng after
the date of enactment.

S C. 60 . ST T T MPTION FOR WOR S OF RT
LO N D Y NONR SID NT LI NS R NU CT OF
19 1, PPRO D OCTO R 20, 19 1 .
(a) mendment of Secton 63(c). Secton 63(c) (reatng to
e empton of works of art oaned by nonresdent aens) s hereby
(c) Works of rt on Loan for hbton. Works of art owned
by a nonresdent not a ctzen of the Unted States (1) mported nto
the Unted States soey for e hbton purposes, (2) oaned for such
purposes to a pubc gaery or museum, no part of the net earnngs of
whch nures to the beneft of any prvate stockhoder or ndvdua,
and (3) at the tme of the death of the owner, on e hbton, or en
route to or from e hbton, n such a pubc gaery or museum.
(b) ffectve Date. The amendment made by ths secton sha
be appcabe ony wth respect to estates of decedents dyng after the
Par. 2. Secton 1. 0 26 CFR 1. 0 s amended as foows:
( ) y strkng from the frst sentence thereof tangbe persona
property and nsertng n eu thereof tangbe persona property
(f not sub|ect to the e cepton provded n secton 63(c)) .
( ) y nsertng mmedatey after the frst paragraph thereof
(endng wth physcay ocated. ) the foowng:
Secton 63(c), as added by Pubc Law 7 9 ( 1st Cong., 2d sess.), provdes
that, wth respect to estates of decedents dyng after September 1, 19 0, and
on or before October 20, 19 1, works of art owned by a nonresdent not a ctzen
of the Unted States sha not be deemed to be property stuated wthn the
Unted States f such works of art are (1) mported nto the Unted States
soey for e hbton purposes, (2) oaned to the trustees of the Natona Gaery
of rt, Washngton, D. C, soey for e hbton purposes, and (3) at the tme
of the death of the decedent on e hbton (or en route to or from e hbton)
ether n such Natona Gaery of rt or n such other pubc gaery or museum
as the trustees of such Natona Gaery of rt may have desgnated.
Secton 63(c), as amended by secton.60 of the Revenue c of 19 1, provdes
that, wth respect to estates of decedents dyng after October 20, 19 1, works
of art owned by a nonresdent not a ctzen of the Unted States sha not be
deemed property stuated wthn the Unted States If such works of art are
(1) mported nto the Unted States soey for e hbton purposes, (2) oaned
for such purposes to a pubc gaery or museum, no part of the net earnngs of
whch nures to the beneft of any prvate stockhoder or ndvdua, and (3)
at the tme,of the death of the owner, on e hbton, or en route to or from
e hbton, n such a pubc gaery or museum.
2 21G0 3 16
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1.2, Regs. 10 .
23
t s found that t s unnecessary to ssue ths Treasury Decson wth
stratve Procedure ct, approved une 11, 19 6, or sub|ect to the
effectve date mtaton of secton (c) of sad ct.
3791).)
ustn F. Wnke,
pproved une 27,19 2.
Thomas . Lynch,
S CTION 939. C RT IN M M RS OF RM D FORC S
Secton 1.2, Reguatons 10 : Descrpton 19 2-2 -13970
of ta . T. D. 9 1
TITL 26 INT RN L R NU C PT R I. SU C PT R , P RT 1.
ST T T UND R C PT R 3 OF T INT RN L R NU COD , S
M ND D
Reguatons 10 amended to conform to the provsons of sec-
ton 606 of the Revenue ct of 19 1 (Pubc Law 1 3, 2d Cong.,
1st sess.).
Washngton 2 , D. C.
Others Concerned:
In order to conform Reguatons 10 26 CFR, part 1 to secton
606 of the Revenue ct of 19 1, reatng to e empton from add-
tona estate ta of members of the rmed Forces upon death, such
reguatons are amended as foows:
Paragraph 1. There s nserted mmedatey before secton 1.2
26 CFR 1.2 the foowng:
S C. 606. MPTION FROM DDITION L ST T T OF
M M RS OF RM D FORC S UPON D T R NU
CT OF 19 1, PPRO D OCTO R 20, 19 1 .
Secton 939 (reatng to the estate ta treatment of certan mem-
bers of the rmed Forces) s hereby amended as foows:
(1) y nsertng before the frst sentence thereof the foowng:
(a) Deaths fteb December 6, 19 1, and efore anuary
1,19 7. .
(2) y addng at the end thereof the foowng:
(b) D Tns fter une 2 , 19 0, and efore anuary 1, 19 .
The ta mposed by secton 93 sha not appy to the transfer of the
net estate of a ctzen or resdent of the Unted States dyng after
une 2 , 19 0, and before anuary 1, 19 , whe n actve servce as
a member of the rmed Forces of the Unted States, If such decedent
(1) was ked n acton whe servng n a combat zone, aa
determned under secton 22(b) (13) ; or
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23
1.2, Regs. 10 .
(2) ded as a resut of wounds, dsease, or n|ury suffered, whe
servng n a combat zone (as determned under secton 22(b) (13))
and whe n ne of duty, by reason of a hazard to whch he was
sub|ected as an ncdent of such servce.
Par. 2. Secton 1.2, as amended by Treasury Decson C. .
19 1-2, 160 , approved September 1 , 19 1 26 CFR 1.2 , s further
amended as foows:
( ) y strkng Secton 939 of the Interna Revenue Code from
the frst sentence of (b) and nsertng n eu thereof Secton 939(a)
of the Interna Revenue Code ,
( ) y nsertng mmedatey after the frst paragraph of (b)
(endng wth ncdent of mtary or nava servce .) the foowng:
Secton 939(b) of the Interna Revenue Code, as added by secton G06 of
the Revenue ct of 19 1, provdes that the addtona estate ta does not appy
to the transfer of the net estate of a ctzen or resdent of the Unted States
dyng after une 2 , 19 0, and before anuary 1, 19 , whe n actve servce
as a member of the rmed Forces of the Unted States f the decedent was
() ked n acton whe servng n a combat zone, as determned under
secton 22(b) (13) of the Interna Revenue Code, or
(11) ded as a resut of wounds, dsease, or n|ury suffered whe servng
n such combat zone and whe n ne of duty, by reason of a hazard to
whct he was sub|ected as an ncdent of such servce.
For purposes of secton 939(b), servce s performed n a combat zone ony If
It Is performed n an area whch the Presdent of the Unted States has desg-
nated by ecutve order for purposes of secton 22(b) (13) as an area n whch
the rmed Forces of the Unted States are, or have, after une 2 , 19 0, engaged
n combat, and ony f t s performed on or after the date desgnated by the
Presdent by ecutve order as the date of the commencng of combatant actv-
tes n such zone (or on or after une 2 , 19 0, n the case of the zone desgnated
n ecutve Order 1019 , C. . 19 1-1, 6) and on or before the date desgnated
by the Presdent by ecutve order as the date of termnaton of combatant
actvtes In such zone.
(C) y amendng the frst sentence of the thrd paragraph of (b)
(begnnng person was n actve servce as a member of the m-
tary or nava forces ) to read as foows:
person was n actve servce as a member of the forces descrbed n secton
939 (a) or (b) f he was at the tme of hs death actuay servng n such forces,
not necessary n the fed or n the theater of war.
(D) y nsertng mmedatey foowng the thrd paragraph of
(b) (endng perods of actve servce. ) the foowng:
member of the rmed Forces n actve servce n a combat zone who there
becomes a prsoner of war or mssng n acton and occupes such status at
death or when the wounds, dsease, or n|ury resutng n death were ncurred,
s consdered for purposes of ths secton as servng n a combat zone.
( ) y strkng therefrom the frst sentence of the fourth para-
graph of (b) and nsertng n eu thereof the foowng:
For the purposes of ths secton, the term mtary or nava forces of the
Unted States and the term rmed Forces of the Unted States each ncudes
a reguar and reserve components of the unformed servces whch are sub|ect
to the |ursdcton of the Secretary of Defense, the Secretary of the rmy, the
Secretary of the Navy, or the Secretary of the r Force. The terms aso n-
cude the Coast Guard. The members of such forces ncude commssoned
offcers and the personne beow the grade of commssoned offcer n such forces.
t s found that t s unnecessary to ssue ths Treasury Decson wth
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1.2, Regs. 10 . 236
stratve Procedure ct approved une 11,19 6, or sub|ect to the effec-
tve date mtaton of secton (c) of sad act.
Ths Treasury Decson s ssued under the authorty contaned
n secton 3791 of the Interna Revenue Code ( 3 Stat 67 ; 26 U. S. C.
3791).)
ohn . Dt|nap,
ohn S. Graham,
(Fed wth the Dvson of the Federa Regster October 2 , 19 2, : 2 a. m.)
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MPLOYM NT T RULINGS
INT RN L R NU COD
C PT R 9, SU C PT R D. COLL CTION OF INCOM T T
SOURC ON W G S
.Secton 1627: Other aws appcabe. 19 2-23-139 9
Reguatons 116, Secton 0 .001: Return and T. D. 93
payment of ncome ta wthhed on wages.
( so Secton 1633; Reguatons 116, Secton
0 . 01.)
TITL 2C INT RN L R NU C PT R I. SU C PT R D. P RT 0 .
COLL CTION OF INCOM T T SOURC ON W G S
Reguatons 11C amended to requre corrected Forms W-2 n
certan cases, and for other purposes.
Washngton , D. 0.
Concerned:
On uy 2 ,19 2. notce of proposed rue makng amendng Regua-
tons 116 26 CFR, part 0 to requre corrected Forms W-2 n certan
cases, and for other purposes, was pubshed n the Federa Regster
(17 F. R. 6 2 ). fter consderaton of a reevant matter presented
by nterested persons regardng the proposed amendments, the amend-
ments set forth beow are hereby adopted.
Paragraph 1. Secton 0 . 01(b), as amended by Treasury Decson
2 C. . 19 1-1, 111 , approved anuary 22, 19 1 26 CFR
0 . 01(b) , s further amended to read as foows:
(b) Wages pad after December St, 19 0. Wth respect to wages pad on or
after anuary 1, 19 1, every person requred to deduct and wthhod from an
empoyee a ta under secton 1C22, or who woud have been requred to deduct
and wthhod a ta under secton 1622 f the empoyee had camed no more
than one wthhodng e empton, sha furnsh to each such empoyee, n respect
of the remuneraton pad by such person to such empoyee durng the caendar
year, the orgna and dupcate of a statement on Form W-2 showng the foow-
ng: (1) the name and address of such person, (2) the name and address of
the empoyee, and, f wages as defned n secton 1 26(a) have been pad, hs
soca securty account number, (3) the tota amount of wages as defned n
secton 1621(a), ( ) the tota amount deducted and wthhed as ta under
secton 1622, ( ) the tota amount of wages as defned n secton 1 26(a), and
(6) the tota amount of empoyee ta under secton 1 00 deducted and wthhed
(ncreased by any ad|ustment n the caendar year for overcoecton, or
(237)
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Regs. 116, 0 .601.
23
decreased by any ad|ustment In such year for undercoecton, of such ta
durng any pror year).
For e ampe, f the tabe method of wthhodng s used, a wthhodng state-
ment must be furnshed each empoyee whose wages durng any payro perod
are equa to or n e cess of the smaest wage for whch ta must be wthhed
from empoyees camng one e empton. If the percentage computaton method
s used, a wthhodng statement must be furnshed each empoyee whose wages
durng any payro perod are n e cess of one wthhodng e empton for such
payro perod as shown n the percentage method wthhodng tabe contaned
n secton 1622(b) (1).
If () the amount of empoyee ta under secton 1 00 deducted and wthhed
n the caendar year from the wages as defned n secton 1 26(a) pad durng
such year was ess or greater than the ta mposed by secton 1 00 on such wages
by reason of the ad|ustment n such year of an overcoecton or undercoecton
of the ta n any pror year, or () regardess of the reason for the error or
the method of ts correcton, the amount of wages as defned n secton 1 26(a)
or ta under secton 1 00 entered on a statement furnshed to the empoyee for a
pror year was ncorrect, a corrected statement for such pror year refectng
the ad|ustment or the correct data sha be furnshed to the empoyee.
Lkewse, a corrected statement on Form W-2 sha be furnshed the empoyee
wth respect to a pror caendar year (a) f the amount of wages as defned n
secton 1621(a) entered on a statement furnshed to the empoyee for such pror
year s ncorrect, or (6) If the amount deducted and wthhed as ta under
secton 1022 s ess or greater than the amount entered on the statement furnshed
the empoyee for such pror year.
The statement on Form W-2 for the caendar year and the corrected statement
for any pror year sha be furnshed to the empoyee on or before anuary 31
of the year succeedng such caendar year, or, f hs empoyment s termnated
before the cose of such caendar year, on the day on whch the ast payment
of wages s made.
See the appcabe reguatons under the Federa Insurance Contrbutons
ct for the requrement as to the furnshng of a statement n cases where such
statement s requred soey by reason of the ta under secton 1 00 of such act
so see such reguatons wth respect to ad|ustments of that ta .
Par. 2. Secton 0 .601, as amended by Treasury Decson 2
26 CFR 0 .601 , s further amended as foows:
( ) y changng the thrd sentence of the frst paragraph to read
as foows:
For the purpose of the precedng sentence, the tmeness of the depost w
be determned by the date ot the endorsement by a desgnated commerca bank
or by a Federa Reserve bank made on the reverse sde of Form 0.
( ) y strkng or f the empoyer has no prncpa pace of
busness n the Unted States from the penutmate sentence of the
frst paragraph and nsertng n eu thereof the foowng: or, f
the empoyer has no prncpa pace of busness n a coecton dstrct
of the Unted States, .
sectons 1 29 and 3791 ( 3 Stat. 17 , 67; 26 U. S. C. 1 29, 3791)
and secton 1627 ( 7 Stat. 13 ; 26 U. S. C. 1627) of the Interna
Revenue Code.)
ohn . Dt|nap,
pproved October 1 ,19 2.
Thomas . Lynch,
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239
Regs. 116, 0 . 01.
C PT R 9, SU C PT R . G N R L PRO ISIONS FOR
MPLOYM NT T S
Secton 1633: Recepts for empoyees. 19 2-21-1393
Reguatons 116, Secton 0 . 01: Recepts for IR-Mm. 3
ta wthhed at source on wages.
Form W-2, Wthhodng Statements (or 19 3. Rues for
reproducton.
Washngton 2 , D. C, September 11, 19 2.
Coectors and Drectors of Interna Revenue and Others Concerned:
1. Facsmes of Form W-2 and Form W-2b are attached for the
nformaton and gudance of empoyers and prnters who desre to
reproduce them. If, because of mtatons of hs mechanca equp-
ment, an empoyer s unabe to use the forms n the e act reproduc-
ton of the format shown n the attached facsmes, they may be
reproduced wth sght varatons or rearrangement of the face of the
forms wthout specfc approva of the ureau f the foowng
specfcatons are met:
(a) Coor and quaty of paper: The forms for 19 3 are requred
to be prnted n dark bue nk on whte paper of substantay the same
weght and te ture, and of quaty as good as that used by the Govern-
ment. The offca forms are prnted on substance 30 or 32 paper.
(b) Typography; The reproducton must be prnted n type not
smaer than the correspondng type on the offca form, and, as
neary as possbe, of the same font.
(c) Data to be shown: Reproduced forms must be desgned so as
to provde for entry by empoyers of the same data as to wages pad
and ta es wthhed as requred by the offca form. mpoyers are
not permtted to show on the orgna and trpcate copes any payro
deductons other than those ndcated heren. (There s no ob|ecton
to the attachment of a stub or e tenson to the dupcate porton of
the form ony to provde addtona nformaton not authorzed for
reproducton on the form tsef.) No devaton from the nstructons
on the reverse sde of the forms w be permtted.
(d) ddtona copes may be reproduced for the use of empoyers.
It w be permssbe to prepare prvatey prnted forms as carbon
mpressons of Form W-2, for use n connecton wth ta es other
than Federa ncome ta and ta es due under the Federa Insurance
Contrbutons ct, provded such forms bear no menton of the In-
terna Revenue Servce or the Unted States Treasury Department.
These forms or addtona copes must not be paced ahead of Form
W-2a n the assemby, e cept that n cases where a State w accept
a copy of the Form W-2 n eu of ts own nformaton return, the
State copy may be paced n the second poston n the assemby so
as to provde a egbe copy for the State. Forms for devery to
State or oca ta ng authortes shoud be ceary abeed to ndcate
the purpose for whch they are ntended and shoud not bear any part
of the desgnaton Form W-2 .
(e) Dmensons: The sze of the offca form s 7 nches wde by
3 6 nches n depth, but the wdth may vary from 7 nches to nches
and the depth may vary from 3 ncnes to 3 nches.
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Regs. 116, 0 . 01.
2 0
(/) Carbonzed forms or spot carbons are not permssbe. Inter-
eaved carbon, f used, must be back and of good quaty to precude
smudgng.
(g) The Government Prntng Offce symbo must be omtted from
reproduced forms.
(h) Forms W-2a must show the heavy vertca back nes n the
upper rght corner.
2. In any rearrangement of the spaces for empoyee and empoyer
name and address, the space for empoyee s name must be to the eft
or above the space for empoyer s name. The bock headed Federa
Insurance Contrbutons ct must be to the eft or above the bock
headed U. S. Income Ta Wthhodng Informaton . Forms W-2
may aso be reproduced n contnuous form or n booket form.
3. Prvatey prnted forms whch conform to the specfcatons stated
above may be used wthout obtanng further permsson from the
ureau of Interna Revenue. Other varatons from the prescrbed
forms may be permtted n specfc cases, but such permsson shoud
be requested by etter. Such requests for permsson shoud be ad-
dressed to the Commssoner of Interna Revenue, attenton O: C: P,
Washngton 2 , D. C, and must ncude a sampe or rough draft copy
of the proposed reproducton.
. The pages of the form are reproduced n the attached facsme
n the foowng order: face of orgna; back of orgna; face of
dupcate; face of trpcate; back of trpcate; and face of Form
W-2b.
. Correspondence reatve to the contents of ths mmeograph
shoud refer to ks number and to the symbos O: C: P.
T. C. tkeson,
ctng ssstant Commssoner.
Secton 1633: Recepts for empoyees. 19 2-2 -13971
Reguatons 116, Secton 0 . 01: Recepts for IR-Mm. 3
ta wthhed at source on wages. ( mendment 1)
Form W-2, Wthhodng Statement for 19 3. Rues for repro-
ducton.
Washngton 2 , D. C, October U, 19 2.
Coectors and Drectors of Interna Revenue and Others Concerned:
1. Paragraph 1(h) of IR-Mm. 3 page 239, ths uetn , dated
September 11, 19 2, whch reads as foows: Forms W-2a must
show the heavy vertca back nes n the upper rght corner s hereby
amended to read: Forms W-2a must show the heavy vertca nes
n the upper rght corner.
ustn F. Wnke,
ssstant Commssoner.
Secton 1633: Recepts for empoyees.
Reguatons 116, Secton 0 . 01: Recepts
for ta wthhed at source on wages.
Reguatons 116 amended to requre corrected Forms W-2 n certan
cases. (See T.D. 93 , page 237.)
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2 1
Regs. 116, 0 . 01.
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INSTRUCTIONS 70R FILING . S. INCOM T R TURN
Who Most Te. If your ncome n 19 3 was 600 or
more, you must fe an ncome ta return ether on mpoyee s
Optona Income Ta Return (Form 10 0 ) or on Form 10 0.
Copes of these forms may be obtaned from the Drector of
Interna Revenue, your empoyer, bank, or post offce.
snge person wth ess than 600 ncome shoud fe a
return to get a refund f ta was wthhed. marred per-
son wth ncome ess than her (or hs) own persona e emp-
ton(s) shoud aways fe a |ont return wth husband or wfe
to get the smaer ta or arger refund for the coupe.
Fng on Form 10 0 . Form 10 0 ( mpoyee s Op-
tona Income Ta Return) mav be used by an ndvdua, or
as a |ont ncome ta return of husband and wfe, f the tota
ncome conssts ony of (a) wages of ess than ,000 whch
were sub|ect to ncome ta wthhodng and whch were re-
ported on Wthhodng Statements (Forms W-2), or (b) such
wages and not more than 100 tota of other wages, dv-
dends, and nterest.
The Drector of Interna Revenue w compute the ta
from the tabe provded by aw whch aows about 10 per-
cent of your tota ncome for chartabe contrbutons, nter-
est, ta es, casuaty osses, medca e penses, and mscea-
I neous tems. If ta s overpad, a refund check w be sent.
If ta s underpad, a b w be sent.
; |ont return of husband and wfe on Form 10 0 never
1 resuts n more ta than separate returns, because the ta
s computed by the Drector of Interna Revenue on the com-
bned ncomes or on the separate ncomes, whchever re-
suts n the smaer ta or arger refund for the coupe.
Fng on Form 10 0. If your ncome cannot be report-
ed on Form 10 0 under the tests stated above, or you had
ncome from any other source, such as rents, annutes,-etc.,
you must use Form 10 0. so, t w generay be to your
advantage to fe Form 10 0 f your deductons amount to
more than 10 percent of your ncome, or f you cam trave-
ng or rembursed e penses. To assure any benefts of the
spt-ncome provsons, a marred coupe shoud fe a |ont
ncome ta return.
mpoyee avng Two mpoyers Durng Year. If
an aggregate of more than of F.I.C. . empoyee ta was
wthhed durng 19 3 because you worked for two or more
empoyers, cam the e cess over as Federa ncome ta
wthhed on your return for 19 3.
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2 3
Regs. 116, 0 . 01.
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Regs. 116, 0 . 01.)
2
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TO MPLOY R:
1. Prepare ths form n trpcate for each empoyee (a) from
whom ncome ta has been wthhed durng the year or
(b) whose wages, for purposes of ncome ta wthhodng,
e ceeded the amount of one wthhodng e empton for
any payro perod (even though no ncome ta was wth-
hed).
2. F n:
(a) tota wages pad (before payro deductons) sub|ect
to the Federa Insurance Contrbutons ct. If not
sub|ect to F.I.C. ., enter None or 0. No F.I.C. .
wage entry need be made f (1) F.I.C. . wages e -
acty equa the tota wages for ncome ta wthhod-
ng purposes, or (2) F.I.C. . wages are 3,600 and
the tota wages for ncome ta wthhodng purposes
e ceed 3,600;
(b) tota amount of F.I.C. . empoyee ta deducted and
wthhed, f any (but f there was an ad|ustment n
19 3 to correct the ta for a pror year, enter the
amount wthhed n 19 3 ncreased by the ad|ustment
for an over-coecton or decreased by the ad|ustment
for an under-coecton). If F.I.C. . wages were pad
but no empoyee ta was deducted, enter None or
6 ;
(c) tota wages, for purposes of ncome ta wthhodng,
pad before any payro deductons;
(d) the amount cf ncome ta deducted and wthhed, f any;
(e) the empoyee s name, address, and soca securty
account number; and-
(f) your name, address, and dentfcaton number.
3. Gve the Orgna and the mpoyee s Copy to the em-
poyee (a) on or before anuary 31 foowng the caendar
year f the empoyee s n your empoy at the cose of such
year, or (b) wthn 30 days after the ast payment .of
wages, f hs empoyment s termnated before the cose of
such year.
. Forward ths trpcate copy and a other trpcate copes
together wth your yeary reconcaton statement, Form
W-3, to your Drector of Interna Revenue wth your m-
poyer s uartery Federa Ta Return (Form 9 ) for the
fourth quarter of the caendar year (or wth your fna
return).
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Regs. 116, 0 01.)
2 6
t
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2
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CIS T RULINGS
INT RN L R NU COD
ST MP T S
Reguatons 9, Sectons 323.30 and 323.31. 19 2-23-13960
T. D. 939
TITL 26 INT RN L R NU C PT R I. SU C PT R C, P RT 32.3.
SP CI L T S WIT R SP CT TO COIN-OP R T D MUS M NT ND
G MING D IC S. OWLING LL YS. ILLI RD T L S. ND POOL T L S
empton from the ta on bowng aeys, bard tabes, or
poo tabes, used e cusvey by members of the rmed Forces.
Washngton 2 , D. C.
Concerned:
In order to conform Reguatons 9 26 CFR, part 323 , reatng to
speca ta es wth respect to con-operated amusement and gamng
devces, bowng aeys, bard tabes and poo tabes, to Pubc Law
76 page 361, ths uetn , approved uy 17, 19 2 ( 2d Cong., 2d
sess.), such reguatons are hereby amended as foows:
Paragraph 1. Immedatey precedng secton 323.30 26 CFR
323.30 , there s nserted the foowng:
PU LIC L W 76 ( 2d CONG., 2d S SS.), PPRO D ULY 17, 19 2
e t enacted by the Senate and ome of Representatves of the Unted
States of merca n Congress assembed. That secton 320 (a) of the
Interna evenue Code (reatng to ta on bowng aeys and bard
and poo tabes) s hereby amended by addng at the end thereof the
the foowng new sentence: The ta mposed under ths secton sha
not appy for any perod begnnng after une 30, 19,r2, wth respect to
any bowng aey, bard tabe, or poo tabe mantaned e cusvey
for the use of members of the rmed Forces on any property owned,
reserved, or used by, or otherwse acqured for the use of, the Unted
States f no charge s made for ther use.

Par. 2. Secton 323.31, as amended by Treasury Decson 27
C. . 19 1-1 1 2 , approved anuary 16, 19 1 26 CFR 323.31 , s
further amended by addng at the end the foowng:
On and after uy 1, 19f)2, no abty to such speca ta s ncurred wth
respect to any bowng aey, bard tabe, or poo tabe mantaned e cusvey
for the use of members of the rmed Forces on any property owned, reserved,
(2 7)
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Regs. 71 (19 1), 113.1, etc. 2
or used by, or otherwse acqured for the use of, the Unted Stares f no charge
Is made for ther use. The term rmed Forces ncudes a reguar and
reserve components of the unformed servces whch are sub|ect to the ursdcton
of the Secretary of Defense, the Secretary of the rmy, the Secretary of the
Navy, or the Secretary of the r Force, The term aso ncudes the Coast
Guard.
ecause the purpose of ths Treasury Decson s merey to conform
the reguatons to the e empton granted n the case of bowng aeys,
bard or poo tabes mantaned e cusvey for members of the
rmed Forces on property owned, reserved, used, or otherwse ac-
qured by the Unted States, t s unnecessary to ssue the decson
dmnstratve Procedure ct, approved une 11, 19 6, or sub|ect
to the effectve date mtaton of secton (c) of sad act.
26 U. S. C. 3791).)
ohn . Dunap,
Thomas . Lynch,
DOCUM NT RY ST MP T S
Reguatons 71 (19 1), Sectons 113.1, tc. 19 2-20-13932
T. D. 931
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 113.
DOCUM NT RY ST MP T S
Reguatons 71 (19 1 edton) amended to conform to the provsons
of the ct approved May 23,19 2, and for other purposes.
Washngton 2 , D. C.
Others Concerned:
In order to conform Reguatons 71 26 CFR, part 113 to the pro-
vsons of the ct approved May 23, 19 2 (Pubc Law 361, 2d
Cong., 2d sess.) C. . 19 2-1, 262 , and to provde n such regua-
tons for the sae of new denomnatons of documentary stamps and
the dscontnuance of the use of stock transfer stamps, such regua-
tons are hereby amended as foows:
Paragraph 1. Secton 113.1 26 CFR 113.1 s amended by chang-
ng (g) thereof to read as foows:
The term documentary stamps means a documentary stamps Issued for
use n payment of stamp ta es.
Par. 2. Secton 113.26 26 CFR 113.26 s amended to read as
foows:
Sec. 113.20. Stamps to be ff ed to Stock ook. The requste documen-
tary stamps sha be aff ed to the stock book or correspondng record of the
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IRegs. 71 (19 1), 113.1, etc
organzaton and not to the certfcates ssued. For provsons reatng to can-
ceaton of stamps, see secton 113.133.
Par. 3. There s nserted mmedatey precedng secton 113.30, as
amended by Treasury Decson 013 C. . 10 -1, 133 , approved
pr 27,19 26 CFR 113.30 , the foowng:
PU LIC L W 361 ( 2d CONG., 2d S SS.), PPRO D M Y 23, 19 2
Unted Sates of merea n Congress assembed, That (a) secton
1 02(b) of the Interna Revenue Code s hereby amended by nsertng
after the thrd provso (hereof a coon and the foowng new provso:
Provded further, That the ta sha not be mposed upon any devery
or transfer to a trustee or pubc offcer, made pursuant to Federa
or State aw to secure the performance of an obgaton, or upon a re-
devery or retransfer of such shares or certfcates to the transferor,
f such devery, transfer, redevery, or retransfer s accompaned by
a certfcate settng forth the facts .

(c) ffectve Date. The amendments made by ths ct sha take
effect on the day foowng the date of the enactment of ths ct.
Par. . Secton 113.3 , as amended by Treasury Decson 799
C. . 19 0-2, 133 , approved ugust 2, 19 0 26 CFR 113.3 , s
( ) y strkng the headng of (a) and nsertng n eu thereof
the foowng:
(a) Stock deposted as coatera securty and stock transfers made pursuant to
Federa or State aw to secure the performance of obgatons. (1) Stock de-
posted as coatera securty;
( ) y strkng from the fourth sentence of (a) (1), whch sentence
begns The person makng an e empt transfer , the words ths sub-
secton and nsertng n eu thereof ths paragraph .
(C) y addng after (a)(1) the foowng:
(2) Stock transfers made pursuant to Federa or State aw to secure the
performance of obgatons. The ta sha not be mposed upon any devery or
transfer to a trustee or pubc offcer, made on and after May 2 . 11) 2, pursuant
to Federa or State aw to secure the performance of an obgaton, or upon a
redevery or retransfer of such shares or certfcates to the transferor. The per-
son makng an e empt transfer under ths paragraph sha, at the tme of such
transfer, furnsh and attach to the certfcate an e empton certfcate n sub-
stantay the form prescrbed n () of ths secton.
Par. . Secton 113. 0 26 CFR 113. 0 s amended to read as
foows:
Sec. 113. 0. Stamps to be Used. Documentary stamps sha be used n con-
necton wth n saes or transfers of stock. For provsons reatng to cancea-
ton of stamps, see secton 113.133.
Par. 6. Secton 113. 1(c)( ), as added by Treasury Decson 301
C. . 19 3, 1167 , approved October 2, 19 3 26 CF 113. 1(c) ( ) ,
s amended by deetng the words stock transfer wherever appearng
theren, and by substtutng therefor the word documentary .
Par. 7. Secton 113. 7 26 CFR 113. 7 s amended by deetng the
second sentence and amendng the frst sentence thereof to read as
foows:
The requste documentary stamps sha be aff ed ether to the bonds or to
the ndenture under whch the bonds are ssued.
2 21G0
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Regs. 71 (19 1), 113.1, etc. 2 0
Par. . There s nserted mmedatey precedng secton 113.60,
as amended by Treasury Decson 613 26 CFR 113.60 , the foow-
ng:
PU LIC L W 361 ( 2d CONG., 2d S SS.), PPRO D M Y 23, 19 2

(b) Secton 3 1(a) of the Interna Revenue Code s hereby amended
by nsertng nfter the thrd provso thereof the foowng new provso:
: Provded further, That the ta sha not be mposed upon any devery
or transfer to a trustee or pubc offcer, made pursuant to Federa or
State aw to secure the performance of an obgaton, or upon a re-
devery or retransfer of such nstruments to the transferor, f such
devery, transfer, redevery, or retransfer s accompaned by a certf-
cate settng forth the facts .
(c) ffectve Date. The amendments made by ths ct sha take
effect on the day foowng the date of the enactment of ths ct.
Par. 9. The thrd sentence of secton 113.6 , as amended by Treas-
ury Decson 613 20 CFR 113.0 , s further amended to read as
foows:
The e empt transactons and the subsectons of secton 113.3 settng forth
the rues appcabe thereto are as foows:
onds deposted as coatera securty, subsecton (a) (1).
Transfers made on and after May 2 , 19 2, pursuant to Federa or State
aw to secure the performance of obgatons, subsecton (a) (2).
Transfers from customer to broker, subsecton (c).
Transfers from broker to customer, subsecton ( /).
Transfers between fducares and ther nomnees, subsecton (c).
Transfers to or by a custodan, subsecton (/).
26 CFR 113.70 , s further amended to read as foows:
Sec. 113.70. Stamps to be Used. Documentary stamps sha be used n connec-
ton wth a saes and transfers of bonds. For provsons reatng to canceaton
of stamps, see secton 113.133.
Par. 11. Secton 113. 26 CFR 113. s amended to read as
foows:
Sec 113. . Wheke Stamps Sha be ff ed. Requste documentary
stamps sha be aff ed to the deed, nstrument or other wrtng by whch
reaty s conveyed. For provsons reatve to canceaton of stamps, see
secton 113.133.
Par. 12. Secton 113.10 , as amended by Treasury Decson 20-2
C. . 1912-2, 2 , approved December 17, 19 2 20 CFR 113.10 ,
s further amended by strkng from the frst sentence the words
Ordnary documentary stamps and nsertng n eu thereof
Documentary stamps .
Par. 13. Secton 113.130 20 CFR 113.130 s amended to read as
foows:
Sec 113.130. Denomnatons of Documentary Stamps. Documentary stamps
are ssued n the foowng denomnatons: 1 cent, 2 cents, 3 cents, cents,
cents, cents, 10 cents, 20 cents. 2 cents, 0 cents, 0 cents, cents, SO cents,
1, 1.10, 1.6 , 2, 2.20, 2.7 , 3. 3.30, , , 10, 20, 30, 0, 00, 100,
00, 1,000, 2, 00, ,000, 10,000.
Par. 1 . Secton 113.1 1 20 CFR 113.1 1 s amended to read as
foows:
Sec. 113.1 1. Requstons. Requstons for the purchase of documentary
stamps sha be made on Form 27, revsed pr 19 2. Copes of these forms
may be procured from any coector.
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2 1
Regs. 132, 32 .21.
ecause ths Treasury Decson merey (1) nserts n the reguatons
the e empton of certan transfers from the ta mposed by sectons
1 02(b) and 3 1 of the Interna Revenue Code n conformty wth
the provsons of Pubc Law 361 ( 2d Cong.); (2) amends the regua-
tons to provde for the use of documentary stamps n eu of stock
transfer stamps n the case of certan transactons wth respect to
whch the use of stock transfers tamps s prescrbed n e stng regua-
tons; and (3) nserts n the reguatons an amended st of denom-
natons n whch documentary stamps are used, t s found to be unnec-
essary to ssue ths Treasury Decson wth notce and pubc procedure
thereon under secton (a) of the dmnstratve Procedure ct,
approved une 11, 19 G, or sub|ect to the effectve date mtatons of
secton (c) of sad ct.
taned n secton 3791 of the Interna Revenue Code ( 3 Stat. ( 7;
2G U. S. C. 3791).)
ohn . Dunap,
. . Foey,
(Fed wth the Dvson of the Federa Regster September 12, 10, )2, : 0 a. m.)
S CTIONS 32 ND 3290. W G RING T S
Reguatons 132, Secton 32 .21: Scope of ta . 19 2-2 -139
M.T.
ppcaton of wagerng ta es, mposed by sectons 32S and
3290 of the Interna Revenue Code, to ottery actvtes of an
organzaton e empt from ncome ta under secton 101 of the
Code.
dvce s requested concernng the appcaton of the wagerng
ta es, mposed by sectons 32 and 3290 of the Interna Revenue Code,
under the foowng crcumstances:
, who prevousy operated a baseba poo under the name of
M Company, sod that busness on November 1, 19 1, the date on
whch the wagerng ta es frst became appcabe, for 1 and other
vauabe consderaton to the Cub, Inc., an organzaton e empt
from ncome ta under secton 101 of the Code. Under the contract
of sae, t was agreed that woud be retaned by the Cub,
at a saary of 200 per week, as genera manager of the poo; and that
he woud have e cusve contro over the operaton thereof, ncudng
the hrng of personne and the determnaton of ther saares. The
Cub mantans a separate bank account for operatng the poo,
but s the ony person authorzed to ssue checks aganst such
account.
Durng the baseba season, the wnner of the poo s determned by
the resuts of the baseba games payed each day, and durng the off-
season perod the wnner s determned by the day bank cearngs
used n con|uncton wth the resuts of the pror season s games.
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Regs. 132, 32 .21.
2 2
Gross recepts from operatng the poo from November 1, 19 1, to
une 30, 19 2, amounted to 37 ,000. Of that amount, 9 ,000 was
pad to agents as commssons, 20,000 for prntng, 230,000 for
przes to customers, and 13,000 as saares to empoyees, whch re-
suted n a proft of 17,000 for the perod.
Secton 32 of the Code mposes on wagers an e cse ta equa to
10 percent of the amount thereof, and defnes the term wager as
ncudng any wager paced n a ottery conducted for proft.
The term ottery ncudes the numbers game, pocy, and smar
types of wagerng but, under the provsons of secton 32 (b)(2)
( ) of the Code, t does not ncude any drawng conducted bv an
organzaton e empt from ncome ta under secton 101 of the Code,
f no part of the net proceeds derved from such drawng nures to the
beneft of any prvate sharehoder or ndvdua. The report of the
Senate Commttee on Fnance (Senate Report No. 7 1, 2d Cong., 1st
sess., C. . 19 1-2, , 1), states that t s contempated that the
reguatons w requre the e penses of such a drawng, such as saa-
res pad to the actua operators, to be reasonabe n amount f the
e empton s to be aowed; and that, any agreement to pay as com-
pensaton a percentage of the amounts contrbuted woud be a cear
ndcaton that the drawng s not wthn the e empt category.
Secton 32 .21(f) of Reguatons 132 provdes that, n genera, a
ottery conducted for proft ncudes any scheme or method for the
dstrbuton of przes among persons who have pad or promsed a
consderaton for a chance to wn such przes, usuay as determned
by the numbers or symbos on tckets as drawn from a ottery whee
or other receptace, or by the outcome of an event, provded such ot-
tery s conducted for proft.
In addton to the 10 percent e cse ta mposed on wagers, secton
3290 of the Code provdes that an occupatona ta of 0 per year
sha be pad by each person abe for the e cse ta and by every
person who s engaged n recevng wagers for or on behaf of any
person abe for the e cse ta .
It s hed that the operaton here nvoved consttutes a ottery
conducted for proft. The mere fact that the Cub has been granted
e empton from ncome ta under secton 101 of the Code s not con-
trong, because the e empton provded by secton 32 (b)(2)( )
of the Code, supra, does not appy uness the operaton nvoved fas
wthn the category of a drawng whch s conducted by a secton
101 organzaton, and no part of the net proceeds therefrom nures to
the beneft of any prvate sharehoder or ndvdua.
Where the wnner s determned by the outcome of any desgnated
event or happenng, or by bank cearng or smar fgures, the opera-
ton s not a drawng wthn the contempaton of the statute. It s
beeved that the term drawng refers to a physca drawng of a
tcket, or the equvaent thereof, such as the use of a whee or a smar
devce, whereby the wnner s concusvey determned by a number,
etter, egend, or symbo, wthout reference to any other event the hap-
penng of whch s beyond the contro of the operator.
drawng, as defned above, whch s conducted by a secton 101
organzaton must be o| erated n fact by such organzaton, n order to
be e cuded from wagerng ta es. There s a basc dstncton between
mere sponsorshp of a drawng and actua conduct thereof. Gener-
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Regs. 132. 32 . 0.
ay speakng, conduct denotes supervson and contro, as dstn-
gushed from endng the name of an organzaton to the actvty or
endorsng t.
Snce the nstant ottery s not a drawng as denned above, and
snce t s not operated n fact by the Cub, Inc., a secton 101
organzaton, the e empton from wagerng ta es provded by secton
32 (b) (2) (13) of the Code does not appy.
ased upon the facts outned above, t s hed that the baseba poo
s the |ont venture of the Cub, Inc., and . ccordngy, both
partes are |onty and severay abe for the 10 percent e cse ta
and the occupatona ta of 0 per year mposed by sectons 32
and 3290 of the Code. Lkewse, each person engaged n recevng
wagers for or on behaf of such partes s aso abe for the occupa-
tona ta of 0 per year.
W G RING T S
Reguatons 132, Secton 32 . 0: Regstry, return, 19 2-16-13
and payment of ta . T. D. 920
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, T RT 32 .
CIS ND SP CI L T ON W G RING
Reguatons 132 amended to requre persons abe for speca
(occupatona) wagerng ta to te returns and pay ta before com-
mencng ta abe actvty and to te suppementa returns advsng
of a agents or empoyees engged to receve wagers, or wth respect
to a persons for whom wagers are receved.
Offce or Commssoner of Interna Revenue,
Washngton 2 , D. C.
Concerned:
On une 3,19 2, notce of proposed rue makng regardng amend-
ment of secton 32 . 0 of Reguatons 132 26 CFR 32 . 0 was pub-
shed n the Federa Regster 17 F. R. 9 . No ob|ecton to the
rues proposed havng been receved, secton 32 . 0 of Reguatons
132 s amended to read as foows:
Sec. 32 . )0. Regstry, Return, and Payment of Ta . (a) No person sha
engage n the busness of acceptng wagers sub|ect to the 10 percent e cse ta
mposed by secton 32 of the Interna Revenue Code (see secton 32 .2 ) unt
he has ed a return on Form 11-C and pad the speca ta mposed by secton
3290. Lkewse, no person sha engage n recevng wagers for or on behaf of
any person, engaged n such busness unt he has fed a return on Form 11-C
and pad the speca ta mposed by secton 3200 of the Interna Revenue Code.
Fng of successve appcatons and payment of ta by such persons are re-
qured on or before uy 1 of each year thereafter durng whch ta abe actvty
contnues. The return, wth remttance, sha be ted wth the coector of n-
terna revenue for the dstrct n whch s ocated the ta payer s offce or prn-
cpa pace of busness. If such ta payer resdes n the Unted States, but has
no offce or prncpa pace of busness n the Unted States, the return sha be
fed wth the coector of nterna revenue for the dstrct n whch he resdes.
If the ta payer has no offce, resdence, or prncpa pace of busness n the
Unted States, the return sha be fed wth the Coector of Interna Revenue,
atmore, Md. The coector, upon request, w furnsh the ta payer proper
forms whch sha be fed out and sgned as ndcated theren.
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Regs. 132, 32 . 0.
2
(b) ach return sha show the ta payer s fu name. person dong bus-
ness under an aas, stye, or trade name sha gve hs true name, foowed by
hs aas, stye, or trade name. In the case of a partnershp, assocaton, frm,
or company, other than a corporaton, the stye or trade name sha be gven,
aso the true name of each member and hs pace of resdence. In the case of
a corporaton, the true name and tte of each offcer and hs pace of resdence
sha be shown.
(c) ach person engaged n the busness of acceptng wagers on hs own
account sha report on Form 11-C the name and address of each pace where
such busness w be conducted and the name, address, and number appearng
on the speca (occupatona) stamp of each agent or empoyee who may accept
wagers on hs behaf. Thereafter, a return sha be fed on Form 11-C, marked
suppementa, each tme an addtona empoyee or agent s engaged to receve
wagers. Such suppementa return sha be fed not ater than 10 days after
the date such agent or empoyee s engaged to receve wagers and sha show
the name, address, and number appearng on the speca (occupatona) stamp of
each such agent or empoyee. s to a change of address, see secton 32 .07.
(d) ach agent or empoyee of a person acceptng wagers sha report on
Form 11-C the name and resdence address of each person (. e., ndvdua,
partnershp, corporaton, etc.) on whose behaf wagers are to be accepted.
Thereafter, a return sha be fed on Form 11-C, marked suppementa, each
tme the agent or empoyee s engaged or empoyed to receve wagers for a
person or persons other than the person or persons frst reported on Form 11-C.
Such suppementa return sha be fed not ater than 10 days after the date
such agent or empoyee s engaged to receve wagers and sha show the name,
busness address, or, f none, the resdence address of the erson or persons by
whom he s engaged to receve wagers. s to a change of address, see secton
32 . 7.
The amendments made by ths Treasury Decson sha become ef-
fectve September 1, 19 2.
secton 3791 of the Interna Revenue Code ( 3 Stat. 67; 26 U. S. C.
3791).)
ohn . Dunap,
pproved uy 16, 19 2.
. . Foey,
(Fed wth the Dvson of the Federa Regster uy 22,19 2, : a. m.)
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2 Regs. 6 (19 0), 316.
M NUF CTUR RS CIS T S
S CTION 3 03, S M ND D. T ON UTOMO IL S, TC.
Recusatons 6 (1910), Secton 316. : Def- 19 2-17-13906
ntons of parts or accessores. S. T. 9
ppcaton of the ta , mposed by secton 3 03(c) of the Interna
Revenue Code, as amended, to the sae of automobe seat covers by
a manufacturer who furnshes the matera therefor and produces
them for the consumer thereof accordng to ndvdua desgn and
measurement.
Secton 3 03(c) of the Code, as amended, mposes, effectve Novem-
ber 1, 19 1, a ta of percent on the sae by the manufacturer of parts
or accessores for vehces ta abe under subsecton (a) and (b) of
secton 3 03 of the Code, as amended, e cept that on and after pr
1,19 , the rate of ta sha be percent. Seat covers for automobes
are consdered to be parts or accessores wthn the meanng of secton
3 03(c) of the Code, as amended, and saes thereof by the manufac-
turer are sub|ect to ta .
The ureau has ssued rungs heretofore that the ony crcum-
stances under whch the ta does not appy to saes of seat covers by
a manufacturer, s where the seat covers are ndvduay desgned, cut,
taored, and ftted by the manufacturer to the automobe beongng
to the person who contracts for the performance of such operaton,
and such person s the consumer of the seat covers. Such rungs
provded, however, that the sae of seat covers, smary produced, to
a deaer n new or used automobes s not a sae for consumpton out
one for resae, and that the ta attaches to the manufacturer s sae
thereof.
Upon reconsderaton of the matter, the ureau s now of the
opnon that where a manufacturer furnshes the matera and pro-
duces automobe seat covers for the consumer thereof, accordng to
ndvdua desgn and measurement, the sae by the manufacturer of
such seat covers s ta abe under secton 3 03(c) of the Code, as
amended, regardess of whether they are nstaed by the manufac-
turer or by other persons.
The ureau has ssued rungs, as stated above, that saes by a
manufacturer of seat covers, produced accordng to ndvdua desgn
and measurements, to a deaer n new or used cars are not consdered
saes for consumpton, and are sub|ect to ta . The ta abty of such
saes s not affected by the rung heren, and ta contnues to attach,
as n the past, to such saes.
ecause of the past rungs of the ureau concernng the nonappca-
ton of the ta to automobe seat covers whch are produced accordng
to ndvdua desgn and measurement for the consumer thereof, t has
been concuded that, under the authorty contaned n secton 3791 (b)
of the Code, the rung set forth heren reatng to seat covers so pro-
duced w not be apped retroactvey wth respect to saes of such
seat covers pror to ugust 1 , 19 2, the date of ths uetn, e cept
that any ta whch has been pad on the sae of such seat covers w not
be refunded, uness n a partcuar case t s estabshed to the sats-
facton of the Commssoner, as requred under secton 3 3 (d) of the
Code, that the manufacturer, by reason of reyng on an e stng rung
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Regs. 6 (19 0), 316. . 2 6
that the sae of seat covers so produced was not ta abe, dd not ncude
n hs prce any part of the manufacturers e cse ta whch he may
have subsequenty pad on the sae.
S CTION 3 06(a)(3), S M ND D. T ON L CTRIC, G S, ND OIL
PPLI NC S
Reguatons 6 (19 0), Secton 316. : Scope 19 2-2 -13972
of ta . S. T. 9
ppcaton of the manufacturers e cse ta , mposed by secton
3 06(a)(3) of the Interna Revenue Code, to the sae of eectrc
ar heaters whch are not n fact furnaces, even though they take
the pace of furnaces and are permanenty nstaed n was, cengs,
or foors of budngs.
Under secton 3 06(a) (3) of the Interna Revenue Code, as amended,
an e cse ta s mposed on saes by the manufacturer, producer, or
mporter of, among other thngs, eectrc ar heaters (not ncudng
furnaces) of the househod type. The statute as orgnay enacted
apped to saes of such heaters made pror to November 1. 19 1,
wthout regard to whether they were of the househod type.
It has heretofore been the poston of the ureau that eectrc ar
heaters desgned for permanent nstaaton n was, cengs, and
foors of budngs whch suppant, rather than .merey suppement, a
heatng system are part of a centra heatng system, or a furnace, and
therefore are e cuded from the ta mposed by secton 3 06(a) (3),
supra.
Upon reconsderaton of the matter, the ureau s now of the
opnon that the statute does not warrant the treatment of such eectrc
ar heaters as furnaces merey because they are used n eu of furnaces
and are desgned for permanent nstaaton. ccordngy, t s hed
that the manufacturers e cse ta mposed by secton 06(a)(3)
of the Code appes to saes of eectrc ar heaters whch are not n
fact furnaces, even though they take the pace of furnaces and are
permanenty nstaed n the was, cengs, or foors of budngs.
ecause of the poston whch the ureau has heretofore mantaned
concernng the nonappcaton of the ta to saes of eectrc ar
heaters desgned for permanent nstaaton and the consequent re-
ance of manufacturers on such poston, t has been concuded that,
under the authorty contaned n secton 3791(b) of the Code, the
rung set forth heren w not be apped retroactvey wth respect
to saes of such heaters made pror to November 2 , 19 2, the date of
ths uetn. owever, any ta whch has been pad on the sae of
such heaters w not be refunded, uness n a partcuar case t s
estabshed to the satsfacton of the Commssoner, as requred under
secton 3 3(d) of the Code, that the manufacturer, by reason of
reyng on an e stng rung that the sae of such a heater was not
ta abe, dd not ncude n hs prce any part of the manufacturers
e cse ta whch he may have subsequenty pad on the sae.
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2 7 Regs. 1 (19 1), 320.0, etc.
R T IL RS CIS T S
Reguatons 1 (19 1), Sectons 320.0, tc. 19 2-17-13 97
T. D. 922
R T IL RS CIS T S
Reguatons 1 (19 1 edton) amended to conform to the Revenue
ct of 10 1.
W ashngton 2 , D. C.
Concerned:
In order to conform Reguatons 1 26 CFR, part 320 , reatng
to the retaers e cse ta es on saes of |ewery, furs, toet prepara-
tons, and uggage under the Interna Revenue Code, to sectons 31,
32, and 7 of the Revenue ct of 19 1, approved Octoher 20, 19 1,
such reguatons are further amended as foows:
Paragraph 1. The frst paragraph of secton 320.0, as amended by
Treasury Decson 19 C. . 19 0-2, 1 2 , approved December 7,
19 0, 2G CFR 320.0 , s further amended as foows:
Secton 320.0. Scope of Reguatons. The reguatons contaned n ths part
dea wth e cse ta es mposed by chapter IS) and chapter D of the Interna
Revenue Code, as amended, on saes by the retaer of
(a) ewery.
(6) Furs.
(c) Toet preparatons.
(d) Luggage.
Par. 2. Immedatey precedng secton 320.2 26 CFR 320.2 , there
s nserted the foowng:
S C. 32. FF CTI D T OF P RT III R NU CT OF
19 1, PPRO D OCTO R 20, 19 1 .
The amendments made by ths part sha appy ony to artces sod
on or after the frst day of the frst month whch begns more than ten
days after the date of the enactment of ths ct.
Par. 3. Secton 320.2, as amended by Treasury Decson 19 26
CFR 320.2 , s further amended by addng at the end thereof the
foowng:
The provsons of secton 31 of the Revenue ct of 19 1, reatng o sac-s at
reta of otons, os, powders, or other artces ntended to be used or apped
ony n the care of babes; saes of ta abe artces to persons operatng a
barber shop, beauty paror, or smar estabshment for use n the operaton
thereof; and the sae of mnature sampes of any such artce for demonstra-
ton use ony to a house-to-house saesman by the manufacturer or dstrbutor
became effectve November 1, 19 1.
Par. . The parenthetca matera at the end of secton 320.31, a9
amended by Ireasury Decson 3 3 C. 13. 19 , 97 , approved
March 31, 19 26 CFR 320.31 , s amended by addng after etc.
the foowng:
See secton 320.7 a for credt and refund provsons reatng to mechanca
pencs, fountan and ba pont pens, and mechanca ghters for cgarettes,
cgars, and ppes.
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Regs. 1 (19 1), 320.0, etc. 2
Par. . Secton 320.33, as amended by Treasury Decson 79
C. . 19 , 37 , approved September 2 , 19 26 CFR 320.33 , s
further amended by addng at the end thereof the foowng:
(See secton 320.7 a for credt and refund provsons reatng to mechanca
pencs, fountan and ba pont pens, and mechanca ghters for cgarettes,
cgars, and ppes.)
Par. 6. There s nserted mmedatey precedng secton 320. 0 26
CF 320. 0 the foowng:
S C. 31. R T IL RS CIS T ON TOIL T PR P R -
TIONS R NU CT OF 19 1, PPRO D OCTO R 20,
19 1 .
(a) abv Os, tc. Secton 2 02(a) Is hereby amended by addng
at the end thereof the foowng new sentence: The ta mposed by
ths subsecton sha not appy to oton, o, powder, or other artce
ntended to be used or apped ony n the care of babes.

Par. 7. Secton 320. 0, as amended by Treasury Decson 3 3 26
CFR 320. 0 , s further amended as foows:
( ) y strkng the words baby os and baby powders; n the
second sentence of the second paragraph.
( ) y addng at the end thereof the foowng new paragraph:
Under the specfc provsons of secton 31 of the Revenue ct of 19 1 the ta
does not appy to the sae on and after November 1, 19 1, of otons, os, powders,
or other artces ntended to be used or apped ony n the care of babes. The
determnaton of whether toet artces are ntended to be used or apped ony
n the care of babes w be made ony by reference to the advertsng wth
respect to, and the abeng contaned on, the artce. If an artce s adver-
tsed and abeed as beng for use n the care of babes and s not advertsed
or abeed as usabe by persons other than babes the artce s e empt from ta
even though the partcuar purchaser buys t for adut use. On the other hand,
an artce whch s represented by advertsng or abeng as ft for adut use,
n addton to use n the care of babes, w not be e empt from ta even
though sod to a purchaser who ntends to use the artce ony n the care of
babes.
Par. . Immedatey precedng secton 320. 2 26 CFR 320. 2 ,
there s nserted the foowng:
S C. 31. R T IL RS CIS T ON TOIL T PR P R TIONS

(b) Saes to arbeb Shops, tc. Secton 2 02(b) s hereby amended
to rend as foows:
(b) eauty Parors. tc. For the purposes of subsecton (a), the
sae of any artce descrbed n such subsecton to any person operatng
a barber shop, beauty paror, or smar estabshment for use n the
operaton thereof, or for resae, and the sae of mnature sampes of any
such artce for demonstraton use ony to a house-to-house saesman
by e manufacturer or dstrbutor, sha not be consdered as a sae at
reta. The resae of such artce at reta by such person, or the resae
of such sampe at reta by such house-to-house saesman, sha be sub-
|ect to the provsons of subsecton (a).
Par. 9. Secton 320. 2, as amended by Treasury Decson 191
C. . 19 2-2, 2S3 , approved December 3, 19 2 26 CFR 320. 2 , s
( ) y strkng out the headng of paragraph (b) and nsertng
(6) Saes made durng the perod November 1, 19 2, through October 91,19 1,
both dates ncusve.
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2 9 Regs. 1 (19 1), 320.0, etc.
( ) y strkng out the words on and after November 1, 19 2
wherever they appear n paragraph (b) and nsertng n eu thereof
the words durng the perod November 1, 19 2, through October
31, 19 1 .
(C) y addng at the end thereof the foowng:
(c) Saes made on and after November 1, 19 1. The sae on and after Novem-
ber 1, 19 1, of any artce ta abe under secton 2 02(a) to another person
operatng a barber shop, beauty paror, or smar estabshment, whether for
use n the operaton thereof or for resae purposes, sha not be consdered
as a sae at reta and the ta mposed by secton 2 02(a) sha not be appcabe
to such sae. It w not be necessary for the operator of a barber shop, beauty
paror, or smar estabshment to furnsh any type of e empton certfcate to
hs vendor wth respect to such sae.
In any case where the operator of a barber shop, beauty paror, or smar
estabshment ses such artce at reta, he s abe for the ta mposed by
secton 2 02(a). See secton 320. 1.
Par. 10. Immedatey foowng secton 320. 2, there s nserted the
foowng new secton:
Sec. 320. 3. Sa.es of Mnature Sampes. The sae on and after November
1, 19 1, by the manufacturer or dstrbutor of mnature sampes of any artce
ta abe under secton 2 02(a) to a house-to-house saesman for demonstraton
use ony sha not be consdered as a sae at reta and the ta mposed by secton
2 02(a) sha not be appcabe to such sae. In any case where the house-to-
house saesman ses at reta any of the mnature sampes purchased from the
manufacturer or dstrbutor for demonstraton use, he s abe for the ta
mposed by secton 2 02(a). See secton 320. 1.
Par. 11. Immedatey precedng secton 320.7 26 CFR 320.7 ,
S C. 7. IMPOSITION OP T ON M C NIC L P NCILS,
FOUNT IN ND P LL TOINT P NS, ND M C NIC L
LIG T RS FOR CIG R TT S. CIG RS, ND PIP S R -
NU CT OF 19 1, PPRO D OCTO R 20, 19 1 .
Chapter 29 (reatng to manufacturers e cse and mport ta es) s
hereby amended by addng after secton 3 07 the foowng new secton:
S C. 3 0 . T ON M C NIC L P NCILS, FOUNT IN ND
LL POINT P NS, ND M C NIC L LIG T RS FOR
CIG R TT S, CIG RS, ND PIP S.

(b) empton f rtce Ta abe as ewery. No ta sha be
mposed under ths secton on any artce ta abe under secton 2 00
(reatng to |ewery ta ). If any artce, on the sae of whch ta has
been pad under ths secton, s further manufactured or processed re-
sutng n an artce ta abe under secton 2 00, the person who ses such
artce at reta sha, n the computaton of the retaers e cse ta due
on such sae, be entted to a credt or refund n an amount equa to the
ta pad under ths secton.
Par. 12. Immedatey foowng secton 320.7 , as renumbered by
Treasury Decson 3 3 26 CFR 320.7 , there s nserted the foow-
ng new secton:
Sec. 320.7 a. Saes of Mechanca Pencs, Pens, and Lghters. Secton
3 0 (a) of the Code mposes a ta on the sae on and after November 1, 19 1,
by the manufacturer, producer, or mporter of mechanca pencs, fountan
and ba pont pens, and mechanca ghters for cgarettes, cgars, and ppes.
Under the specfc provsons of secton 3 0 (b), the ta on the sae by the manu-
facturer does not appy f such penc, pen, or ghter when sod by the manu-
facturer s sub|ect to the retaers ta mposed by secton 2 00. (See sectons
320.31 and 320.33.)
Where an artce (L e, mechanca penc, fountan or ba pont pen, or me-
chanca ghter for cgarettes, cgars, and ppes) sub|ect to ta under secton
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Regs. 1 (19 1), 320.0, etc. 260
0 s sod by the manufacturer thereof and thereafter such artce s further
manufactured or processed so as to sub|ect t to the ta under secton 2 00 when
sod at reta, the reta deaer upon the sae of the artce s entted to a credt
or refund n an amount equa to the ta pad by the orgna manufacturer of
such artce.
Where a cam for refund s fed, t sha be supported by evdence showng
(1) the name and address of the person who pad to the Unted States the manu-
facturers e cse ta refund of whch Is camed, (2) the amount of such ta
and the date of payment thereof, (3) that the artce has been further manu-
factured or processed subsequent to the sae thereof by the orgna manufacturer,
and ( ) that the artce has been sod at reta and that the retaers e cse ta
has been pad thereon wthout beneft of any ad|ustment for the manufacturers
ta pad on such artce.
credt taken on a return sha be supported by the same evdence, e cept that,
f the credt s taken on the return for the month n whch the artce s sod at
reta, the statement under ( ) above, sha show that the ta due on such artce
aganst whch the credt s taken, has been computed wthout beneft of any
ad|ustment for the manufacturers ta pad on such artce. If t s mpossbe
to furnsh a of such evdence wth the return, a statement to that effect must
be submtted wth the return. The evdence supportng such credt sha be fed
wth the coector wthn 30 days after the date on whch the return s fed.
If the requred evdence s not so fed the credt w be dsaowed and assess-
ment of the ta resutng from the dsaowance w be made on the current
assessment st.
ecause of the short perod of tme between the date of approva
of the Revenue ct of 19 1, and November 1,19 1, the date on whch,
pursuant to such ct, the amendments to chapter 19 and chapter 29
became effectve, and because of the technca nature of such amend-
ments, t s found that t s mpractcabe and unnecessary to ssue ths
secton (a)of the dmnstratve Procedure ct, approved une 11,
19 6, or sub|ect to the effectve date of mtaton of secton (c) of
sad ct.
taned n sectons 2 10, 3 0, and 3791 of the Interna Revenue Code
( Stat. 720, 3 Stat. 19, 67; 26 U. S. C. 2 10, 3 0, 3791).)
ohn . Dunap,
Commssoner of Interva Revenue.
pproved uy 2 , 19 2.
Thomas . Lynch,
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261 Regs. 2 (19 2), 130. 0, etc.
TR NSPORT TION T S
T ON TR NSPORT TION OF P RSONS
Reguatons 2 (19 2), Sectons 130. 0, tc. 19 2-20-13931
T. D. 929
TITL 26 INT RN L R NU C PT R I, SU C PT R C. P RT 130.
T S ON S F D POSIT O S ND ON C RT IN TR NSPORT TION ND
COMMUNIC TIONS S R IC S
Ta on transportaton whch begns and ends n the Unted States
Washngton 2 , D. C.
Others Concerned:
On March . 19 2, notce of proposed rue makng was pubshed
n the Federa Regster (17 F. R. 1900), n order to conform Regu-
atons 2 (19 2 edton) 26 CFR, part 130 , to secton 607 of the
Revenue ct of 19 0 (Pubc Law 1 , 1st Cong., 2d sess.), ap-
proved September 23. 19 0. fter consderaton of a such reevant
matter as was presented by nterested persons regardng the rues
proposed, the amendments to Reguatons 2 20 CFR, part 130
set forth beow are hereby adopted.
Paragraph 1.- There s nserted mmedatey precedng secton
130. 0 26 CFR 130. 0 the foowng:
S C. 607. TR NSPORT TION W IC GINS ND NDS
WIT IN T UNIT D ST T S R NU CT OF 19 0,
PPRO D S PT M R 23, 19 0 .
(a) Transportaton of Persons.
(1) mendment of secton 3 09(a). So much of secton
3 69(a) (reatng to ta on transportaton of persons) as pre-
cedes 10 per centum of the amount so pad s hereby amended
to read as foows:
(a) Transportaton. There sha be mposed
(1) upon the amount pad wthn the Unted States for the
transportaton of persons by rn, motor vehce, water, or ar wthn
or wthout the Unted States, and
(2) upon the amount pad wthout the Unted States for the
transportaton of persons by ra, motor vehce, water, or ar
whch begns and ends n the Unted States,
a ta equa to .

appy to amounts pad on or after the frst day of the frst month whch
begns more than ten days after the date of the enactment of ths ct
for transportaton whch begns on or after such frst day.
Par. 2. Secton 130. 1, as amended by Treasury Decson 9
C. . 19 7-1, 160 , approved pr 1 , 19 7 26 CFR 130. 1 , s
( ) y substtutng the foowng new paragraphs for the frst
and second paragraphs thereof:
Secton 3 69(a) mposes a ta upon payments of more than 3 cents (a) made
wthn the Unted States on or after October 10, 19 1, for the transportaton of
persons, on or after such date, by ra, motor vehce, water, or ar, and (6)
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Regs. 2 (19 2), 130. 0, etc. 262
made wthout the Unted States on or after November 1, 19 0, for the transpor-
taton of persons on or after such date, by ra, motor vehce, water, or ar,
where such transportaton begns and ends n the Unted States.
The ta abty of a payment for transportaton made wthn the Unted States
s determned by whether the transportaton servce s furnshed wthn or
wthout the northern porton of the Western emsphere as provded n secton
130.6 .
Wth respect to a payment for transportaton made wthout the Uuted States,
the appcaton of the ta s determned not ony by whether the transportaton
servce s furnshed wthn or wthout the northern porton of the Western
emsphere as provded n secton 130.6 , but aso by whether the transportaton
servce begns and ends wthn the Unted States. The ta does not appy to a
payment made wthout the Unted States for one-way or round-trp transporta-
ton between a pont wthn the Unted States and a pont outsde the Unted
States.
( ) y changng the perod at the end of the frst sentence of the
s th paragraph to a comma and addng the words:
e cept that, where the payment s made outsde the Unted States for a pre-
pad order, e change order, or smar order for transportaton of persons whch
begns and ends wthn the Unted States, the ta s coectbe by the person
furnshng the nta transportaton pursuant to such order.
Par. 3. Secton 130. 3, as amended by Treasury Decson 9 26
CFR 130. 3 , s further amended as foows:
( ) y substtutng the foowng new paragraphs for paragraphs
(/) and (ff) thereof:
(f) Prepad orders, e ehange orders, or smar orders. The ta appes to
the amount pad n the Unted States for a prepad order, e change order,
or smar order for transportaton whether wthn or wthout the Unted States.
The ta aso appes to de amount pad wthout the Unted States for a pre-
pad order, e change order, or smar order for transportaton whch begns
and ends n the Unted States. n addtona amount pad n the Unted States
n procurng transportaton n connecton wth the use of a prepad order,
e change order, or smar order, s kewse sub|ect to ta , regardess of whether
the orgna payment for the order s made wthn or wthout the Unted States.
(See secton 130. (6).)
(g) Tckets. The ta appes to an amount pad wthn or wthout the Unted
States for a tcket for transportaton whch begns and ends n the Unted States
regardess of where such tcket s ssued. (See secton 130. (6).)
( ) y strkng out the words n the Unted States n the frst
sentence of paragraph () thereof.
(C) y revsng paragraph (|) thereof to read as foows:
(; ) -e pense tours. n amount pad for an a-e pense tour s sub|ect
to ta wth respect to that porton representng ta abe transportaton. (See
secton 130. ( ).)
(D) y nsertng the foowng new paragraphs mmedatey after
paragraph (|) thereof:
(fc) Payments remtted to foregn countres by persons n the Unted States.
Payments for transportaton tckets, prepad orders, e change orders, or sm-
ar orders are sub|ect to the ta where the payment for such tckets or orders
s accompshed by the purchaser ether (1) by transmsson from wthn the
Unted States va teegraph or ma of cash, checks, posta or teegraphc money
orders, and smar drafts to tcket offces or trave agences, etc., ocated n
any pace wthout the Unted States, or (2) the devery of the funds to an
agency ocated n the Unted States for transmsson to tcket offces, or
trave agences, etc., wthout the Unted States. Such payments are consdered
to be payments made wthn the Unted States.
(/) Payments outsde The Unted States. The ta appes to a payment
made outsde the Unted States for transportaton whch begns and ends
wthn the Uuted States. or purposes of the precedng sentence, a pay-
ment made outsde the Unted States for transportaton between two or
more ponts n the Unted States s a payment for transportaton whch begns
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263 ( egs. 2 (19 2), 130. 0, etc.
and ends In the Unted States, even though addtona transportaton to or from
a pont outsde the Unted States s nvoved n the entre |ourney, where at
the tme of makng payment for the transportaton between two or more ponts
In the Unted States t s not defntey estabshed that such transportaton s
purchased for use n makng the |ourney from or to a pont outsde the Unted
States, as requred by and under the rues set forth n secton 130. (6). In such
case, the fact that the entre |ourney ncudes transportaton from or to a
pont outsde the Unted States s not n tsef determnatve of the abty
for ta .
The foowng e ampes ustrate the appcaton of ths paragraph.
ampe ( ). W traves from avana to New York by way of Mam. e
purchases n avana a steamshp tcket for hs transportaton from avana
to Mam and an e change order for ar transportaton from Mam to New
York. The tcket for the connectng transportaton from avana to Mam, and
the order for the transportaton from Mam to New York were not appropratey
nscrbed by the agency or carrer whch receved the payment for the ar trans-
portaton Invoved, at the tme such payment was receved, so as to ceary show
that the tcket and order were purchased for use n con|uncton wth each other.
Therefore, the agency or carrer whch accepts the e change order and ssues the
tcket for the transportaton from Mam to New York s requred to coect the
ta whch apped to the amount pad outsde the Unted States for such
transportaton.
ampe (2). traves on a round trp from Montrea to Los ngees by way
of New York. e purchases n Montrea ar transportaton for the round trp
between New York and Los ngees, and uses a prvate automobe for transpor-
taton from Montrea to New York and return to Montrea. The amount pad
n Montrea for the round-trp transportaton between New York and Los ngees
s a payment for transportaton whch begns and ends n the Unted States, and
s therefore sub|ect to ta .
Par. . Secton 130. 20 CFR 130. s amended by substtutng
the foowng new paragraph for paragraph (b) thereof:
(6) Payments outsde the Unted States. (1) The ta does not appy to a
payment made outsde the Unted States for transportaton whch begns or ends
outsde the Unted States. For purposes of the precedng sentence, a payment
made outsde the Unted States for transportaton between two or more ponts
wthn the Unted States (such transportaton beng referred to herenafter n
ths secton as the Unted States porton ), whch s part of transportaton from
or to a pont outsde the Unted States s a payment for transportaton whch
begns or ends outsde the Unted States, where t s defntey estabshed at the
tme of makng payment for the Unted States porton that such porton s pur-
chased for use n makng the |ourney from or to a pont outsde the Unted States.
The nonta abe character of the payment made outsde the Unted States for the
Unted States porton sha be estabshed under the rues set forth n the foow-
ng subparagraphs (2) through ( ).
(2) Where one tcket (such as one commony known as a through tcket )
s ssued to cover a of the Unted States porton of a |ourney whch begns or
ends outsde the Unted States and to cover aso the connectng transportaton
from or to a pont outsde the Unted States, no further evdence of the non-
ta abe character of the transportaton covered by such tcket w be requred.
( ) Where separate tckets or orders are ssued for the Unted States porton
of a |ourney whch begns or ends outsde the Unted States, the agency or car-
rer whch receves payment for such tckets or orders sha defntey determne
at the tme of recevng the payment that the Unted States porton s beng pur-
chased for use n con|uncton wth connectng transportaton from or to a pont
outsde the Unted States, and sha appropratey nscrbe the tckets or orders
Issued outsde the Unted States for the Unted States porton and for the con-
nectng transportaton from or to a pont outsde the Unted States to show
ceary that such tckets or orders arc purchased for use n con|uncton wth each
other. Such tckets or orders sha be nscrbed n the foowng manner:
() The tcket or order for the connectng transportaton from or to a pont
outsde the Unted States sha be nscrbed or stamped wth an approprate
egend (for e ampe, Not To e Used gan for Purchase of Ta -Free Unted
States Transportaton ) to show that the Unted States porton has been pur-
chased ta -free for use n con|uncton therewth.
() Where the tcket for the Unted States porton s ssued outsde the Unted
States, t sha be nscrbed to show (a) the dentty of the agency or carrer
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Regs. 2 (19 2), 130. 0, etc. 26
whch receved payment therefor (uness otherwse shown on the tcket), (6)
the orgn and destnaton of the connectng transportaton, (c) the dentty of
the carrer furnshng the connectng transportaton, and (d) the sera number
of the tcket or order coverng such connectng transportaton. If the tcket Is
not arge enough to accommodate the prescrbed nscrpton, a statement settng
forth the requred nformaton sha be attached to such tcket
() Where an order for the Unted States porton s ssued outsde the Unted
States, t sha be nscrbed to show (a) the orgn and destnaton of the con-
nectng transportaton, (6) the dentty of the carrer furnshng the connectng
transportaton, and (c) the sera number of th tcket or order coverng such
connectng transportaton.
( ) Where the tcket for the Unted States porton s Issued n the Unted
States pursuant to an order whch was purchased and propery nscrbed outsde
the Unted States under the rues set forth n subparagraph (3) () above, a-
bty for payment or coecton of ta w not be ncurred upon the ssuance of
the tcket provded the agency or carrer ssung such tcket stamps or nscrbes
thereon an approprate egend, for e ampe, Ta Not Pad Furnshed on
Order , or empt Order .
( ) In any case where a payment for the Unted States porton s not sub|ect
to ta under the rues set forth heren, the carrer furnshng transportaton for
the Unted States porton sha procure and mantan approprate evdence whch
w ceary show that the tckets or orders for such transportaton were pur-
chased for use n con|uncton wth connectng transportaton from or to a pont
outsde the Unted States.
(6) The foowng are e ampes of nonta abe transportaton
ampe (1). Y traves from London to San Francsco by way of New York.
e purchases from an agency or carrer n ngand a of the transportaton
nvoved n such |ourney, whch ncudes ar transportaton from London to New
York and from New York to San Francsco, for whch separate tckers are ssued.
The agency or carrer whch receves the payment for Y s transportaton from
New York to San Francsco w not be requred to coect ta wth respect to the
payment, provded t determnes at the tme such payment s receved that the
transportaton n queston s beng purchased for use n con|uncton wth the
connectng transportaton from London to New York and t appropratey n-
scrbes both of the tckets for the |ourney.
ampe (f). Z traves from avana to New York by way of Mam. e
purchases n avana a tcket for hs transportaton by water from avana to
Mam, and ater purchases from a trave agency n avana ar transportaton
from Mam to New York for whch the trave agency ssues an e change order.
To estabsh the nonta abe character of the payment for Z s transportaton from
Mam to New York t w be necessary for the trave agency whch receves the
payment for such transportaton to determne at the me the payment s receved
that the transportaton n queston s beng purchased for use n con|uncton wth
the connectng transportaton from avana to Mam, and to make the appro-
prate nscrptons on the tcket and the order. The carrer whch accepts the
e change order and ssues the tcket for the transportaton from Mam to New
York w not be requred to coect ta wth respect to the tcket so ssued f
t appropratey nscrbes the tcket as provded In subparagraph ( ).
Par. . Immedatey precedng secton 130. 26 CFR 130. ,
WIT IN T UNIT D ST T S R NU CT OF 10 0,
PPRO D S PT M R 23, 19 0 ,

(2) Seats, berths, etc. Secton 3 69(c) (reatng to ta wth
respect to seatng and seepng accommodatons) s hereby amended
by strkng out wthn the Unted States .

begns more than ten days after the date of the enactment of ths ct for
transportaton whch begns on or after such frst day.
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26 Regs. 2 (19 2), 130. 0, etc.
Par. 6. Secton 130. 6 26 CFR 130. 6 s amended to read as
foows:
Sec. 130. 6. Scope of Ta . Secton 3 69(c) mposes a ta upon payments of
any amount made wthn the Unted States on or after October 10, 19 1, and
made wthout the Unted States on or after November 1, 19 0, for seatng or
seepng accommodatons n connecton wth transportaton wth respect to whch
a ta s mposed by secton 3 69(a).
Par. 7. Immedatey after secton 3 69(d) n subpart G, there s
nserted the foowng:
WIT IN T UNIT D ST T S R NU CT OF 19 0, P-
PRO D S PT M R 23, 19 0 .

(3) Coecton of ta . So much of the second sentence of secton
3 69(d) (reatng to returns and payment of ta ) as precedes on
or before the ast day of each month s hereby amended to read as
foows: ach person recevng any payment specfed n subsecton
(a) or (c) sha coect the amount of the ta mposed from the per-
son makng such payment: e cept that, f the payment s made out-
sde the Unted States for a prepad order, e change order, or smar
order, the person furnshng the nta transportaton pursuant to
such order sha coect the amount of the ta . ny person requred
to coect the a mposed by ths secton sha, .

begns more than ten days after the date of the enactment of ths ct
for transportaton whch begns on or after such frst day.
Par. . Secton 130.6 , as amended by Treasury Decson 70 C. .
19 9-2, 130 , approved une 27, 19 9 26 CFR 130.6 , s further
amended by nsertng at the end thereof the foowng:
The rues set forth n the frst paragraph of ths secton for determnng the
ta abe porton of a payment made wthn the Unted States for transportaton
any part of whch Is outsde the northern porton of the Western emsphere
aso appy to payments made wthout the Unted States for transportaton whch
begns and ends n the Unted States but part of whch s outsde the northern
porton of the Western emsphere.
Par. 9. Secton 130.70 26 CFR 130.70 s amended by changng
the perod at the end thereof to a comma, and addng the words:
e cept that (wth respect to (e) and (/) above) f the payment s made outsde
the Unted States for a prepad order, e change order, or smar order vad for
transportaton of persons whch begns and ends wthn the Unted States, or
for seatng or seepng accommodatons n connecton wth such transportaton,
the person furnshng the nta transportaton pursuant to such order must
coect the amount of the ta .
C. . 19 -2,17 , approved November 23,19 26 CFR 130.72 , s
( ) y revsng the thrd paragraph of (d) to read as foows:
very person recevng payment n the Unted States for a prepad order, e -
change order, or smar order, for transportaton or seatng or seepng accom-
modatons to be furnshed by any carrer wthn the Unted States sha coect
a of the ta appcabe to such transportaton or accommodatons and remt
such ta n the proper amount to those carrers ocated wthn the Unted States
furnshng such transportaton or accommodatons to be Incuded In monthy
returns on Form 727, revsed.
2 2160 63 1
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Regs. 113, 1 3. .
266
( ) y nsertng the foowng new paragraph mmedatey foow-
ng the fourth paragraph of (d):
very person furnshng the nta transportaton pursuant to a prepad order,
e change order, or smar order for transportaton whch begns and ends In the
Unted States, or for seatng or seepng accommodatons n connecton therewth,
and for whch payment s made outsde the Unted States sha coect a of the
ta appcabe to such transportaton or accommodatons and ncude the amount
In monthy return on Form 727, revsed.
Ths Treasury Decson sha be effectve upon the thrty-frst day
after the date of ts pubcaton n the Federa Regster.
sectons 3 72 and 3791 of the Interna Revenue Code ( 3 Stat. 23,
67, Stat. 722; 26 U. S. C. 3 72, 3791).)
ohn . Dunaf,
Thomas . Lynch,
(Pubshed n the Federa Regster September , 19 2)
S CTION 3 7 . T ON TR NSPORT TION OF PROP RTY
Reguatons 113, Secton 1 3.1: Meanng of 19 2-19-13920
terms. Ct. D. 17
ta on transportaton of property nterna revenue code-
decson of court
1. Contract fob Towng arges.
mounts receved by a company engaged n the busness of ownng,
operatng, and rentng fuy manned tugboats, whch company was
under contract wth a cement company or the operaton of a tugboat
for towng barges, oaded and unoaded, used by the cement company
n transportng raw materas used n ts busness, are amounts
pad for the transportaton of property and are sub|ect to the ta
mposed by secton 3 7 of the Interna Revenue Code. The tug was
hred at a f ed day rate, and the towng company assumed a
abty for nsurance on the tug and for persona and property
damage to thrd partes or to members of the crew, or both.
2. Decson ffrmed
Decson of the Unted States Dstrct Court for the astern
Dstrct of Lousana, 0 Fed. Supp. 99 (19 1), affrmed.
In the Unted States Court of ppeas for the Ffth Crcut
Guf Coast Towng Company, Inc., appeant, v. Unted States of merca, appcttee
190 Fed. (2d) 9
ppea from the Unted States Dstrct Court for the astern Dstrct of Lousana
efore IIomes, Russe, and Rves, Crcut udges
May 16, 19 2
opnon
Russe, Crcut udge: Guf Coast Towng Company, Inc., sued the Unted
States seekng to recover aeged overpayment of Federa transportaton ta es
whch t camed to have pad through error. The Unted States dened that
there had been an overpayment. The ssue was submtted to the tra court
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267
Regs. 113, 1 3.1.
upon a stpuaton of facts, to some of whch we w refer herenafter. The
tra court, by ts memorandum opnon, reported at 9 Fed. Supp. 99 , hed
that there had been no overpayment of ta es and entered |udgment for the
Government. Ths appea foowed.
ppeant, durng the perods nvoved, was engaged n the busness of ownng,
operatng and rentng to others fuy manned tugboats. On pr 27, 19 2,
t entered nto a Towage Contract wth Lone Star Cement Corporaton under
the terms of whch t agreed to furnsh a tug and to tow oaded and unoaded
raw matera barges between Mobe, abama, and New Oreans, Lousana,
fur a perod of 0 months. In consderaton thereof Lone Star Cement Corpora-
ton was to pay a f ed day rate, sub|ect to ad|ustment upward n the event
the wages of the crew shoud be ncreased, and was responsbe for any ncrease
n the unt cost of fue or war rsk nsurance above the rates e stng at the tme
of the agreement. ppeant, referred to as Transportaton Company n the
contract, agreed to mantan a compete crew on the tug and to furnsh a
stores, fues, os, tow nes and take care of a other e penses connected wth
the operaton of the tug. In the event the tug shoud be taken out of servce
for repars. Lone Star Cement Corporaton was to be reeved of the payment of
the day towng charge for the perod necessary to make such repars. p-
peant was to carry marne nsurance on the tug at ts e pense and agreed to
assume a abty for damages to property of thrd partes or n|ures to thrd
persons or members of the crew of the tug or tow, or both. Two smar con-
tracts were entered nto by the partes coverng subsequent perods. Nether
of these contracts provded for an ad|ustment of the day rate to be pad by
Lone Star Cement Corporaton, but f ed a rate greater than the rate charged
tnder the orgna contract. cept for ths, the term of the contract and the
name of the tug to be used, these contracts were dentca wth the contract of
pr 27, 19 2.
t a tmes durng the performance of these contracts Lone Star Cement
Corporaton furnshed a sang drectons and pad the day charge for the
use of the tug. The crew of the tug asssted n makng connectons and tyng
barges up for oadng and dschargng cargoes. The detaed navgaton of the
tug and tow was under the contro and drecton of the captan of the tug,
who was n the empoy of appeant.
ppeant coected from Lone Star Cement Corporaton and pad to the
coector of nterna revenue the 3 percent transportaton ta provded for by
secton 7 (a) of the Interna Revenue Code (26 U. S. C. . 3 7 (a)) on the
amount pad to t under the terms of te contracts. The tota sum coected
as ta and remtted to the coector, 3,0 0.77, s the amount n controversy.
Secton 3 7 (a) of the Interna Revenue Code, supra, nsofar as s reevant
here, mposes upon the amount pad for transportaton of property by ra,
motor vehce, water or ar from one pont n the Unted States to another, a
ta equa to 3 per centum of the amount so pad. Ths ta appes ony to
amounts pad to a person engaged n the busness of transportng property
for hre. Transportaton , as used n ths secton, s defned by Treasury
Reguatons 113, secton 1 3.1(d) as the movement of property by a person
engaged n the busness of transportng property for hre and ncudes towng
and accessora servces furnshed n connecton wth a transportaton move-
ment. Property , as defned by subsecton (e) of secton 1 3.1, Treasury
Reguatons 113, s any physca matter regardess of vaue over whch the
rght of ownershp or contro may be e ercsed.
ppeant urges that the tra court erred n fndng that t was engaged n
the transportaton of property for hre wthn the meanng of the statute,
nsofar as the transactons descrbed are concerned. though stated var-
ousy, the cru of the contenton s that the contracts were not contracts for
transportaton of property, but were contracts for renta, ease or charter or
marne equpment under whch Lone Star Cement Corporaton transported
ts own property by use of the eased tug. It s contended on behaf of appeee
that the queston can not be so mted snce, under the facts of ths ease, the
contractua agreement was specfcay one for towage and otherwse provded
a transportaton servce.
The same queston here presented, arsng from substantay the same facts,
was determned by the dstrct court n Oho Rver Sand Co. v. Unted States,
1 That the sad Transportaton Company agrees to tow oaded and unoaded raw mate-
ra barges (capacty not to e ceed appro matey 1.300 tons) between Mobe, abama
and Lone Star s Pant ocated on the Industra Cana, New Oreans, Lousana.
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Regs. 113, 1 3.1.
26
60 Fed. Supp. 63. In that case the court recognzed that the towng of barges
consttuted transportaton, but hed, as the appeant contends here, that the
transacton evdenced a ease of the tugboat on a renta bass so that the essee
coud transport ts own property, and that the essor was compensated for
renta as the owner of the tug and was not engaged n the busness of trans-
portng property for hre. In rdge uto Rentng Corp. v. Pedrck, 17 Fed.
(2d) 733, the Court of ppeas for the Second Crcut referred to the Oho Rver-
Sand Company case, supra, as beng ndstngushabe , but e pressy decned
to foow t. The rdge uto Rentng Corporaton case decson nvoved a
busness where the ta payer eased trucks to busness concerns for haung
purposes and, as mmedatey there nvoved, the stuaton where the essor
furnshed 2 of the ta payer s customers drvers as we as trucks. The court
found these drvers to be empoyees of the ta payer and, one |udge dssentng,
concuded that the essor was engaged n the busness of transportng property
for hre as to such trucks. That decson turned upon the court s answer to the
questons stated, that the essor furnshed substantay a the factes
for and perform ed substantay a of the functons of, transportng the
property of the customers whose payments to t were ta ed. Ths
court as recenty had occason to reterate that the e stence of ta abty
under the statute now nvoved depends upon whether the transacton n ques-
ton n any case s transportaton wthn the terms of the statute. Ths s
generay a queston of fact Uasonte Corp. v. Fy, No. 130 6,
1 2 Fed. (2d) 93 , S. C, Uasonte Corp. v. Fy, No. 137 0, Fed. (2d)
. In the second appearance of the case t was emphaszed that the
Intent of the statute was to ta amounts pad to a person engaged n the
busness of transportng property for hre .
Upon our consderaton of the facts presented to us we concude, contrary to
the resut reached by the court n the Oho Rver Sand Company case, supra,- that
the amounts whch the ta was pad were pad to a person engaged In the
busness of transportng property for hre. There can be no queston that the
compensaton receved by the towng company was that for the operaton of a
fuy mamed tugboat for towng barges, oaded and unoaded, used by the cement
corporaton n transportng raw materas used n ts cement manufacturng
busness. oth the barges and the raw materas oaded thereon and towed by
appeant s tug under the towage agreement were the property of the cement
corporaton. Such towage was the transportaton of property. s we vew the
contracts the performance of the towage contract was the obgaton of the
appeant and ts com esaton was receved by vrtue of ts engagement n the
busness of transportng property for hre. Under the terms of the contract, and
the means and method of operatons thereunder the arrangement dd not evdence
a transportaton by the cement corporaton. The terms of the contract and the
method of operaton thereunder requre the concuson that the appeant was n
fact furnshng transportaton to the cement corporaton, whose payments to t
were ta ed, and dd not merey ease or charter a tug. For the consderaton
pad appeant furnshed the tug and crew and performed the towng servce.
Whe the cement corwraton furnshed the sang drectons, the master of the
tug was at a tmes an empoyee of appeant and was responsbe for the detaed
navgaton of the tug. ppeant was abe for any damages or n|ures nfcted
n operatng the tug and was aso responsbe for any n|ures sustaned by
members of the crew of the tug and/or tow. dfferent resut s not requred
because of the fact that the amount pad for the towage servces was f ed at a
day rate, and was to be pad whether the tug and ts crew were used on a
partcuar day or not. The statute s not concerned wth the method used to
compute the amount of the payment. Such amount, however It may be computed,
s ta abe, f, n k-ga effect, t s pad for transportaton. The obvous purpose of
the agreement to pay whether or not the tug was engaged n the towng operaton
on a partcuar day was to nsure the avaabty of the tug at a tmes when
towage mght be desred
The contracts r, queston were contracts for transportaton of property for hre
and the compensaton pad therefor was ta abe. We have consdered appeant s
contenton that the Lone Star Cement Corporaton, by vrtue of the contract,
became owner of the tug, pro hac vce, under admraty aw, but fnd t wthout
mert. The |udgment of the tra court Is
ffrmed.
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269 Regs. 113 (19 3), 1 3.31, etc.
Reguatons 113, Secton 1 3.13: ppcaton 19 2-26-13997
of ta . M. T.
Where a person contracts wth a carrer for the transportaton
of matera to be dsposed of as waste In the course of busness from
hs pant or premses to a desgnated pace wthn the boundares of,
or ad|acent to, such pant or premses, the amount pad to the carrer
s not ta abe under secton 3 7 of the Interna Revenue Code.
Moreover, an amount pad to a carrer for the remova of waste
matera where the carrer s permtted to dspose of the matera
as t sees ft s not sub|ect to ta under that secton.
M. T. 13 (C. . 19 3,1161) mod ed.
Secton 3 7 of the Interna Revenue Code mposes a ta , wth
certan e ceptons, upon amounts pad wthn or wthout the Unted
States, to a person engaged n the busness of transportng property
for hre, for transportaton of property by ra, motor vehce, water,
or ar from one pont n the Unted States to another.
In M. T. 13 (C. . 19 3, 1161), t was hed n part that where a
person contracts wth a carrer for the transportaton of waste ma-
tera from hs pant or premses to a desgnated pace, the amount pad
to the carrer for such transportaton s ta abe under secton 3 7
of the Code.
Upon reconsderaton of M. T. 13, supra, t s now hed that where
a person contracts wth a carrer for the transportaton of matera
to be dsposed of as waste n the course of busness from hs pant
or premses to a desgnated pace wthn the boundares of, or ad|acent
to, such pant or premses, the amount pad to the carrer s not ta abe
under secton 3 7 of the Code. Moreover, an amount pad to a
carrer for the remova of waste matera where the carrer s permtted
to dspose of the matera as t sees ft s not sub|ect to ta under that
secton. The atter type of payment s consdered as an amount pad
for a dsposa servce rather than for transportaton of property from
one pont n the Unted States to another.
ccordngy, M. T. 13, supra, s modfed to the e tent that t s
nconsstent wth the rung heren e pressed.
Reguatons 113 (19 3), Sectons 1 3.31, tc. 19 2-19-13921
T. D. 926
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 1 3.
T WIT R SP CT TO T TR NSPORT TION OF PROP RTY
Changes n procedure for estabshng e empton from the ta
In the case of e port shpments.
Washngton 2 , D. C.
Others Concerned:
In order to conform Reguatons 113 26 CFR, part 1 3 , reatng
to the ta on the amount pad for the transportaton of property, to
a change n procedure for estabshng e empton from the ta n
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Regs. 113 (19 3), 1 3.31, etc. 270
the case of property shpped for e port and actuay e ported, such
reguatons are amended as foows:
Paragraph 1. Secton 1 3.31 26 CFR 1 3.31 s amended by chang-
ng the ast sentence of the thrd paragraph to read as foows:
The amount pad for transportaton from the pont of dverson or reconsgnment
to the foregn destnaton w be consdered as e empt from ta provded an
e port e empton certfcate s fed. (See sectons 1 3.33 and 1 3.3 .)
Par. 2. Secton 1 3.32 26 CF 1 3.32 s amended to read as
foows:
Sec. 1 3.32. pobt Shpments Not Requrng empton Certfcate. n
amount pad for the transportaton of property shpped drect from a pont
wthn the Unted States to a pont outsde the Unted States under a through
b of adng, a through e port b of adng, or a domestc b of adng show-
ng the name of the foregn consgnee and the utmate foregn destnaton w
be treated as e empt from the transportaton ta , wthout further evdence
of actua e portaton. In case a through b of adng s not ssued at the
pont of orgn, but the shpper ntends to obtan a through b of adng, there
shoud be stamped across the orgna shppng papers the words: To be
e changed for through b of adng. The orgna shppng papers n such
ease must show a consgnee and destnaton outsde the Unted States.
Par. 3. Secton 1 3.33 26 CFR 1 3.33 s amended to read as
foows:
Sec. 1 3.33. port Shpments Requrng empton Certfcate. n
amount pad for an e port shpment not made on a through b of adng, a
through e port b of adng, or a domestc b of adng showng the name
of the foregn consgnee and the utmate foregn destnaton, w be e empt
from the transportaton ta , provded (1) the shpment s covered by an port
empton Certfcate, Form 1363, and (2) proof of e portaton s obtaned as
requred by secton 1 3.3 . The certfcate sha be e ecuted, n trpcate,
by the shpper or other person who pays the transportaton charge. Such person
sha retan the trpcate wth the shppng papers and fe the orgna and
dupcate wth the agent of the carrer at the tme of payment of the transporta-
ton charge. The carrer recevng an port empton Certfcate sha retan
the dupcate wth the pad transportaton document, and forward the orgna
wth ts monthy return, Form 727, Revsed, to the coector of nterna revenue
for the dstrct n whch the carrer s prncpa pace of busness s ocated.
If a break for a busness purpose occurs n the transportaton movement
covered by an port empton Certfcate, the amount pad for the transporta-
ton from the pont of orgn to the pont where the break occurs s ta abe and
the shpper or other person who pad the transportaton charge sha furnsh
nformaton to the Commssoner smar to that set forth n secton 1 3.3 n
order that the ta due may be assessed and coected.
Par. . Secton 1 3.3 26 CFR 1 3.3 s amended as foows:
( ) y substtutng for the frst paragraph thereof the foowng
paragraph:
Sec. 1 3.3 . Proof of portaton. The port empton Certfcate, Form
1303, suspends abty for the payment of the ta for a perod of 6 months from
the date of shpment from the pont of orgn. If wthn such perod the shpper
or other person who pad the transportaton charge has not receved evdence
of the actua e portaton of a shpment, coverng whch an port empton
Certfcate, Form 1363, has been ted, then the temporary suspenson of the
abty for the payment of the ta ceases. Wthn 30 days after termnaton
of the temporary suspenson perod the shpper or other person who pad the
transportaton charge sha forward to the Commssoner of Interna Revenue,
Washngton 2 , D. C, attenton : T: M, a statement settng forth wth respect
to each certfcate Invoved (1) the date the shpment covered thereby was made
from the pont of orgn, (2) the amount pad for the transportaton, and (3) the
date such payment was made, n order that the ta due may be assessed and
coected. If proof of e portaton s subsequenty receved, the person who pad
the ta may fe a cam for refund on Form 3, but such acton must be taken
wthn the -year perod of mtaton prescrbed by secton 3313.
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271 Regs. 113 (19 3), 1 3.31, etc.
( ) y substtutng for the thrd paragraph thereof the foowng
paragraph:
If the shpper or other person who pad the transportaton charge s not the
actua e porter and s unabe to obtan the documentary evdence of e portaton
specfed n the precedng paragraph, such person sha obtan from the person
havng custody of the documentary evdence a statement (1) certfyng that the
property covered by the port empton Certfcate, Form 1363, was n fact
e ported, (2) dentfyng the evdence of e portaton, (3) specfyng the foregn
destnaton or the possesson of the Unted States to whch the property was
shpped, or n eu thereof, certfyng that the property was not shpped to the
Terrtores of aska or awa, and ( ) showng where the evdence of e porta-
ton w be avaabe for nspecton by nterna revenue offcers for a perod of
years.
Par. . Secton 1 3.3 26 CFR 1 3.3 s amended as foows:
( ) y strkng front the second paragraph the words a Tempo-
rary empton Certfcate. Form 71) , and nsertng n eu thereof
the words an port empton Certfcate, Form 1363, .
( ) y substtutng the foowng new paragraph for the thrd and
fourth paragraphs thereof:
Where a person has been desgnated to drect the e portng operatons of a poo
wth authorty to contro ts accountng practce, and addtona copy of the
port empton Certfcate, Form 1363, fed wth the carrer coverng each
shpment enterng the poo, sha be furnshed to such person by the person who
pays the transportaton charge. The drector of the poo may, n behaf of the
shpper or other person who pad the transportaton charge, make the statement
to the Commssoner prescrbed n the frst paragraph of secton 1 3.3 wth
respect to ar.y transportaton of property enterng the poo n e cess of the
quantty of the same grade and knd actuay e ported therefrom.
ecause ths Treasury Decson makes ony a procedura change n
net effect reducng the burden on persons sub|ect to the reguatons,
t s found that t s unnecessary to ssue such Treasury Decson
dmnstratve Procedure ct, approved une 11, 19 6, or sub|ect to
the effectve date mtaton of secton (c) of sad ct.
The amendments made by ths Treasury Decson sha be effectve
on the frst day of the frst month whch begns more than 30 days
after the date such Treasury Decson s pubshed n the Federa
Regster.
n sectons 3 72 and 3791 of the Interna Revenue Code ( 3 Stat.
23 and 67, Stat. 722; 26 U. S. C. 3 72, 3791).)
Norman . Sugarman,
pproved ugust 19,19 2.
Thomas . Lynch,
(Pubshed n the Federa Regster ugust 22, 10 2)
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egs. , rts. 1, etc.
272
PROC SSING T ON C RT IN OILS
Reguatons , rtces 1, tc. 19 2-21-13910
T. D. 933
TITL 2C INT RN L R NU . C PT R I, SU C PT R C, P RT 306.
PROC SSING T ON C RT IN OII.S
mnaton of addtona ta appcabe to coconut o produced
n, or produced from materas grown n, the terrtory of the Pacfc
Isands.
Washngton 2 , D. C.
To Offcers and mpoyees of the nterna Revenue Servce and Others
Concerned:
In order to conform Reguatons 26 CFR, part 306 , reatng
to the processng ta on certan os, as made appcabe to the Interna
Revenue Code by Treasury Decson C. . 1939-1 (part 1),396 ,
approved February 11, 1939, to Pubc Law 391 ( 2d Cong., 2d sess.)
page 3 , ths uetn , approved une 12,19 2, such reguatons are
hereby amended as foows:
Paragraph 1. rtce 1, as amended by Treasury Decson 170
C. . 19 2-2,292 , approved November ,19 2 26 CFR 306.1 , s fur-
ther amended by addng at the end thereof the foowng:
( ) The trust terrtory of the Pacfc Isands conssts of the former apanese
mandated Marana, Marsha), and Carone Isands (e cept Guam).
Par. 2. Immedatey precedng artce 2 26 CFR 306.2 , there s
nserted the foowng:
PU LIC L W 391, (S2d CONG.) PPRO D UN 12, 19 2
Unted States of merca n Congress assembed, That secton 2 70-
(a)(2) of the Interna Revenue Code (reatng to the addtona ta
on domestc processng o coconut o) s hereby amended to read as
foows:
(2) ddtona rate on coconut o. There sha he mposed
(In addton to the ta mposed by the precedng paragraph) a ta
of 2 cents per pound, to be pad by the processor, upon the frst do-
mestc processng of coconut o or of any combnaton or m ture
contanng a substanta quantty of coconut o wth respect to
whch o there has been no prevous frst domestc processng. The
addtona ta mposed by ths paragraph sha not appy when t s
estabshed, n accordance wth reguatons prescrbed by the Sec-
retary, that the coconut o (whether or not contaned n a combna-
ton or m ture) ( ) s whoy the producton of the Phppne
Isands, any possesson of the Unted States, or the Terrtory of the
Pacfc Isands (herenafter n ths paragraph referred to as the
Trust Terrtory ), or ( ) was produced whoy from materas the
growth or producton of the Phppne Isands, any possessons of
the Unted States, or the Trust Terrtory : Provded, however, That
such addtona ta sha appy n respect of coconut o (whether
or not contaned n a combnaton or m ture) so derved from the
Trust Terrtory, to such e tent, and at such tme after the date of
the appcabe procamaton, as the Presdent, after takng nto
account the responsbtes of the Unted States wth respect to
the economy of the Trust Terrtory, sha hereafter determne and
procam to be |ustfed to prevent substanta n|ury or the threat
thereof to the compettve trade of any country of the free word.
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273
Regs. , rta. 1, etc.
The ta mposed by ths paragraph sha not appy to any domestc
processng after uy 3, 107 .
Sec. 2. The amendment made by ths ct sha be effectve ony after
the day on whch ths ct s enacted.
Par. 3. rtce 6, as amended by Treasury Decson 179 26 CFR
306.6 , s further amended by addng at the end thereof the foowng:
(c) For the perod begnnng 12:01 a. m., eastern standard tme, une 13,
19 2, the addtona ta of 2 cents per pound, mposed by secton 2 70(a)(2),
does not appy to the frst domestc processng of coconut o or of any com-
bnaton or m ture contanng a substanta quantty of coconut o whoy
produced In, or whoy produced from materas grown or produced n, the trust
terrtory of the Pacfc Isands. owever, such addtona ta sha appy n
respect of coconut o (whether or not contaned n a combnaton or m ture)
so derved from the trust terrtory to such e tent and at such tme as the
Presdent, after takng nto account the responsbtes of the Unted States
wth respect to the economy of the trust terrtory, sha determne and procam
to be |ustfed to prevent substanta n|ury or the threat thereof to the compet-
tve trade of any country of the free word.
Par. . The frst paragraph of subdvson (c) of artce , as
amended by Treasury Decson 101 C. . 19 1-2, 302 , approved
December , 19 1 26 CFR 306. , s further amended by changng
(1) and (2) thereof to read as foows:
(1) Separatey, the quantty of coconut o or combnaton or m ture
contanng a substanta quantty of coconut o, whch s. whoy the
producton of (1) the Phppne Isands, () Guam, () mercan Samoa,
(v) a possessons of the Unted States, and (v) the trust terrtory of the
Pacfc Isands, and
(2) Separatey, the quantty of coconut o, or combnaton or m ture
contanng a substanta quantty of coconut o, produced whoy from
materas whch are the growth or producton of () the Phppne Isands,
() Guam, () mercan Samoa, (v) a possessons of the Unted States,
and (v) the trust terrtory of the Pacfc Isands.
ecause ths Treasury Decson makes technca amendments to the
reguatons to provde for the nappcabty of the ta under secton
2 70(a) (2) to the frst domestc processng of coconut o produced
from materas grown or produced n the trust terrtory of the Pacfc
Isands, t s found that t s unnecessary to ssue ths Treasury Dec-
son wth notce and pubc procedure thereon under secton (a)
of the dmnstratve Procedure ct, approved une 11, 19 6, or
sub|ect to the effectve date mtaton of secton (c) of sad ct.
taned n secton 3791 of the Interna Revenue Code ( 3 Stat. 67:
26 U. S.C.3791).)
ustn F. Wnke,
pproved September 23,19 2.
. . Foey,
(Fed wth the Dvson of the Federa Regster September 20, 10 2, : a. m.)
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MISC LL N OUS RULINGS
COMMITT ON PR CTIC
19 -2-1 001
D. 0 2 0 (Rev.)
L WS ND R GUL TIONS GO RNING T R COGNITION OF G NTS,
TTORN YS, ND OT R P RSONS R PR S NTING CL IM NTS
FOR T TR SURY D P RTM NT ND OFFIC S T R OF
Department Crcuar No. 2. 0 (as Revsed to December 7, 19 1)
Part 10 Practce of ttorneys and gents efore the Treasury Department
Secton
10.1. Commttee estabshed.
10.2. Rues and reguatons reatng to practce.
10.3. uafcatons for enroment.
10. . ppcaton for enroment.
10. . Customhouse brokers.
10.6. Roster of enroees; enroment cards.
10.7. Proceedngs for dsbarment, suspenson, and renstatement.
10. . uthorty to prosecute cams.
10.9. Substtuton of attorneys or agents; revocaton of authorty.
10.10. Dsreputabe conduct.
10.11. Strkng names from ro.
10.12. ppcaton and effectve date of reguatons.
10.13. Wthdrawa or amendment of reguatons.
uthorty : Sectons 10.1 to 10.13, ssued under secton 3, 23 Stat. 2 ;
U. S. C. 261.
Source: Sectons 10.1 to 10.13 appear at 12 F. R. 30 1; e cept that amendments
to partcuar sectons are noted at the end thereof.
Secton 10.1 Commttee .stap.sed. (a) Commttee on Practce. Com-
mttee on Practce s hereby created consstng of such number of members as
sha be apponted by the Secretary of the Treasury. The Secretary sha desg-
nate a charman of the Commttee. The Secretary n hs dscreton may appont
a part-tme member or members of the Commttee, and, whenever n hs |udg-
ment such acton s necessary, the Secretary may appont some person to serve
temporary as a substtute for a reguar member of the Commttee. The Com-
mttee sha have such powers to prescrbe rues for ts own government and
procedure as nre set forth esewhere n the reguatons n ths part. The Com-
mttee sha meet at such tmes as t may desgnate or at the ca of the char-
man. Two members of the Commttee sha consttute a quorum.
(b) Dutes of the Commttee. The Commttee sha receve and act upon
appcatons to be recognzed as attorneys or agents before the Treasury Depart-
ment ; receve and act upon appcatons for reenroment from attorneys or
agents who have been dsbarred; conduct hearngs; make nqures; and per-
form other dutes as prescrbed n ths part.
(c) Secretary of the Commttee. The Secretary of the Treasury may ap-
pont a person to act as secretary of the Commttee or desgnate a member of
the Commttee to act as secretary. The secretary of the Commttee sha keep
and mantan ts records, sha have custody of a ts pa ers, records, ros and
fes, and sha perform such other dutes reasonaby ncdent to hs offce as
the Commttee sha drect. If no secretary s apponted or desgnated, the
dutes heren enumerated sha devove upon the charman of the Commttee,
or upon such person or persons as he may desgnate.
(27 )
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276
(rf) ttorney for the Government. The Secretary of the Treasury sha ap-
pont an attorney not a member of the Commttee as ttorney for the Govern-
ment to prepare and present a forma statements of charges aganst enroed
attorneys or agents, to supervse the gatherng of evdence n support of such
charges, ncudng the takng of de ostons, to represent the Government n a
proceedngs before the Commttee, to represent the Government n a proceedng
pursuant to secton 10.7, and to perform other dutes ncdent to hs poston.
Sec. 10.2. R .es and Reguatons Reatng to Practce. (a) gbty to
practce. (1) No attorney or agent sha be egbe to practce before the
Treasury Department uness such attorney or agent s enroed n accordance
wth the reguatons n ths part or pror reguatons, e cept that any ndvdua
may appear, wthout enroment, on hs own behaf or n behaf of a member
of hs mmedate famy f such appearance s wthout compensaton; and a
member of a partnershp, an offcer of a corporaton, or an authorzed reguar
empoyee of nn ndvdua, partnershp, corporaton, or estate, may kewse
appear, wthout enroment, n any matter reatng to such ndvdua, partner-
shp, corporaton, or estate pendng before the Treasury Department f he pre-
sents adequate dentfcaton to the offcas of the Department. nroment s
not requred for appearances by trustees, recevers, guardans, admnstrators,
and e ecutors on behaf of trusts, recevershps, guardanshps, or estates of
whch such persons are the trustees, recevers, guardans, admnstrators, or
e ecutors, f adequate dentfcaton s presented to the offcas of the Depart-
ment. Ths rue aso appes to an ndvdua, a partnershp, an estate or trust,
or a corporaton wth respect to the abty of the ndvdua, partnershp, es-
tate or trust, or corporaton as a transferee of property of a ta payer and to a
fducary wth respect to the abty of the fducary under secton 01 (a),
Stat. 700; 31 U. S. C. 1 )2. No enroed person or other person authorzed to a| -
pear before the Treasury Department wthout enroment sha represent a
camant before the Treasury Department n any matter to whch the enroee,
as offcer or empoyee of the Unted States, gave persona consderaton or as
to (e facts of whch he ganed knowedge whe n the Government servce.
(2) No former offcer, cerk, or empoyee of the Treasury Department sha
act as attorney or agent, or as the empoyee of an attorney or agent wthn 2
years after the termnaton of such Treasury empoyment, n any matter tendng
n such Department durng the perod of hs empoyment theren, uness he
sha frst obtan the wrtten consent thereto of the Secretary of the Treasury
or hs duy authorzed representatve. Ths consent w not be granted uness
t appears () that the appcant was not, durng the perod of 2 years mmed-
atey precedng the date of appcaton, empoyed n the partcuar departmenta
or fed secton n whch was pendng the matter, to hande whch consent s
sought, provded that ths requrement sha not appy to persons empoyed n an
admnstratve capacty such as head of a unt, dvson, or secton, or empoyed
as a revewer or c|nferee or n an advsory capacty; and () that empoyment
as an agent or attorney n not prohbted by secton , 17 Stat. 202; U. S. C.
09, or other aw, or by the reguatons of the Treasury Deparment. Such app-
cant sha be requred to fe a decaraton to the effect that he gave no persona
consderaton to such matter and had no knowedge of the facts nvoved n such
matter whe e was empoyed n the Department and that he s not now asso-
cated wth, and w not be assocated wth, any former empoyee who has ganed
knowedge of the case whe empoyed by the Treasury Department, and that
hs empoyment s not prohbted by aw, or by the reguatons of the Treasury
Department. The statements contaned n such decaraton sha not be suffcent
f dsproved by an e amnaton of the fes and records pertanng to the case.
ppcatons for consent shoud be drected to the Commttee on Practce on
Form 901 and shoud state the former connecton wth the Department of the
appcant and dentfy the matter n whch the appcant desres to appear. The
appcant sha be prompty advsed as to hs prvege to appear n the partcuar
matter, and ths notce sha be fed by hm In the record of the case.
(3) Nor sha any enroed person knowngy () assst a person who has been
empoyed by a cent to represent hm before the Treasury Department n con-
necton wth any matter to whch such person gave persona consderaton or as
to the facts of whch such person ganed persona knowedge whe n the
Government servce, or () accept assstance from any such person n connecton
wth any such matter, or () share fees wth any such person u connecton
wth any such matter.
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277
Msc.
(b) Scope of practce before the Department. Practce before the Treasury
Department sha be deemed to comprehend a matters connected wth the
presentaton of a cent s nterests to the Treasury Department, ncudng the
preparaton and fng of necessary wrtten documents, and correspondence wth
the Treasury Department reatve to such nterests. Uness otherwse stated
the term Treasury Department as used n ths paragraph and esewhere n ths
port ncudes any dvson, branch, bureau, offce, or unt of the Treasury De-
partment, whether n Washngton or n the fed, and any offcer or empoyee of
any such dvson, branch, bureau, offce, or unt.
(c) nowedge of cent s omsson. ach enroed attorney or agent who
knows that a cent has not comped wth the aw or has made an error n, or
an omsson from, any return, document, affdavt, or other paper, whch the aw
requres such cent to e ecute, sha advse hs cent prompty of the fact of
such noncompance, error, or omsson.
(d) Duty of enroees concernng voatons. It sha be the duty of an en-
roed attorney or agent, when requested by the Commttee or the attorney for the
Government, to gve the Commttee or the sad attorney any nformaton whch
he may have concernng voatons of the reguatons n ths part or of the
occurrence of any acts or omssons whch woud be grounds for suspenson or
dsbarment, uness sad nformaton s prveged.
(e) Use of fcttous names. very enroed attorney or agent practcng as an
ndvdua sha use hs ega name n the conduct of hs ega, accountng, or
other professona practce. The term company, assocates, accountants,
audtors, engneers, or other pura forms suggestng a partnershp, or an-
guage of smar mport, used n connecton wth a name or tte, or any fcttous
tte, or trade name, sha be used ony by a bona fde partnershp consstng of
two or more members, and a statonery, stngs, advertsements, and announce-
ments of enroed persons sha conform to the prncpes heren stated.
(f) Rghts and dutes of agents. n agent enroed before the Treasury De-
partment sha have the same rghts, powers, and prveges and be sub|ect to
the same dutes as an enroed attorney: Provded, That an enroed agent sha
not have the prvege of draftng or preparng any wrtten nstrument by whch
tte to rea or persona property may be conveyed or transferred for the pur-
pose of affectng Federa ta es, nor sha such enroed agent advse a cent as to
the ega suffcency of such an nstrument or ts ega effect upon the Federa
ta es of such cent: nd provded further, That nothng n the reguatons n
ths part sha be construed as authorzng persons not members of the bar to
practce aw.
(g) Certfcaton of documents. very cam, affdavt, wrtten argument,
bref, or statement of fact, prepared or fed by an enroed attorney or agent n
any matter pendng before the Treasury Department, sha have aff ed thereto
a statement sgned by such attorney or agent showng whether he prepared
such document and whether or not he knows of hs own knowedge that the state-
ments of fact contaned theren are true.
(h) Revoked. Reserved.
() nroees as notares. No enroed attorney or agent as notary pubc sha,
take acknowedgments, admnster oaths, certfy papers, or perform any offca
act n connecton wth matters n whch he s empoyed as counse, attorney, or
agent, or n whch he may be n any way nterested before the Treasury Depart-
ment. Under the provsons of ths paragraph an enroed person who s a notary
pubc s prohbted from takng any acknowedgment, oath, or certfcaton
as a notary pubc n connecton wth any ta return, protest, or other document
whch he has prepared or n the preparaton of whch he has asssted (26 Op.
tty. Gen. 236).
( ) Unmpared status requred. It sha be ncumbent upon each enroed
person (1) who s authorzed -to practce as a certfed pubc accountant or as a
pubc accountant to mantan unmpared hs rght to practce as a certfed
pubc accountant or pubc accountant; (2) who s admtted to practce before
any court to mantan unmpared hs rght to practce before such court; and
(3) who Is enroed or admtted to practce before another department or agency
of the Government to mantan unmpared hs standng before such department
or agency.
(k) Certan partnershps prohbted. No enroed person sha mantan a
partnershp for the practce of aw, accountancy, or other reated professona
servce wth a person who s under dsbarment from practcng before the
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27
Treasury Department or any other Government department or agency, or wth an
unenroed person who s nether an attorney egay practcng aw nor a certfed
pubc accountant or a pubc accountant egay practcng accountancy.
(1) Practce by corporatons prohbted. No enroed person sha be con-
nected wth an accountng corporaton ether as offcer, empoyee, or stockhoder;
nor sha any enroed person, whe empoyed as an offcer, empoyee, attorney,
or agent of any corporaton, practce before the Treasury Department on behaf
of such corporaton as the representatve of the offcers, empoyees, drectors,
stockhoders or members, customers or cents, of such corporaton, e cept as
permtted by secton 10. . The term corporaton as used n ths paragraph and
esewhere n ths part sha be deemed to ncude assocatons, |ont stock com-
panes, and nsurance companes. Nothng contaned heren sha prevent an
enroed person from beng empoyed by agrcutura cooperatve assocatons, on
a nonproft bass and not sub|ect to Federa ncome ta es, to represent before
the Treasury Department the groups or unts consttutng membershp of such
assocatons: Provded, That ndvduas may not be so represented.
(m) Cents of unenroed persons. No enroed person sha represent before
the Treasury Department cents of an unenroed person who s nether an attor-
ney nor an accountant reguary engaged n the practce of accountancy nor a
customhouse broker, or who to the knowedge of the enroed person socts
busness, obtans cents, or otherwse conducts hs practce In a manner for-
bdden under the reguatons n ths part to enroed persons.
(n) ssstance from unenroed persons. No enroed person sha n any
Treasury Department matter knowngy and drecty or ndrecty:
(1) mpoy or accept assstance from any unenroed person whose app-
caton for enroment sha at any tme have been dened for a cause nvov-
ng mora turptude, or from a person who has been dsbarred from practce
before any department or agency of the Government or before any court
of record, or who s under suspenson from practce before any such depart-
ment, agency, or court, or who has been deprved of hs certfcate as a
certfed pubc accountant or pubc accountant, or whose name after the ef-
fectve date hereof has been strcken from the ro of attorneys and agents
authorzed to represent camants before the Treasury Department n the
course of dsbarment proceedngs aganst hm, or
(2) ccept empoyment as assocate, correspondent, or sub-agent, from,
or share fees wth, any such person, or any person who s not an attorney or
a pubc accountant reguary engaged n the practce of accountancy, or who
s not a censed customhouse broker.
(o) Preparaton of fnanca statements. ach enroed person sha e ercse
due dgence n preparng fnanca statements for cents and n certfyng to
the correctness of the same.
(p) Dgence as to accuracy. ach enroed person sha e ercse due d-
gence to ascertan the correctness of any nformaton whch he mparts to a cent
wth reference to any Treasury Department matter, and no enroed person sha
wthhod nformaton reatve to any such matter from a cent who s entted to
the nformaton.
(q) Moneys receved n trust. ach enroed person sha prompty pay over
to the Government when due a sums receved for the payment of any duty, ta ,
or other debt or obgaton owng to the Government, and sha prompty account
to cents for funds receved for them from the Government, or receved from a
cent n e cess of the charges propery payabe n respect of the cent s
busness.
(r) ndorsement of cent s checks. No enroed person sha wthout author-
ty of hs cent endorse or accept any Government draft, check, or warrant
drawn to the order of such cent.
(s) Use of nfuence forbdden. No enroed person sha attempt to nfuence
the acton of any offca or empoyee of the Treasury Department n any Treasury
Department matter by the use of threats, fase accusatons, duress, or by the
offer of any speca nducement or promse of ndvantage, or by the bestowng of
any gft or favor or other thng of vaue.
(t) Producton of records. No enroed person sha negect or refuse to pro-
duce records or evdence n any matter before the Treasury Department upon
proper and awfu demand by a duy authorzed agent of the Department, uness
the attorney or agent has reasonabe grounds to beeve and does beeve that
the sad demand s of doubtfu egaty; or sha otherwse nterfere, or attempt
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to nterfere, wth any proper and awfu efforts by such Department or agent to
procure such nformaton.
(u) ttemptng to obtan nformaton. No enroed person sha procure, or
attempt to procure, drecty or ndrecty, from Government records or other
Government sources nformaton of any knd whch s not made avaabe by
proper authorty.
(v) Soctaton and advertsng, drect or ndrect, prohbted. No enroed
attorney or agent sha n any manner whatsoever soct, drecty or ndrecty,
or by mpcaton, empoyment from persons not cents or frends n matters
before the Treasury Department or u matters reated thereto. mong other
thngs the foowng sha be deemed to be prohbted by ths paragraph:
(1) The pubcaton of artces or the devery of addresses on Federa ta
questons by an enroed person over the rado or esewhere n connecton
wth whch the name of the frm of whch he s a member, assocate, or em-
poyee, or the address of the wrter or speaker s gven ether by the wrter,
speaker, announcer, or pubsher, provded that nothng heren sha be
construed to prohbt the pubcaton, by perodcas admtted to second-cass
mang prveges, of such nformaton concernng contrbutors of artces
as s usuay pubshed n such perodcas.
(2) The mang of crcuars, etters, pamphets, or other prnted or
wrtten matter to persons not cents or frends of such enroed person
whch contan no drect soctaton of empoyment but whch do ncude
the name and a descrpton of the practce and address of such enroed
person.
(3) dvertsng n one or more of the foowng forms: (1) Sgns, prnt-
ng, or other advertsng matter, ndcatng prevous connecton wth the
Treasury Department; () representaton, oray, n wrtng, or n any
other manner, of speca nfuence wth the offcas or empoyees of the
Treasury Department through acquantance or otherwse; () the use of
any tte or other descrpton of the attorney or agent or hs practce whch
tends to suggest some connecton wth the Treasury Department of the
Unted States, and any tte or descrpton contanng the words Unted
States sha be presumed to carry such suggeston, e cept that there s no
ob|ecton to the use of the words nroed to practce before the Unted
States Treasury Department ; (v) dstrbuton of buetns, crcuars,
pamphets, or so-caed ta servces, to persons who are not cents or
frends of the attorney or agent contanng decsons or rungs of the Treas-
ury Department, the Ta Court of the Unted States, or courts on Federa
ta matters, or comment thereon by the attorney or agent; (v) dstrbuton
to persons not cents or frends of the practtoner of crcuars or pamphets
advertsng any busness, educatona, or soca nsttuton, or organzaton,
whch crcuar or pamphet contans a card or advertsement of the practce
of such attorney or agent.
( ) The foowng knds of advertsng w not be deemed to consttute a
voaton of ths paragraph :
() Letterheads, professona cards, and the customary professona n-
sertons n professona, teephone, and cty drectores, or n newspapers,
trade or professona |ournas, or other pubcatons admtted to second-cass
mang prveges, provded they set forth ony the name and address of the
attorney or agent or the name of the frm of whch he s a member or wth
whch he s assocated, a bref descrpton of the nature of hs practce, to
wt, whether he practces as an attorney or accountant, and, f desred, any
fed or practce or servce In whch such attorney or agent may specaze;
() The dstrbuton by former offcers or empoyees of the Government
of cards brefy statng the fact of ther former offca status and announc-
ng ther new assocaton: Provded, The cards are addressed ony to per-
sona or busness acquantances: nd provded further, That such cards are
dstrbuted ony once and wthn a reasonabe tme after severance of offca
connecton wth the Government and wthn 30 days after the formaton of
a new assocaton.
(w) Preparaton of documents by cnroUecs. ach enroed person sha e er-
cse due dgence n preparng or assstng n the preparaton of, approvng,
and fng returns, documents, affdavts, and other pa ers reatng to Treasury
Department matters, and n otherwse representng cents before the Treasury
Department; and no enroed person sha unreasonaby deay the prompt dspos-
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2 0
ton of matters before the Treasury Department by negectng to answer corre-
spondence, by unreasonaby deayng the fng of cosng agreements, by fng
frvoous cams for refunds, or otherwse.
( ) Duty to request name to be strcken upon acceptng empoyment rth the
Unted States. It sha he the duty of every enroed person who becomes a
|udge of any court of record or an offcer or empoyee (1) of the Unted States.
(2) of any corporaton owned whoy by the Unted States, (3) of the Dstrct
of Coumba, or ( ) of any State or subdvson thereof whose dutes dscose
facts or nformaton appcabe to Federa ta matters, to request the Commttee
on Practce to pace hs name on the nactve st of Treasury Department
practtoners durng the perod of such ncumbency. ny person who on becomng
an offcer or empoyee of the Treasury Department requested that hs name be
strcken from the ro and surrendered hs enroment card to the Commttee for
canceaton and whose empoyment wth the Department has been or sha be
termnated n good standng sha be entted upon hs wrtten request to have
hs name restored to the ro and hs enroment card returned to hm.
(y) Fees; agreements. (1) No enroed person sha e act from hs cent
a manfesty unreasonabe fee, whether contngent or otherwse, n any matter
before the Treasury Department. The reasonabeness of a fee n any case s
wthn mts a matter of |udgment and de| euds upon a facts and crcum
stances thereof, ncudng the compe ty and dffcuty of the case, the amount
of tme and abor requred for ts proper preparaton and presentaton, the
amount nvoved, and the professona standng and e perence of the attorney
or agent.
(2) whoy contngent fee agreement sha not be entered nto wth a cent
by an enroed person uness the nanca status of the cent s such that he
woud otherwse e unabe to obtan the servces of an attorney or agent. Par-
tay contngent fee agreements are permssbe where provson s made for the
payment of a mnmum fee, substanta n reaton to the possbe ma mum fee,
whch mnmum fee s to be pad and retaned rrespectve of the outcome of
the proceedng. Such mnmum fee need not be pad n advance, f provson
for ts payment s made rrespectve of the outcome of the case. The payment
of or agreement to pay a nomna mnmum fee w not satsfy the requrements
of ths subparagraph.
(3) Whenever an enroed attorney or agent sha enter nto a contract to
represent a cent before the Treasury Department on a whoy or partay con-
tngent bass, he sha fe wth the Commttee a sgned statement to that effect,
contanng the terms of the contract as they reate to compensaton.
( ) When a power of attorney s ted wth the Treasury Department t sha
be the duty of the attorney or agent tng the same to fe therewth a statement
as foows:
(Date and pace)
Ths s to certfy that I (have) (have not) entered nto a contngent or mr-
tay contngent fee agreement for the representaton of
(name of cent, prncpa, or ta payer)
before the Treasury Department n the matter of
under the terms of power of
(Income, estate, |rft or other ta es, or other matter)
attorney ted wth the Treasury Department on , 19 , and
(n case a contngent or partay contngent fee agreement has been made) that
a report of such fee agreement (has) (has not) been made to the Commttee on
Practce.
(Sgnature of attorney or agent)
Ths requrement sha not be appcabe to powers of attorney wheren the au-
thorty granted s mted to the fng of ta or nformaton returns. (Sees 3,
23 Stat. 2 ; U. S. C. 261; 1 F. R. 6 .)
(z) Dtty to observe cunmm of ethcs. ach enroed person sha conduct bs
practce n an ethca and professona manner and t sha be the duty of each
enroed attorney to observe the canons of ethcs as adopted by the mercan ar
ssocaton and of each enroed agent to observe the ethca standards of the
accountng professon. mong other forms of unethca and unprofessona con-
duct the foowng w be deemed to consttute such conduct. The use of ntem-
perate and abusve anguage, the makng of fase accusatons or statements
knowng them to the fase, or the crcuaton of macous and beous matter n
connecton wth Treasury practce.
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Sec. 10.3. uafcatons fob nroment. (a) (1) Persons of the foowng
casses who are found, upon consderaton of ther appcatons, to possess the
quafcatons requred by the reguatons n ths part may be admtted to practce
before the Treasury Department as attorneys or agents respectvey:
() ttorneys at aw who have been admtted to practce before the courts
of any State or Terrtory, or the Dstrct of Coumba, and who are awfuy
engaged n the actve practce of ther professon.
() Certfed pubc accountants who have duy quafed to practce as
certfed pubc accountants n ther own names, under the aws and regua-
tons of any State or Terrtory, or the Dstrct of Coumba, and who are
awfuy engaged n actve practce as certfed pubc accountants.
(2) ppcants who are empoyed by corporatons on a fu-tme bass and
who do not mantan offces apart from such empoyment wth ther servces
avaabe to the genera pubc w not be consdered to be n actve practce
wthn the meanng of the term as used above.
(3) ppcants for enroment to practce before the Treasury Department
are requred by statute to show that they are of pood character and n good
repute, possessed of the necessary quafcatons to enabe them to render such
camants vauabe servce, and otherwse competent to advse and assst such
camants n the presentaton of ther cases ( U. S. C. 261). The burden s
upon appcants to estabsh ceary ther rght to enroment by showng that
they possess () a good character and reputaton, () an adequate educaton, and
() a knowedge of the aws and reguatons reatng to ta matters and other
sub|ects whch they e pect to hande before the Department and of the rues
and reguatons governng practce before the Department.
( ) Good character and good reputaton are not dentca requrements. The
former s determned by the appcant s actua quates; the atter depends
upon the opnon entertaned of the appcant by those who have had the op-
portunty of knowng hm n the communty n whch he resdes or n whch he
practces hs professon. It foows that evdence of any act or omsson whch
tends to estabsh ack of ntegrty or untrustworthness or other quates rep-
rehensbe n a professona man, s matera as bearng upon the character of
the appcant, notwthstandng there s cear proof that hs reputaton s good.
n appcant must furnsh as references the names and addresses of at east
n persons who are acquanted wth hs reputaton and wth whom the appcant
has come n contact n hs professon or busness.
(b) (1) mong the causes suffcent to |ustfy dena of an appcaton for
enroment are: ny conduct, or practces, or proposed practces, whch woud
consttute a voaton of any of the provsons of the reguatons n ths part f
the appcant were enroed or any other conduct whch woud be a ground for
suspenson or dsbarment under the appcabe aw or aws; any conduct whch
woud be deemed grossy unfar n commerca transactons by accepted stand-
ards ; or a bad reputaton mputng to an appcant conduct of a crmna, ds-
honest, or unethca knd.
(2) The Commttee on Practce w endeaver to ascertan a the facts deemed
necessary by t to pass upon any appcaton wthout e pense or undue ncon-
venence to the appcant. In the event, however, that the Commttee s not
satsfed wth the nformaton receved, t may requre the appcant to appear
n person before the Commttee or before some person or persons desgnated by t
for the purpose of undergong addtona wrtten or ora e amnaton as to hs
ftness for enroment. The Commttee may grant a hearng on an appcaton at
the appcant s request.
(c) ppcaton for enroment may be dened n any case n whch t appears
that the appcant has termnated hs empoyment wth the Treasury Depart-
ment In voaton of an obgaton assumed as a condton of such empoyment
to reman n the servce of the Department for a s cfed perod or for a reason-
abe tme.
(d) Ony ctzens of the Unted States over the age of 21 years are egbe for
enroment. person who s unabe for any reason to take the oath of aegance,
and to support the Consttuton of the Unted States, as requred of persons
prosecutng cams aganst the Unted States by Tte 31, secton 20 , Unted
States Code cannot be enroed.
(e) Corporatons and partnershps are negbe for enroment.
(f) Offcers and empoyees of any State, or subdvson thereof, whose dutes
requre them to pass upon, nvestgate, or dea wth ta matters of such State or
2 2100 03 19
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subdvson, sha be negbe for enroment, provded such empoyment may
dscose facts or nformaton appcabe to Federa ta matters.
( ) udge of a court of record sha be negbe for enroment e cept that
negbty on ths account sha not attach to any |udge of any court of any
state or terrtory (ncudng any subdvson thereof) the aws of whch permt
hm to practce n cases n whch he does not act as |udge.
(h) persons to whom 1 T . S. C. 2 1 appes, a persons reguary em-
poyed by corporatons owned whoy by the Unted States, and a persons regu-
ary empoyed by the Dstrct of Coumba sha be negbe for enroment See
nso 1 U. S. C. Ch. 1 . (Sec. , 23 Stat. 2 ; U. S. C. 261. Interprets or appes
sec. 1, G2 Stat. 697, as amended by sec. 6, 63 Stat. 90; 1 D. S. C. 2 1. 1 F. R.
6 .)
() The quafcatons for enroment stated n paragraph (a)(1) (1) and (11)
of ths secton are prerequstes for genera enroment for practce before the
Treasury Department.
(|) Speca enroment. owever, speca enroment for the presentaton
of matters before a partcuar bureau or dvson may be effected n the fo-
owng manner. n appcant for such speca enroment sha present hs
quafcatons to the Commttee. The Commttee sha prescrbe an e amna-
ton for such appcant. If the Commttee s satsfed that the appcant s pos-
sessed of the quafcatons necessary to enabe hm to render vauabe servces to
camants and other persons before the partcuar bureau or dvson before
whch he s seekng authorzaton to practce, It sha ssue to the appcant an
approprate speca enroment card.1
(k) uthorty for a partcuar matter. Moreover, authorty for the presenta-
ton of a partcuar matter before the Treasury Department may be effected
In the foowng manner. n appcant for such authorty sha present hs
quafcatons to the Commttee. If the Commttee s satsfed that the appcant
s possessed of the quafcatons necessary to enabe hm to render vauabe
servces to hs prncpa n the presentaton of the partcuar matter before the
Treasury Department, t sha ssue to the appcant an approprate etter of
authorty. Such a etter of authorty sha not be necessary, e cept n the case
of matters before the ureau of Interna Revenue, f the offcer or empoyee of
the bureau or dvson before whom appearance s made s satsfed that the
person appearng s not under orders of suspenson or dsbarment from the
Treasury Department and s so ceary quafed that appcaton to the Com-
mttee woud be a useess formaty.
Nothng n paragraphs ( ) and (k) sha authorze any procedure to permt a
person to act as a customhouse broker wthout compance wth the requre-
ments of Part 11 of ths subtte, nor mt the rghts granted by such Part 11 of
ths subtte to customhouse brokers to represent ther cents before the Treasury
Department.
Skc. 10. . ppcaton for nroment. ppcants for enroment sha sub-
mt to the Commttee an appcaton n dupcate, propery e ecuted on Form
23. ppcatons n any other form may not be consdered. Members of the bar
of an mercan court of record w appy for enroment as attorneys; a
other appcants w appy for enroment as agents. appcatons for enro-
ment must be ndvdua. Whe members of a partnershp shoud appy as n-
dvduas and not n the partnershp name, an enroed attorney or agent may
represent cents before the Treasury Department n the name of the partnershp
of whch he s a member or wth whch he s otherwse reguary connected. In
ease a of the members of a partnershp are not enroed, then the enroed at-
torney or agent sha be responsbe for any acts or omssons of the unenroed
partner or partners whch are n voaton of aw or of the provsons of the regua-
tons n ths part, to the same e tent as though the offendng partner hmsef
were enroed.
Sec. 10. . Customhouse rokers. Secton 0 1 of the Tarff ct of 1930 ( 6
Stat. 7 ); 19 U. S. C. 1 1), as amended, provdes n part that the Secretary of
the Treasury may prescrbe rues and reguatons governng the censng as
customhouse brokers of ctzens of the Unted States of good mora character,
and of corporatons, assocatons, and partnershps. The Department s regua-
tons pursuant thereto are pubshed n Part 11 of ths subtte. customhouse
broker so censed requres no further enroment under the reguatons n ths
part for the transacton, wthn the customs dstrcts n whch he s censed,
Standards and Procedures reatng to Former Offcers and mpoyees See page 291.
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of any busness reatng specfcay to the mportaton or e portaton of mer-
chandse under customs or nterna-revenue aws. e s aso entted, wthout
further cense or enroment to represent camants or other persons before the
Treasury Department n Washngton n any matter n whch he acted as a cus-
tomhouse broker n any dstrct n whch he s censed. When servng n such
capacty, a censed customhouse broker sha, n addton to beng sub|ect to
the provsons of secton 6 1 of the Tarff ct of 1030, as amended, and the rues
and reguatons thereunder, be sub|ect aso to a the provsons of the aws and
reguatons set forth In ths part, as revsed from tme to tme, and sha be re-
sponsbe as specfed n secton 11.7(d) of ths subtte for voaton of any such
aws or reguatons commtted by hs or ts offcers, empoyees, or authorzed at-
torneys or asents. In connecton wth the prosecuton on behaf of the prncpa
of any busness before the Treasury Department n Washngton.
Sec. 10.0. Rosteb ok nro kes ; nkomknt Cards. (a) Router of attorneys
and agents. roster of a attorneys and agents who make appcaton for en-
roment or who are enroed, or whose appcatons have been dened, or who
have been suspended or dsbarred, w be kept n the offce of the Commttee on
Practce. bureaus, offces, and dvsons of the Treasury Department sub-
|ect to the e ceptons In secton 10. n the case of the ureau of Customs, are
prohbted from recognzng or deang wth any unenroed attorney or agent
as the representatve of any person havng a cam pendng before the Depart-
ment: Provded, That the Commttee on Practce may grant, pendng acton
upon an appcaton, temporary recognton to an appcant not requred to take
an e amnaton n connecton wth hs appcaton: nd provded further. That an
unenroed erson who has not been dsbarred or suspended from practce before
the Treasury Department may be permtted to make nta appearance In a
partcuar case. Such permsson sha n no case authorze an unenroed per-
son to appear before the Treasury Department n Washngton, D. C, or to
represent a camant n any formn hearng. It sha be the duty of the Gov-
ernment offca before whom such person appears to notfy hm that f he
wshes to appear further n the case, or In any forma hearng, or before the
Treasury Department n Washngton, t w be necessary to fe an appcaton
for enroment.
(b) Informaton as to enroment. The Commttee w furnsh upon request
nformaton as to whether any ndvdua s enroed. Other nformaton w
be made avaabe to the varous departments and agences of the Government
and to any person entted to receve the same n accordance wth the rues and
reguatons of the Treasury Department, and, e cept as prohbted by aw,
access to the fes and records of the Commttee w be granted to the Ta Court
of the Unted States and ts representatves.
(c) nroment cards. The Commttee on Practce sha ssue an enroment
card to every attorney or agent upon hs enroment. Uness advsed to the
contrary by the Commttee on Practce, any offcer of the Treasury Department
may consder the hoder of such an enroment card as duy authorzed to prac-
tce before the Department.
(d) praton and renewa of enroment cards. enroment cards whch
sha have been Issued to persons enroed to practce before the Treasury Depart-
ment pror to anuary 1, 10 2 sha be vod after March 31, 10 2. n enroee
hodng a vod card sha prompty surrender t to the Commttee on Practce.
ppcaton for ssuance of a renewa card may be made at any tme between
anuary 1, 10 2, and une 30, 19 2. n appcaton for renewa sha be fed
wth the Commttee on Form 23 . The form w ca upon the appcant to state
whether he made an ncome ta return for each year snce the date of hs enro-
ment, wth what coector the ast return was fed, and the reasons for not fng
any such return; and whether the appcant has been cted to appear before
any professona dscpnary body or convcted of a crme other than mnor
traffc voaton snce the date of hs enroment, and, f so, the detas. Copes
of Form 23 w be avaabe at the offce of the Commttee on Practce and
at the offces of a coectors of nterna revenue, of a nterna revenue agents
n charge and of a speca agents n charge. The Commttee w ssue a new
enroment card f a tmey appcaton s made and f the Commttee s satsfed
that the appcant s egbe to retan enroment n accordance wth U. S. C
261 and the reguatons n ths part. The reportng requrements of ths para-
graph have been approved by the ureau of the udget n accordance wth the
Federa Reports ct of 19 2.
(e) Perod of enroment card. very enroment card ssued after anuary
1, 19 2 (ncudng enroment cards ssued pursuant to paragraph (d) of ths
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secton) sha by ts terms become vod fve years after ts date of ssue, but It
sha be renewabe pursuant to procedures of the character prescrbed by para-
graph (d) of ths secton.
Seo. 10.7. Proceedngs for Dsbarment, Suspenson, and Ren statement. (a)
Proceedngs for suspenson and dsbarment. If an offcer of empoyee of the
Treasury Department has reason to beeve that an enroed attorney or agent
has voated any provson of the aws or reguatons governng practce before
the Treasury Department, or If a compant concernng any enroed attorney or
agent Is made to any such offcer or empoyee, he sha prompty make a wrtten
report thereof to the attorney for the Government. If any other person has n-
formaton of such voatons, he may aso make wrtten report thereof to (he
sad attorney. The attorney and the Commttee w treat as strcty confdenta
the dentty of the nformant n any case n whch the nformant Is other than an
offcer or empoyee of the Treasury Department, uness the nformant n gvng
hs nformaton states that hs dentty and connecton therewth are not
confdenta.
(b) Rues of procedure. The ttorney for the Government may, ether on
the bass of such nformaton or upon hs own moton where he has cause to
beeve that any enroed attorney or agent has voated any provson of the
aws or reguatons governng practce before the Treasury Department, nst-
tute proceedngs for suspenson or dsbarment aganst any enroed attorney
or agent, herenafter caed the respondent n ths paragraph, by fng wth the
Commttee a statement of charges sgned by the ttorney for the Government.
Sub|ect to the provsons of the dmnstratve Procedure ct (60 Stat. 237),
such proceedngs sha be governed by the foowng rues:
(1) Opportunty to avod proceedng. The ttorney for the Government sha,
before a proceedng s nsttuted, gve to the respondent notce n wrtng that:
() Transmts a copy of the proposed statement of charges, or a spec-
fcaton of the substance thereof;
() Ctes sectons (b) and 9(b) of the dmnstratve Procedure ct;
() Cas upon the respondent to show cause why the proceedng shoud
not be nsttuted;
(Iv) Informs the respondent that the notce affords hm opportunty to
make submssons and demonstratons of the character contempated by
the cted statutory provsons;
(v) Invtes any negotaton that the respondent deems t desrabe to enter
nto; and
(v) Specfes a reasonabe tme for response to such notce: Provded,
That, f pror to nsttuton of the proceedng, the ttorney for the Govern-
ment determnes that the case Is one n whch such notce woud be mproper
and unnecessary, he sha fe hs fndngs and hs reasons therefor n the
record, and such proceedng may be nsttuted wthout frst gvng notce.
(2) Servce. () Servce of notce and statement of charges. Notce of a pro-
ceedng for suspenson or dsbarment, sgned by the Secretary or a member of
the Commttee, sha be served upon the respondent n the foowng manner:
(a) y devery to the respondent personay, or
(6) y regstered ma, wth demand for a return card sgned by the
respondent: Provded, That, f an enroed attorney or agent sha have
sgned and fed wth the Commttee on Practce hs wrtten consent to be
served n some other manner t sha be suffcent f servce s made n that
manner. Where the servce s by regstered ma, the recept of the return
card duy sgned sha be satsfactory evdence of servce. The notce sha
gve the pace and tme wthn whch the respondent sha fe hs answer,
whch tme sha be not ess than 20 days from the date of servce of the
notce, and sha contan or be accompaned by a statement of charges,
whch statement sha be sgned by the ttorney for the Government,
() Servce of papers other than notce and statement of charges. Papers
other than the orgna notce and statement of charges sha be served on the
respondent as foows:
(a) y deverng the same to the respondent personay, or by regstered
ma; or
(6) y eavng them at hs offce wth hs cerk or wth a person n charge
thereof; or
(c) y depostng them In a Unted States post offce or post offce bo , en-
cosed n a seaed enveope, pany addressed to such respondent at the ad-
dress under whch he s enroed or at hs ast address known to the Com-
mttee.
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( f) When the respondent s represented by attorney, by servce upon the
attorney n the same manner as provded n subdvsons (a), (6), and (c)
of ths subdvson for servce on the respondent.
(3) amner. There sha presde at the recepton of the evdence an e -
amner, apponted as provded n the dmnstratve Procedure ct: Provded,
hocever. That unt e amners are apponted as provded n sad act (but n
no case ntated after une 10, 19 7), the Commttee sha act as e amner,
and ts acton sha be taken by ma|orty vote.
( ) Fng of papers. Whenever under ths paragraph the fng of a paper
n a proceedng s requred or permtted, and the pace of fng s not specfed
ether by rue of the e amner n the partcuar proceedng or pursuant to ths
paragraph, the paper sha be fed wth the Commttee on Practce, Treasury
Department, Washngton, D. C.
( ) tenson of tme. In any case n whch the tme for fng, peadng,
makng a submtta, or makng an appea, sha have e pred or sha be about to
e pre, to the pre|udce of a party, the e amner sha have the power n hs
dscreton and upon approprate appcaton and showng by the party pre|u-
dced, to e tend the tme, as |ustce may be deemed to requre.
(6) Negotaton. t any tme pror to hearng by the e amner, the ttorney
for the Government s authorzed, n hs sound dscreton, to negotate wth
the respondent for the purposes contempated by sectons (b) and 0(b) of the
dmnstratve Procedure ct. The partes may at any tme durng the hearng
mt the ssues by stpuaton. ny stpuatons resutng from such negota-
ton sha be entered n the record.
(7) Resgnaton to avod dsbarment. If pursuant to negotaton (or other-
wse) the respondent resgns to avod possbe nsttuton of dsbarment pro-
ceedngs, or to avod possbe dsbarment or suspenson n a pendng proceedng,
the Commttee may, upon moton of the ttorney for the Government, accept
the resgnaton. If the Commttee overrues the moton t sha enter a forma
order whch sha recte the fndngs of fact and concusons of the Commttee
and whch sha be made of record n the proceedng, f any, aganst the respond-
ent before the e amner.
( ) Statement of charges. The statement of charges sha gve a pan and
concse descrpton of the facts whch t s camed consttute grounds for sus-
penson or dsbarment, wthout n detaed descrpton of such facts. state-
ment of charges whch fary nforms the respondent of the charges aganst
hm so that he s abe to prepare hs defense sha be deemed suffcent. Dffer-
ent means by whch a purpose may have been accompshed or dfferent ntents
wth whch acts may have been commtted may be aeged n the statement of
charges n a snge count In the aternatve.
(9) of partcuars. If, n order to prepare bs defense, the respondent
desres addtona nformaton as to the tme and pace of the aeged mscon-
duct, or the means by whch t was commtted, or any other more specfc nforma-
ton concernng the aeged msconduct, he may present a moton n wrtng to the
e amner askng that the statement of charges be made more specfc, settng forth
n such moton n specfc manner n what respect the statement of charges eaves
hm n doubt and descrbng the partcuar anguage of the statement of charges as
to whch addtona nformaton s needed. If n the opnon of the e amner such
nformaton s reasonaby necessary to enabe the respondent to prepare hs
defense, the e amner sha drect the ttorney for the Government to furnsh
the respondent wth an amended statement of charges gvng the needed
nformaton.
(10) nswer. The respondent s answer sha be fed n wrtng wthn the
tme specfed n the orgna notce uness on appcaton the tme s e tended
pursuant to subparagraph ( ) of ths paragraph. The answer sha be made
under oath before a notary pubc or other offcer authorzed to admnster oaths
and sha be fed n dupcate wth the Commttee on Practce.
(11) Content of answer. In hs answer the respondent shoud specfcay
admt or deny every matera aegaton of fact n the statement of charges.
very aegaton n the statement of charges not dened sha be deemed ad-
mtted, uness the respondent sha state n hs answer that he has no know-
edge thereof suffcent to form a beef, whch statement sha be consdered a
dena. In answer to a statement of charges, no enroed person sha deny a
matera aegaton of fact whch he knows to be true, or state n such answer
that he s wthout suffcent Informaton to form a beef when n fact he possesses
such nformaton.
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(12) ffrmatve defense. In hs answer the respondent may aso state af-
frmatvey speca matters of defense, and sha not gve n evdence any matters
n avodance or of defense, consstent wth the truth of the aegatons of the
statement of charges, uness u hs answer he states such matters specfcay.
(13) Companng wtness. The ttorney for the Government may n hs
dscreton furnsh a companng wtness wth a copy of the answer f n hs
opnon such acton w ad n ascertanng the truth or fasty of the charges.
The term companng wtness for the purposes of ths provson sha ncude
any offcer or empoyee of the Treasury Department or any enroed attorney or
agent who may have reported the aeged msconduct to the ttorney for the
Government, or any other person upon whose nformaton the ttorney for vhe
Government has nsttuted the proceedng.
(1 ) Repy to answer.- If the answer contans affrmntve matter n avodance,
consstent wth the truth of the matera aegatons n the statement of charges,
a repy by the ttorney for the Government admttng or denyng the new mat-
ter set forth n the answer sha e fed and served upon the respondent.
(1 ) Suppementa charges. If t appears that a dena of a matera aega-
ton of fact n the statement of charges, or a statement that the respondent has
no knowedge suffcent to form a beef, was made n bad fath n the answer;
or that the respondent has knowngy ntroduced fase testmony durng pro-
ceedngs aganst hm for suspenson or dsbarment, the ttorney for the Gov-
ernment may thereupon fe suppementa charges, whch charges may be tred
wth the other charges n the case, provded the respondent sha be gven due
notce thereof and afforded an opportunty for preparng a defense thereto.
(16) Suffcency of the peadngs. The e amner sha have authorty to pass
upon the suffcency of the statement of charges, the answer, and a other pead-
ngs. The partes may be heard upon the suffcency of any peadngs when-
ever n the opnon of the amner a hearng thereon s necessary or desrabe.
(17) Immatera mstakes. The amner sha dsregard an mmatera
msnomer of a thrd person, an mmatera mstake n the descrpton of any
person, thng, or pace or the ownershp of any property, a faure to prove m-
matera aegatons u the descrpton of the respondent s conduct, or any other
mmatera mstake n the peadngs.
(1 ) earngs. Sub|ect to ths paragraph the e amner may determne the
tme, pace, and manner n whch hearngs sha be conducted ; the form n whch
evdence sha be receved, and may adopt rues of procedure and modfy the
same from tme to tme as occason requres for the ordery dsposton of sus-
penson, dsbarment, and renstatement cases. Wrtten notce of the tme and
pace of a hearngs sha be gven the respondent n the manner provded n
ths paragraph for the servce of papers. No hearng sha be hed n ess than
10 days from the date of servce on the respondent of the notce of such hearng,
e cept that the amner may postpone or ad|ourn hearngs when necessary or
desrabe, on notce to the partes.
(19) Testmony. Uness the e amner sha otherwse drect, the testmony
of wtnesses at a hearngs w be taken under oath and stenographcay re-
corded and transcrbed.
(20) Depostons. Depostons for use at a hearng may, wth the wrtten
approva of the e amner, be taken by ether the ttorney for the Government or
the respondent, or ther duy authorzed representatves, upon ora or wrtten
nterrogatores, before any offcer duy authorzed to admnster an oath for gen-
era purposes, or an offcer of the Interna Revenue ureau authorzed to admn-
ster an oath n nterna revenue matters, upon not ess than 10 days wrtten
notce to the other party. Such notce sha state the names of the wtnesses;
and the tme and pace where such depostons are to be taken: Provded. That
when depostons are taken as aforesad, f both partes are present or repre-
sented at the tme and pace specfed for the takng of the depostons, ether
party may, after the e amnaton of the wtnesses produced under the order of
the amner, be entted to produce and e amne other wtnesses; but n such
case one day s notce must be gven to the other party or hs duy authorzed
representatve there present, uness such notce s waved : nd provded further.
That the partes or ther duy authorzed representatves may agree n wrtng
upon a tme when and pace at whch such depostons are to be taken, wthout
forma notce. When a deposton s taken upon wrtten nterrogatores, any
cross-e amnaton sha be upon wrtten nterrogatores. Copes of such wrtten
nterrogatores sha be served wth the notce, and copes of any wrtten cross-
nterrogatores sha be maed or devered to the opposng party or hs duy
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authorzed representatve at east days before the tme of takng the
depostons.
(21) Documents Whenever any book, document or paper s ntroduced as an
e hbt n a proceedng, the e amner may authorze, upon such condtons as
he may deem proper, the wthdrawa of such e hbt upon the request of the
ttorney for the Government, or of the respondent or hs attorney.
(22) Proof; parta. If the e amner fnds that a part of the charges n the
statement of charges s not suffcenty proved but that the resdue thereof s so
proved, he may base hs fndngs on any facts estabshed by the evdence whch
are grounds for suspenson or dsbarment and wrhch are substantay charged
by the sad resdue of the statement of charges.
(23) Proof; varance. In the case of a varance between the aegatons n
the statement of charges and the evdence, the e amner sha have power to
base hs fndngs on any facts estabshed by the evdence whch are grounds for
suspenson or dsbarment, and to order the amendment of the statement of
charges to conform to the evdence: Provded, That the respondent has had or
s Rven reasonabe opportunty to present hs defense to such amended charges,
wth such postponements of the hearng as may be reasonaby necessary to
I ermt the respondent to present such defense.
(2 ) Submttas. fter the recepton of evdence has been concuded, the
amner sha by rue afford the partes a reasonabe opportunty to submt
proposed fndngs and concusons and supportng reasons therefor. In the
event that depostons are ntroduced on behaf of the Government at the hear-
ng or n the event that ora testmony n support of the charges s produced by
the Government at the hearng, the ttorney for the Government, as soon as
possbe after the hearng, sha prepare and fe wth the e amner proposed
fndngs of fact based upon a the evdence n the case.
(2 ) ceptons to proposed fndngs. Upon recept of proposed fndngs and
concusons submtted by a party pursuant to subparagraph (2 ) of ths para-
graph, the amner sha forward to the other partes n the case or ther attor-
neys a copy thereof together wth a copy of the transcrpt of such ora testmony
and depostons as may have been ntroduced. Such partes sha have not ess
than 10 days after recept of such pa ers n whch to submt n wrtng to the
amner ther e ceptons, f any, to such proposed fndngs and concusons.
Nether such partes nor ther attorneys sha have the rght to receve any copes
of e hbts ntroduced at the hearng or at the takng of the depostons. Such
partes or ther attorneys, however, sha have the rght to e amne a e hbts.
Upon recept of such e ceptons, or after the tme for fng such e ceptons has
e pred f no such e ceptons are fed the amner sha make hs fndngs and
concusons as requred by subparagraph (26) of ths paragraph.
(20) Decson by the e amner. fter the partes rest, the e amner sha
make hs decson n the case, whch decson sha ncude () fndngs and con-
cusons, as we as the reasons or bass therefor, upon a the matera ssues of
fact, aw, or dscreton presented on the record and () a recommended order of
suspenson or dsbarment or hs order to dsmss the charges, as the case may
requre. In makng hs fndngs and concusons as to the truth of any charges
whch are duy put n ssue by the papers n any case and upon whch a hearng
s had, the e amner sha be guded by the preponderance of reabe, probatve,
and substanta evdence. If at any hearng upon ssues of fact rased by the
papers n the case the respondent fas to put n any evdence, the e amner may
base hs fndngs upon the evdence submtted by the attorney for the Government
(27) ffect of nta decson. If the decson of the e amner does not con-
tempate the suspenson or dsbarment of the respondent, such nta decson
n the absence of an appea pursuant to subparagraph (2 ) of ths paragraph
sha wthout further proceedngs become the decson of the Secretary of the
Treasury.
(2 ) ppea. ny party adversey affected or aggreved, wthn 30 days after
the decson s fed wth the Commttee, has the rght to nppea from such n-
ta decson of the amner by fng notce of ap ea and to submt e ceptons
to the decson and supportng reasons therefor, whch submttas sha be n-
cuded n the record of the case. Upon the e praton of sad perod, the entre
record sha be transmtted to the Secretary of the Treasury.
(29) Submttas on recommended decson. If the recommended decson of
the amner contempates the suspenson or dsbarment of the respondent, any
party has the rght, wthn 30 days after the decson s fed wth the Com-
mttee, to submt e ceptons to such recommended decson and supportng rea-
sons therefor, whch submttas sha be ncuded n the record of the case. Upon
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2
the e praton of sad perod, the entre record sha be transmtted to the Secre-
tary of the Treasury.
(30) Decson by Secretary of the Treasury. The Secretary of the Treasury
w make the agency decson n each case n whch an appea has been taken
from the nta decson of the amner as provded n subparagraph (2 ) of
ths paragraph and n each case n whch the decson of the amner con-
tempates the suspenson or dsbarment of the respondent. In makng such de-
cson, the Secretary of the Treasury, pursuant to the provsons of the dmns-
tratve Procedure ct, w revew the whoe record or such portons thereof as
may be cted by any party to permt mtng of the ssues.
(31) Notce of decsons. ach decson (nta, recommended, or agency)
sha prompty be fed n the record, and the Commttee sha thereupon gve
notce thereof to the partes n the manner prescrbed for the servce of papers.
(32) Notce of suspenson or dsbarment. Upon ssuance of an order of suspen-
son or dsbarment of an attorney or agent by the Secretary of the Treasury
notce thereof sha be gven by the Commttee to the heads of a nterested
bureaus, offces, and dvsons of the Treasury Department and to other nterested
departments and agences of the Government n such manner as the Commttee
may determne. Such person w not thereafter be recognzed durng the perod of
suspenson or dsbarment as an attorney or agent n any matter before the
Treasury Department. Notce n such manner as the Commttee may determne
may be gven to the proper authortes n the State from whch an enroed attor-
ney, certfed pubc accountant, or pubc accountant derves hs cense to
practce n the event that such attorney, certfed pubc accountant, or pubc
accountant s suspended or dsbarred.
(33) Reopenng.- ny attorney or agent who has been suspended or dsbarred
may make wrtten appcaton to the Commttee to have the order of suspenson
or dsbarment vacated or modfed upon the ground () of newy dscovered ev-
dence, or () that mportant evdence s now avaabe whch the appcant was
unabe to produce at the orgna hearng by the e ercse of due dgence. very
appcaton for renstatement sha be fed wth the Commttee n dupcate. Such
appcaton must set forth specfcay the precse character of the evdence to be
reed upon n ts support and sha state the reasons why the appcant was un-
abe to produce t when the orgna charges were heard. If the amner after
due consderaton of the appcaton sha deem t suffcenty mertorous to war-
rant a hearng, he sha so advse the Commttee, who sha set a tme and pace
for such hearng and gve due notce thereof to the appcant. Upon the con-
cuson of the hearng the Commttee sha transmt the recommended decson of
the amner to the Secretary of the Treasury for hs approva or dsapprova.
In the event that the Secretary sha ssue an order vacatng or modfyng the
pror order of suspenson or dsbarment, notce thereof sha be gven by the
Commttee to a those to whom notce of the orgna order of suspenson or
dsbarment was sent. In a cases not covered by the foregong provsons, a ds-
barred attorney or agent who desres to be restored to the ro must fe a new
appcaton for enroment and otherwse compy wth the requrements of
secton 10.3.
(3 ) Savng provson. The reguatons governng suspenson, dsbarment and
renstatement that were n force and effect March 1,19 7, are referred to n ths
subparagraph as the od rues. Ths paragraph as amended effectve pr 1,
19 7, s referred to n ths subparagraph as the new rues. The od rues sha
contnue to govern any proceedng that was nsttuted pror to March 31, 19 7:
Provded, hocever, That f n the course of the proceedng there s taken any
acton that s authorzed by the od rues but that s not authorzed by the new
rues, sad acton sha not consttute grounds for dsturbng any order there-
after made n the proceedng: () Uness t s shown that the acton was n dero-
gaton of substantve rghts, and not merey procedura rghts; and () uness
upon occurrence of the acton the respondent made tmey ob|ecton supported by
hs reasons, and the ob|ecton was overrued: Provded further. That adherence
may be had to the new rues pursuant to stpuaton of the partes.
Sec. 10. . uthorty to Prosecute Cams. power of attorney from the
prncpa n proper form may be requred of enroed attorneys or agents n any
case by heads of bureaus, offces, and dvsons. In the prosecuton of cams
before the ISureau of Interna Revenue, nvovng the asserton of demands for
payment of money by the Unted States, proper powers of attorney sha aways
be ted before an attorney or agent s recognzed.
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Sec. 10.9. Substtuton of ttorneys or gents ; Revocaton of uthorty.
(a) Substtuton of attorneys or agents. Where the power of attorney under
whch an enroed attorney or agent s actng e pressy confers the power of
substtuton, such attorney or agent may, by a duy e ecuted nstrument, subst-
tute another enroed attorney or agent n hs stead: Provded, That such other
attorney or agent w be recognzed as such ony after due notce n wrtng has
been gven the head of the bureau, offce, unt, or dvson before whch the matter
s pendng: nd provded further, That where the enroed attorney or agent
desgnated n the power of attorney, wth power of substtuton has hmsef by
reason of hs suspenson or dsbarment or hs subsequent entry nto Govern-
ment servce become negbe further to represent before the Treasury Depart-
ment the cent who e ecuted the power, the Treasury Department sha be under
no obgaton to recognze any substtute power of attorney e ecuted at any tme
by such attorney or agent, authorzng some other enroed attorney or agent to
appear before the Department upon behaf of such cent, and t w be necessary
for such cent to retan a new attorney or agent.
(b) Confctng powers of attorney. Where there s a contest between mem-
bers of a dssoved frm or between two or more attorneys or agents, actng un-
der the same power of attorney, as to whch one s entted to prosecute a mat-
ter pendng before the Treasury Department or to receve a draft, warrant, or
check, the cent ony sha thereafter be recognzed, uness the members or sur-
vvors of the dssoved frm, or the contestng attorneys or agents, fe an agree-
ment sgned by a desgnatng whch of them sha be entted to prosecute such
matter or to receve the sad draft, warrant, or check. In no case sha the de-
very of a fna draft, warrant, or check to the cent be deayed more than 60
days by reason of faure to fe such agreement.
(c) Revocaton of powers. The revocaton of an authorty to represent a
camant before the Treasury Department sha n no case become effectve, so
far as the Department s concerned, unt due notce n wrtng has been gven
the head of the bureau, offce, or dvson before whch such matter s pendng,
and the fng of evdence of notfcaton of the revocaton to the attorney whose
power has been revoked.
Sec. 10.10. Dsreputade Conduct. (a) The Secretary of the Treasury may
after due notce and opportunty for hearng suspend, and dsbar from further
practce before the Treasury Department any attorney or agent shown to be n-
competent, dsreputabe, or who refuses to compy wth the rues and reguatons
n ths part, or who sha wth ntent to defraud, n any manner wfuy and
knowngy deceve, msead, or threaten any camant or prospectve camant,
by word, crcuar, etter, or by advertsement.
(b) mong other forms of dsreputabe conduct the foowng are deemed
to consttute such conduct:
(1) Convcton of a crme nvovng mora turptude.
(2) Makng fase answers n the appcaton for enroment wth know-
edge that such answers are fase.
(3) Preparng or fng for hmsef or another a fase Federa ncome ta
return or other statement on whch Federa ta es may be based, knowng
the same to be fase.
( ) Suggestng to a cent or a prospectve cent an ega pan for
evadng payment of Federa ta es, knowng the same to be ega.
( ) Gvng fase testmony n any proceedng before the Commttee on
Practce, or n any other proceedng before the Treasury Department, or
before any trbuna authorzed to pass upon Federa ta matters, knowng
the same to be fase.
(0) Fng any fase or frauduenty atered document or affdavt n any
case or other proceedng before the Treasury Department, or procurng the
fng thereof, knowng the same to be fase or frauduenty atered.
(7) Usng, wth ntent to deceve, fase or mseadng representatons to
procure empoyment n any case or proceedng before the Treasury De-
partment.
( ) Gvng, wth ntent to deceve fase or mseadng nformaton reatve
to a matter pendng before the Treasury Department to any ofcer or agent
of the Department.
(9) Preparng a fase fnanca statement for a corporaton, partnershp,
assocaton, or ndvdua, or certfyng the correctness of such fase state-
ment, knowng the same to be fase.
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290
(10) Impartng to a cent fase nformaton reatve to the progress of
a case or other proceedng before the Treasury Department, knowng the
same to be fase.
(11) Fase representatons by an enroed agent that he s an attorney or
a certfed pubc accountant.
(12) Preparng or assstng n the preparaton of, or fng, a fase cam
aganst the Unted States, knowng the same to be fase.
(13) pprovng, for fng, a fase ncome ta return prepared by some
other person, knowng the same to be fase.
(1 ) Msappropraton of sums receved from cents for the purpose of
payment of ta es or other obgatons due the Government, or of funds or
other property beongng to a cent.
(1 ) Improper retenton of a fee for whch no servces have been rendered.
(10) Obtanng or attemptng to obtan money or other thng of vaue
from a camant by fase representatons, knowng the same to be fase.
(17) Obtanng or attemptng to obtan money or other thng of vaue from
a camant by duress or undue nfuence.
(1 ) Conceang or attemptng to concea assets n order to evade the
payment of Federa ta es.
(1 )) Representng to a cent or prospectve cent that the attorney or
agent can obtan e traordnary favors from the Treasury Department or
an offcer or empoyee thereof or has access to unusua sources of nforma-
ton wthn the Department.
(20) Soctng or procurng (he gvng of fase testmony n any pro-
ceedng before the Commttee on Practce or n any other proceedng before
the Treasury Department
Sec. 10.11. Strkng Namks Fkom Rom. (a) On request of an attorney or
agent, the Commttee may strke hs name from the ro, but before grantng the
request the Commttee sha make nqures to ascertan whether the request
has been made n order to evade proceedngs for suspenson or dsburment, n
whch event the request sha be dened uness the Commttee sha deem t to
the best nterest of a partes concerned to grant such request.
(b) The Commttee may upon moton of the attorney for the Government or
upon ts own moton strke from the ro the name of any person who has faed
to suppy the nformaton requred by secton 13 of Department Crcuar 230,
revsed October 1, 1 , provded that any attorney or agent whose name has
been so strcken from the ro may have hs name restored thereto by fng wth
the Commttee such nformaton and a statement showng that hs faure to
suppy t wthn the tme specfed n such crcuar was not due to any faut
on hs part. Upon the recept of such nformaton and statement, the name of
such attorney or agent sha be restored to the ro uness t sha appear that
he s negbe for enroment, n whch event he sha be advsed of the fact
and gven 00 days wthn whch to present to the Commttee satsfactory evdence
that he s egbe for enroment.
Sec. 10.12. ppcaton and ffectve Date of Reguatons. The reguatons
n ths part supersede the reguatons promugated by Treasury Department Cr-
cuar No. 230 of October 1, 103 , reatng to the recognton of attorneys, ageuts,
and others, as heretofore amended and suppemented. Ths part sha appy to
attorneys, agents, and censed customhouse brokers representng camants
before any offce of the Treasury Department, wth such e ceptons as to custom-
house brokers as are set forth n secton 10. , and sha be effectve from and
after October 1, 1930. The reguatons n ths part sha aso appy to a un-
setted matters then pendng n ths Department or whch may hereafter be pre-
sented or referred to the Department or offces thereof for ad|udcaton, and
sha be appcabe to a those now enroed to practce before the Treasury De-
partment as attorney or agent, and a proceedngs wthn the purvew of secton
3 of the act of uy 7, 1 , 23 Stat. 2 ( U. S. C. 201) after October 1, 1936,
sha n a procedura matters be governed by the provsons of the reguatons
n ths part and such suppementary rues as may from tme to tme be adopted
pursuant to sad reguatons: Provded, That voatons of the reguatons com-
mtted pror to October 1, 19. 0, sha n a substantve matters h; deat wth
accordng to the provsons of the reguatons n force at the tme when the
act or acts aeged to consttute such voatons occurred.
Sec. 10.13. Wthdrawa or mendment of Reguatons. The Secretary of
the Treasury reserves the power to wthdraw or amend or suppement at any
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tme or from tme to tme a or any of the reguatons In ths part, and may
make such speca orders as he may deem pro er n any case.
P T 12 ST ND RDS ND PROC DUR S FO T SP CI L NROLLM NT OF FORM R
TR SURY OFFIC RS ND MPLOY S
The Commttee on Practce, pursuant to the provsons of secton 10.3(|) of
ths subtte, reatng to speca enroment, has adopted the foowng standards
and procedures whch w govern the enroment of ormer offcers and empoyees
upon a noncompettve bass by reason of ther educaton, tranng, and e per-
ence n the Treasury Department:
Secton 12.1. Standards and Procedures dopted by the Commttee on Prac-
tce.- Former empoyees of the Treasury Department, u on appcaton for
speca enroment for the presentaton of a partcuar cass of matters or of
matters before a partcuar bureau, unt, or other dvson of the Department, may
be specay enroed by the Commttee on Practce under secton 10.3C| ( of ths
subtte, n cases where ther servce n the Department has quaed them for
such enroment, as foows:
(a) ppcaton for speca enroment on account of former servce n the
Treasury Department sha be made to the Commttee on Practce. ach app-
cant w be supped a form by the Commttee, whch sha ndcate the nfor-
maton requred respectng the appcant s quafcatons. In addton to the
appcant s name, address, ctzenshp, age, educatona e erence, etc., such
nformaton sha specfcay ncude a detaed account of the appcant s em-
poyment n the Treasury Department, whch account sha show (1) stons
hed, (2) date of each appontment and termnaton thereof, (3) nature of
servces rendered n each poston, and ( ) name of supervsor n such postons,
together wth such other nformaton regardng the e perence and tranng o
the appcant as may be reevant.
(b) Upon recept of each such appcaton, t sha be transmtted to the ap-
proprate offcer of the Treasury Department wth the request that a detaed
report of the nature and ratng of the appcant s servces n the Treasury
Department, accommned by the recommendaton of the superor offcer n the
partcuar bureau or dvson of the Treasury that such empoyment does or does
not quafy the appcant for the desred authorzaton, be furnshed to the Com-
mttee on Practce. (Such report sha be requested n addton to the usua
reports requested n cases of appcaton for enroment.)
(c) In e amnng the quafcatons of an appcant for speca enroment on
account of Treasury servce, the Commttee w be governed by the foowng
poces:
(1) Speca enroment cards w be ssued for the presentaton of matters
ony of the partcuar cass or ony before the partcuar bureau, unt, or d-
vson of the Treasury Department for whch hs former Treasury servce
has quafed the appcant.
(2) In the case of empoyees separated from empoyment In the Treasury
Department, appcaton for speca enroment on account of such empoyment
must be made wthn 2 years after the termnaton thereof: Provded, That,
n the case of empoyees separated from empoyment In the Treasury Depart-
ment after May 2 , 1939, and pror to anuary 1, 19 1, the Commttee on
Practce w consder appcatons presented to the Commttee on or be fore
December 31, 19 2, for speca enroment on account of former servce n the
Treasury Department.
(3) In the case of appcants who have been empoyed n the Cv Servce, a
mnmum of 7 years contnuous empoyment n the Treasury Department sha
be requste for Speca nroment on account of Treasury servce, e cept,
however, that 7 years contnuous empoyment sha not be requste n the case
of any appcant who has hed n the ureau of Interna Revenue the offce of
Commssoner, ssstant Commssoner, Deputy Commssoner, Coector, ead
of the Technca Staff, Chef of the Integence Unt, Interna Revenue gent
n Charge, Speca gent n Charge, or ead of a Technca Staff Dvson.
( ) For the pur oses of subparagraph (3), an aRprrenate of 10 or more years
of empoyment, at east three of whch occurred wthn the years precedng
the date of appcaton, sha be deemed the equvaent of 7 years contnuous
empoyment (Sec. 3, 23 Stat. 2 ; U. S. C. 201.)
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292
P RT IS PROC DUR S OF T COMMITT ON PR CTIC IL ILITY OF R CORDS
Secton
13.1. Procedures.
13.2. Offca records.
13.3. Informaton, requests, and submttas.
uthorty : Sectons 13.1 to 13.3 ssued under R. S. 161; T . S. C. 22.
Source: Sectons 13.1 to 13.3 appear at 11 P. R. 177 - 7, as amended at 11
P. R. 120 ; 13 P. R. 276; 1 P. R. 7 ; 1 P. R. 367 ; and 1 P. R. 6 .
Secton 13.1. Procedures. (a) Lcensng to practce before the Treasury
Department s sub|ect to ths procedure:
(1) n appcant s requred to fe wth the Commttee on Practce an ap-
pcaton on the form prescrbed by secton 10. of Treasury Department Cr-
cuar No. 230, Revsed secton 10. of ths subtte . The appcaton form cas
for these tems of nformaton regardng the appcant: dentfcaton, descrp-
ton and ocaton of hs practce, quafcatons, references, etc. Copes of the
form may be procured from the Commttee on Practce.
(2) Upon recept of the appcaton, the Commttee on Practce grants a
temporary cense, provded the appcaton s reguar on ts face; provded
the averments of fact made theren, f true, woud warrant ssuance of a -
cense; provded nothng of record before the Commttee on Practce ndcates
the averments to be untrue; and provded there s nothng before the Com-
mttee on Practce to ndcate that the appcant has not a good character.
(3) If a temporary cense s not granted, the Commttee on Practce ac-
cords the appcant an opportunty by correspondence or conference to cor-
rect any defcency n the appcaton.
( ) Upon the grantng of a temporary cense the Commttee on Practce
refers the appcaton to the Integence Unt of the ureau of Interna Rev-
enue, Treasury Department, for nvestgaton as to the truth of the averments
made n the appcaton and as to the character of the appcant.
( ) Upon competon of nvestgaton, the Integence Unt sends the re-
sutant report to the Commttee on Practce for consderaton.
(6) If the appcaton and the nvestgatve report are favorabe to the ap-
pcant, the Commttee on Practce recommends to the Secretary of the Treas-
ury that the temporary cense be repaced wth a permanent cense, repace-
ment normay beng accompshed n due course wthout the necessty of
speca request or petton on the part of the appcant.
(7) If the appcaton and nvestgatve report are not favorabe to the ap-
pcant, the Commttee on Practce by etter notfes the appcant of the ap-
parent defcences and accords the appcant opportunty to show cause why
a permanent cense shoud be granted, the natnre of the opportunty beng
determned by the character of the questons presented by the defcences.
( ) controverted queston s not determned adversey to the appcant
by the Commttee on Practce wthout accordng the appcant the opportunty
for a hearng.
(9) Upon determnaton by the Commttee on Practce that an appcaton
shoud be dened, the Commttee on Practce so recommends to the Secretary
of the Treasury, who thereupon affrms, overrues, or remands the recommen-
daton.
(b) Lcensng (. e., the grantng of the consent of the Secretary of the Treas-
ury to) former personne of the Treasury Department to act as attorney or
agent (or as empoyee of an attorney or agent) wthn 2 years after the ter-
mnaton of the empoyment by the Treasury Department s sub|ect to the pro-
cedure descrbed n secton 10.2(a)(2) of Treasury Department Crcuar No.
230 Revsed secton 10.2(a)(2) of ths subtte . The appcaton form pre-
scrbed by secton 10.2(a)(2) of the crcuar cas for the tems of nforma-
ton specfed n that secton. Copes of the form may be procured from the Com-
mttee on Practce.
(c) Proceedngs for suspenson, dsbarment, and renstatement of censees
to practce before the Treasury Department are sub|ect to the procedure de-
scrbed n secton 10.7 of Treasury Department Crcuar No. 230, Revsed secton
10.7 of ths subtte .
(d) Lcensng to be a customhouse broker s sub|ect to the procedure de-
scrbed n sectons 3 and of Treasury Department Crcuar No. 0 sectons
11.3 and 11. of ths subtte . The appcaton form prescrbed by secton 3(a)
of the crcuar cas for these tems of Informaton regardng the appcant:
dentfcaton, descrpton and ocaton of hs busness, quafcatons, references.
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etc. Copes of the form may be procured from the Commttee on Practce and
from the offces of Coectors of Customs.
(e) Proceedngs for revocaton and suspenson of customhouse brokers censes
are sub|ect to the procedure descrbed n sectons 10, 11 and 13 of Treasury De-
partment Crcuar No. 9 sectons 11.10, 11.11, and 11.13 of ths subtte .
Sec. 13.2. Offca Records. (a) There are made avaabe to pubc nspecton
at the offce of the Commttee on Practce:
(1) The roster of a persons admtted to practce before the Treasury De-
partment pursuant to the ct of uy 7, 1 , 23 Stat. 2 ( U. S. C. 261).
(2) The roster of a persons censed as customhouse brokers pursuant
to amended secton 6 1 of the Tarff ct of 1030, 6 Stat. 7 9 (19 U. S. C.
10 1).
(3) The fna opnon or order n the ad|udcaton of any case n whch
there was sought revocaton of any cense of the character ndcated n
paragraph (a) (1) and (2) of ths secton, provded the censee (or former
censee) e pressy consents to pubcaton.
(b) Matters of offca record pertanng to the enroment of persons to prac-
tce before the Treasury Department and pertanng to the censng of custom-
house brokers are avaabe at the offce of the Commttee on Practce to persons
propery and drecty concerned.
(c) The offca records pertanng to the revocaton (or the proposed revoca-
ton) of censes of the character ndcated n paragraphs (a) (1) and (2) of
ths secton, and to the nvestgaton of appcants therefor, consttute confden-
ta nformaton, e cept as provded n paragraphs (a) and (b) of ths secton.
These records are hed confdenta for these good causes:
(1) Pubcaton s capabe of n|urng censees and former censees wth-
out furtherng the pubc nterest.
(2) Much of the nformaton s ected wthout the ad of the subpoena
power on the assurance that the sources w be protected.
Sec. 13.3. Informaton, Requests, and Submttas. The pubc may secure
nformaton from, or make submttas or requests to, the Commttee on Practce,
Treasury Department, Washngton, D. C, by persona appearance, by teephone,
or by wrtten communcaton.
ST TUT S
Secton 3 of the ct of uy 7,1 , 23 Stat. 2 ; U. S. C. 201:
That the Secretary of the Treasury may prescrbe rues and reguatons gov-
ernng the recognton of agents, attorneys, or other persons representng cam-
ants before hs Department, and may requre of such persons, agents, and attor-
neys, before beng recognzed as representatves of camants, that they sha
show that they are of good character and n good repute, possessed of the neces-
sary quafcatons to enabe them to render such camants vauabe servce,
and otherwse competent to advse and assst such camants n the presentaton
of ther cases. nd such Secretary may after due notce and opportunty for
hearng suspend, and dsbar from further practce before hs Department any
such person, agent, or attorney shown to be ncompetent, dsreputabe, or who
refuses to compy wth the sad rues and reguatons, or who sha wth ntent
to defraud, n any manner wfuy and knowngy deceve, msead, or
threaten any camant or prospectve camant, by word, crcuar, etter, or by
advertsement.
mended secton 1 of the ct of une 2 , 19 S, 62 Stat. 697; IS U. S. C. 2 1:
Sec. 2 1. Compensaton to Members of Congress, Offcers and Others n
Matters ffectng the Government.
Whoever, beng a Member of or Deegate to Congress, or a Resdent Com-
mssoner, ether before or after he has quafed, or the head of a department,
or other offcer or empoyee of the Unted States or any department or agency
thereof, drecty or ndrecty receves or agrees to receve, any compensaton
for any servces rendered or to be rendered, ether by hmsef or another, n re-
aton to any proceedng, contract, cam, controversy, charge, accusaton, arrest,
or other matter n whch the Unted States s a party or drecty or ndrecty
nterested, before any department, agency, court marta, offcer, or any cv,
mtary, or nava commsson, sha be fned not more than 10,000 or mprsoned
not more than two years, or both; and sha be ncapabe of hodng any offce of
honor, trust, or proft under the Unted States.
Retred offcers of the armed forces of the Unted States, whe not on actve
duty, sha not by reason of ther status as such be sub|ect to the provsons of
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29
ths secton. Nothng heren sha be construed to aow any retred offcer to
represent any person n the sae of anythng to the Government through the de-
partment n whose servce he hods a retred status.
Ths secton sha not appy to any person because of hs membershp In the
Natona Guard of the Dstrct of Coumba nor to any person specay e cepted
by ct of Congress.
mended secton 1 of the ct of une 2 , 19 , G2 Stat. 697; 1 U. S. C. 2 3:
Sec. 2 3. Offcers or mpoyees Interested n Cams ganst the
Government.
Whoever, beng an offcer or empoyee of the Unted States or any department
or agency thereof, or of the Senate or ouse of Representatves, acts as an agent
or attorney for prosecutng any cam aganst the Unted States, or ads or asssts
n the prosecuton or support of any such cam otherwse than n the proper ds-
charge of hs offca dutes, or receves any gratuty, or any share of or nterest
n any such cam n consderaton of assstance n the prosecuton of such cam,
sha be fned not more than 10,000 or mprsoned not more than one year, or
both.
Retred offcers of the armed forces of the Unted States, whe not on actve
duty, sha not by reason of ther status as such be sub|ect to the provsons of
ths secton. Nothng heren sha be construed to aow any such retred offcer
wthn two years ne t after hs retrement to act as agent or attorney for prose-
cutng or assstng n the prosecuton of any cam aganst the Unted States
nvovng the department n whose servce he hods a retred status, or to aow
any such retred offcer to act as agent or attorney for prosecutng or assstng
n the prosecuton of any cam aganst the Unted States nvovng any sub|ect
matter wth whch he was drecty connected whe he was n an actve-duty
status.
Ths secton sha not appy to any person because of hs membershp n the
Natona Guard of the Dstrct of Coumba nor to any person specay e cepted
by enactment of Congress.
mended secton 1 of the ct of une 2 ,19 , 62 Stat. 69 ; 1 U. S. C. 2 :
Sec. 2 . Dsquafcatons of Former Offcers and mpoyees n Matters
Connected Wth Former Dutes.
Whoever, havng been empoyed n any agency of the Unted States, ncud-
ng commssoned offcers assgned to duty n such agency, wthn two years
after the tme when such empoyment or servce has ceased, prosecutes or acts
as counse, attorney, or agent for prosecutng, any cams aganst the Unted
States nvovng any sub|ect matter drecty connnected wth whch such person
was so empoyed or performed duty, sha be fned not more than 10,000 or
mprsoned not more than one year, or both.
Secton 190 of the Revsed Statutes; U. S. C. 99:
It sha not be awfu for any person apponted after the frst day of une,
one thousand eght hundred and seventy-two, as an offcer, cerk, or empoyee
n any of the departments, to act as counse, attorney, or agent for prosecut-
ng any cam aganst the Unted States whch was pendng n ether of sad
departments whe he was. such offcer, cerk, or empoyee, nor n any manner,
nor by any means, to ad n the prosecuton of any such cam, wthn two years
ne t after he sha have ceased to be such offcer, cerk, or empoyee.
Secton 3 7 of the Revsed Statutes; 31 U. S. C. 20 :
ny person prosecutng cams, ether as attorney or on hs own account,
before any of the departments or bureaus of the Unted States, sha be requred
to take the oath of aegance, and to support the Consttuton of the Unted
States, as requred of persons n the cv servce.
Sectons , 7, and 9 of the dmnstratve Procedure ct, 60 Stat. 239, 2 1,
2 2, 2 2 ; U. S. C. 100 , 1000, 1007 and 100 :
ad|udcaton
Sec. . In every case of ad|udcaton requred by statute to be determned on
the record after opportunty for an agency hearng, e cept to the e tent that
there s nvoved (1) any matter sub|ect to a subsequent tra of the aw and the
facts de novo n any court; (2) the seecton or tenure of an offcer or empoyee
of the Unted States other than e amners apponted pursuant to secton 11;
(3) proceedngs n whch decsons rest soey on nspectons, tests, or eecton;
( ) the conduct of mtary, nava, or foregn affars functons; ( ) cases n
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whch an agency s notng as an agent for a court; and (6) the certfcaton of
empoyee representatves
(a) Notce. Persons entted to notce of an agency hearng sha be tmey
nformed of (1) the tme, pace, and nature thereof; (2) the ega authorty and
|ursdcton under whch the hearng s to be hed; and (3) the matters of fact
and aw asserted. In nstances n whch prvate persons are the movng partes,
other partes to the proceedng sha gve prompt notce of ssues controverted n
fact or aw; and n other nstances agences may by rue requre res M nsve
peadng. In f ng the tmes and paces for hearngs, due regard sha be bad
for the convenence and necessty of the partes or ther representatves.
(b) Procedure. The agency sha afford a nterested partes opportunty
for (1) the submsson and consderaton of facts, arguments, oTers of sette-
ment, or proposas of ad|ustment where tme, the nature of the proceedng, and
the pubc nterest permt, and (2) to the e tent that the partes are unabe
so to determne any controversy by consent, hearng, and decson upon notce
and n conformty wth sectons 7 and .
(c) Separaton of Functons. The same offcers who presde at the re-
cepton of evdence pursuant to secton 7 sha make the recommended decson
or nta decson requred by secton e cept where such offcers become
unavaabe to the agency. Save to the e tent requred for the dsposton of
e parte matters as authorzed by aw, no such offcer sha consut any person
or party on any fact n ssue uness upon notce and opportunty for a partes
to partcpate: nor sha such offcer be responsbe to or sub|ect to the supervson
or drecton of any offcer, empoyee, or a rent engaged n the performance of
nvestgatve or prosecutng functons for any agency. No offcer, empoyee, or
agent engaged n the performance of nvestgatve or prosecutng functons for
any agency n any case sha, n that or a factuay reated case, partcpate or
advse n the decson, recommended decson, or agency revew pursuant to
secton e cept as wtness or counse n pubc proceedngs. Ths subsecton
sha not appy n determnng appcatons for nta censes or to proceedngs
nvovng the vadty or appcaton of rates, factes, or practces of pubc
uttes or carrers; nor sha t be appcabe n any manner to the agency or
any member or members of the body comprsng the agency.
(d) Decaratory Okders. The agency Is authorzed n ts sound dscreton,
wth ke effect as n the case of other orders, to ssue a decaratory order to
termnate a controversy or remove uncertanty.
RING
Sec. 7. In hearngs whch secton or requres to be conducted pursuant to
ths secton
(a) Pres dno Offcers. There sha presde at the takng of evdence (1)
the agency, (2) one or more mem ers of the body whch comprses the agency,
or (3) one or more e amners apponted as provded n ths ct; but nothng
n ths ct sha be deemed to supersede the conduct of specfed casses of
proceedngs n whoe or part by or before boards or other offcers specay
provded for by or desgnated pursuant to statute. The functons of a pre-
sdng offcers and of offcers partcpatng n decsons n conformty wth
secton sha be conducted n an mparta manner. ny such offcer may at
any tme wthdraw f he deems hmsef dsquafed; and, upon the fng n
good fath of a tmey and suffcent affdavt of persona bas or dsquafcaton
of any such offcer, the agency sha determne the matter as a part of the record
and decson n the case.
(b) earng Powers. Offcers presdng at hearngs sha have authorty,
sub|ect to the pubshed rues of the agency and wthn ts powers, to (1) ad-
mnster oaths and affrmatons, (2) ssue subpenas authorzed by aw, (3)
rue upon offers of proof and receve reevant evdence, ( ) take or cause
depostons to be taken whenever the ends of |ustce woud be served thereby,
( ) reguate the course of the hearng, (6) hod conferences for the settement
or smpfcaton of the ssues by consent of the partes, (7) dspose of procedura
requests or smar matters, ( ) make decsons or recommend decsons n
conformty wth secton , and (9) take any other acton authorzed by agency
rue consstent wth ths ct.
(c) vdence. cept as statutes otherwse provde, the proponent of a
rue or order sha have the burden of proof. ny ora or documentary evdence
may be receved, but every agency sha as a matter of pocy provde for the
e cuson of rreevant, mmatera, or unduy repettous evdence and no
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296
sancton sha be mposed or rue or order be ssued e cept upon consderaton
of the whoe record or such portons thereof as may be cted by any party and
as supported by and n accordance wth the reabe, probatve, and substanta
evdence. very party sha have the rght to present hs case or defense by
ora or documentary evdence, to submt rebutta evdence, and to conduct such
cross-e amnaton as may be requred for a fu and true dscosure of the facts.
In rue makng or determnng cams for money or benefts or appcatons for
nta censes any agency may, where the nterest of any party w not be
pre|udced thereby, adopt procedures for the submsson of a or part of the
evdence n wrtten form.
(d) Record. The transcrpt of testmony and e hbts, together wth a
papers and requests fed n the proceedng, sha consttute the e cusve record
for decson n accordance wth secton and, upon payment of awfuy pre-
scrbed costs, sha be made avaabe to the partes. Where any agency decson
rests on offca notce of a matera fact not appearng n the evdence n the
record, any party sha on tmey request be afforded an opportunty to show
the contrary.
D CISIONS
Sec. . In cases n whch a hearng s requred to be conducted n conformty
wth secton 7
(a) cton by Subordnates. In cases n whch the agency has not presded
at the recepton of the evdence, the offcer who presded (or, n cases not sub-
|ect to subsecton (c) of secton , any other offcer or offcers quafed to presde
at hearngs pursuant to secton 7) sha ntay decde the case or the agency
sha requre (n the specfc cases or by genera rue) the entre record to be
certfed to t for nta decson. Whenever such offcers make the nta dec-
son and n the absence of ether an appea to the agency or revew upon moton
of the agency wthn tme provded by rue, such decson sha wthout further
proceedngs then become the decson of the agency. On appea from or revew
of the nta decsons of such offcers the agency sha, e cept as t may mt
the ssues upon notce or by rue, have a the powers whch t woud have n
makng the Inta decson. Whenever the agency makes the nta decson
wthout havng presded at the recepton of the evdence, such offcers sha frst
recommend a decson e cept that n rue makng or determnng appcatons for
Inta censes (1) In eu thereof the agency may ssue a tentatve decson or
any of ts responsbe offcers may recommend a decson or (2) any such pro-
cedure may be omtted n any case n whch the agency fnds upon the record that
due and tmey e ecuton of ts functons mperatvey and unavodaby so
requres.
(b) Submttas and Decsons. Pror to each recommended, nta, or tenta-
tve decson, or decson upon agency revew of the decson of subordnate
offcers the partes sha be afforded a reasonabe opportunty to submt for the
consderaton of the offcers partcpatng n such decsons (1) proposed fndngs
and concusons, or (2) e ceptons to the decsons or recommended decsons of
subordnate offcers or to tentatve agency decsons, and (3) supportng reasons
for such e ceptons or proposed fndngs or concusons. The record sha show
the rung upon each such fndng, concuson, or e cepton presented. dec-
sons (Incudng nta, recommended, or tentatve decsons) sha become a part
of the record and ncude a statement of (1) fndngs and concusons, as we
as the reasons or bass therefor, upon a the matera Issues of fact, aw, or
dscreton presented on the record; and (2) the approprate rue, order, sanc-
ton, reef, or dena thereof.
sanctons and powers
Sec. 9. In the e ercse of any power or authorty
(a) In Genera. No sancton sha be mposed or substantve rue or order
be ssued e cept wthn |ursdcton deegated to the agency and as authorzed
by aw.
(b) Lcenses. In any case In whch appcaton s made for a cense re-
qured by aw the agency, wth due regard to the rghts or prveges of a the
nterested partes or adversey affected persons and wth reasonabe dspatch,
sha set and compete any proceedngs requred to be conducted pursuant to
sectons 7 and S of ths ct or other proceedngs requred by aw and sha make
Its decson. cept n cases of wfuness or those n whch pubc heath, n-
terest, or safety requres otherwse, no wthdrawa, suspenson, revocaton, or
annument of any cense sha be awfu uness, pror to the nsttuton of agency
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proceedngs therefor, facts or conduct whch may warrant such acton sha
have been caed to the attenton of the censee by the agency n wrtng and the
censee sha have been accorded opportunty to demonstrate or acheve comp-
ance wth a awfu requrements. In any case n whch the censee has, n
accordance wth agency rues, made tmey and suffcent appcaton for a re-
newa or a new cense, no cense wth reference to any actvty of a contnung
nature sha e pre unt such appcaton sha have been fnay determned
by the agency.
19 2-2 -139
IR-Mm.
Recognton to be accorded unenroed persons who are not wthn
the e ceptons provded n secton 10.2(a) of Department Crcuar
230, Revsed (C. . 19 7-2, 2 ).
U. S. Treasury Department,
Washngton 2 , D. C, October 2 , 19 2.
Concerned:
1. The recent adopton of the nforma conference procedure under
Reorganzaton Pan No. 1 of 19 2 (C. . 19 2-1, 227) has occasoned
a number of nqures concernng the e tent to whch e amnng offcers
and other empoyees of the ureau may accord recognton to unen-
roed persons empoyed by ta payers n connecton wth Federa ta
matters. The purpose of ths mmeograph s to outne generay the
ureau s poston n ths respect, and to set forth prncpes whch may
be used as gudes by the Interna Revenue Servce as a whoe, ncudng
offce audt actvtes, n determnng the e tent to whch matters may
be dscussed wth unenroed persons.
2. Generay speakng, any ndvdua who has knowedge of the
facts, or who can furnsh nformaton whch w be of assstance
n estabshng the facts, s a proper source of nformaton n connec-
ton wth a determnaton of ta abty and can be heard n the
capacty of a wtness wthout regard to whether he s actng at
the request of the ta payer or cams the ta payer as hs cent for
purposes other than representaton before the ureau. For e ampe,
an attorney who represented the ta payer n a sae of rea estate may
be a proper person to furnsh the facts wth respect to the partcuar
transacton nvoved. Smary, an accountant who has kept or au-
dted the ta payer s books and records, or prepared hs ta returns,
may be a proper person to suppy nformaton and assst n the factua
deveopment of the case. owever, uness propery enroed and
authorzed to represent the ta payer before the Treasury Department
wth respect to the ta nvoved n the e amnaton, such awyer or
accountant may not be heard as the ta payer s representatve n ad-
vocatng, n those cases where ssues or controverses have arsen out
of the factua deveopment of such cases, the adopton of any par-
tcuar poston wth respect to such ssues or controverses. In short,
the dfference may be summarzed by dstngushng actvtes n the
capacty of wtness or one who asssts n the factua deveopment of
a case and actvtes n the capacty of advocate or one who acts
on behaf of the ta payer n urgng partcuar determnatons wth
respect to the ssues or controverses arsng out of the factua deveop-
2 2160 3 20
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29
ment of a case. Thus, durng the fed e amnaton process a ta payer
as the rght to use the servces of any person he may eect, whether
or not enroed, for the purpose of e panng hs books, records, or
returns to the e amnng agent; and the e amnng agent, n the
factua deveopment of a case, has not ony the rght but aso the duty
to receve nformaton from anyone, whether or not enroed and
rrespectve of the presence of the ta payer, who has knowedge of
facts pertnent to the case.
3. The foregong pertans prmary to the furnshng of nforma-
ton durng the factua deveopment stage of a case. owever, the
ta payer aso has the rght, n those cases where ssues or controverses
have resuted from the factua deveopment of such cases, to have any
unenroed person who has knowedge of pertnent facts accompany
hm or hs duy enroed and authorzed representatve to conferences,
but such unenroed person may appear at such conferences ony when
the ta payer or hs duy enroed and authorzed representatve s
present n person, and then ony n the capacty of a wtness.
. Nothng n ths mmeograph s to be construed as authorzng
practce before the Treasury Department by unenroed persons
who are not wthn the e ceptons provded n secton 10.2(a) of
Department Crcuar 230, Revsed (C. . 19 7-2, 22 ; 31 CFR
10.2(a)).
. It s beeved that the foregong statements w be of assstance
to fed offcers and empoyees n the e ercse of ther sound admns-
tratve dscreton n determnng the matters that may be dscussed
wth unenroed persons wthout voatng the provsons of the
Department Crcuar reatng to practce or secton 9 of the ureau s
Rues of Conduct and Other Instructons for mpoyees of the
Interna Revenue Servce .
ohn . Dunap,
Commssoner.
S CTION 3761. COMPROMIS S
19 2-19-13922
T. D. 927
TITL 26 INT RN L R NU . C PT R I. SU C PT R , P RT S.
INSP CTION OF R TURNS
Inspecton of accepted offers n compromse under secton 3701
Washngton 2 , D. C.
Concerned:
Sec. .313. Inspecton of Returns and Other Reevant
Papers n Compromse Cases. (a) Pursuant to the provsons of
sectons (a), 0 , 603, 729(a), and 120 of the Interna Revenue
Code ( 3 Stat. 29, 111, 171; Stat. 9 9,100 ; Stat. 722; 26 U. S. C.
(a), 0 , 603, 729(a), and 120 ), and of the ecutve order ssued
thereunder ncome, e cess-profts, decared vaue e cess-profts, cap-
ta stock, estate, or gft ta returns for any ta abe year sha be
open to nspecton to the e tent necessary to permt the nspecton
cf any accepted offer n compromse under secton 3761 of such Code
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reatve to the abty for any such ta and of any schedues or
other papers reevant thereto.
(b) The nspecton authorzed by (a) of ths secton sha be
sub|ect to such rues, and sha be made ony under such crcumstances,
as the Secretary of the Treasury, or such offca as he may desgnate,
sha determne to be n the pubc nterest.
(c) ecause ths Treasury Decson consttutes a genera state-
ment of pocy and estabshes a rue of Department practce, t s
found that t s unnecessary to ssue ths Treasury Decson wth notce
and pubc procedure thereon under secton (a) of the dmnstratve
Procedure ct, approved une 11, 19 0, or sub|ect to the effectve
date mtaton of secton (c) of that ct.
(d) Ths Treasury Decson sha be effectve upon ts fng for
pubcaton n the Federa Regster.
ohn W. Snyof.r,
Secretary of the Trca ury.
pproved ugust 20, 10 2.
arry S. Truman,
The Whte ome.
(Fed wth the Dvson of the Federa Regster ugust 20, 10 2, 3: 20 p. m.)
INSP CTION OF FIL S CO RING COMPROMIS S TTL M NTS OF T
LI ILITY
y vrtue of the authorty vested n me by sectons (a), 0 , 60.3,
729(a), and 120 of the Interna Revenue Code ( 3 Stat. 29, 111, 171;
Stat. 9 9, 100 ; Stat. 722; 26 U. S. C. (a), 0 , 603, 729(a),
and 120 ), t s hereby ordered that ncome, e cess-profts, decared
vaue e cess-profts, capta stock, estate or gft ta returns for any
ta abe year sha be open to nspecton to the e tent necessary to
permt the nspecton of any accepted offer n compromse under
secton 3761 of such Code reatve to abty for any such ta and of
any schedues or other papers reevant thereto. Such nspecton
sha be sub|ect to the condtons stated n the reated Treasury
Decson approved by me ths date.
arry S. Truman.
The Whte ouse,
ugust 20,19 2.
( . O. 103SG)
(Fed wth the Dvson of the Federa Regster ugust 20, 10 2, 3 : 20 p. m.)
19 2-19-1392
IR-Mm. 26
Inspecton of accepted offers n compromse
Washngton 2 , D. C, ugust 27,19 2.
Concerned:
1. The purpose of ths mmeograph s to prescrbe the rues and
crcumstances wth respect to whch nspectons may be made of ac-
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300
cepted offers n compromse n accordance wth ecutve Order 103 6,
above, dated ugust 20, 19 2, and Treasury Decson 927 (page 29 ,
ths uetn), approved the same date.
2. ecutve Order 103 6 provdes that ncome, e cess-profts, de-
cared vaue e cess-profts, capta stock, estate, or gft ta returns
for any ta abe year sha be open for nspecton to the e tent necessary
to permt the nspecton of any accepted offer n compromse under
secton 3761 of the Interna Revenue Code reatve to abty for any
such tu and of an schedues or other papers reevant thereto, and that
such nspecton sha be sub|ect to the condtons stated n Treasury
Decson 927. That Treasury Decson provdes that such nspecton
sha be sub|ect to such rues, and sha be made ony under such cr-
cumstances, as the Secretary of the Treasury, or such offca as he may
desgnate, sha determne to be n the pubc nterest.
3. It has been determned to be n the pubc nterest that the nspec-
ton of accepted offers n compromse sha be sub|ect to the rues, and
made ony under the crcumstances set forth beow:
( ) Wth respect to offers accepted on and after ugust 20, 19 2, a
copy of the summary sheet (abstract) for each such offer w be made
avaabe for pubc nspecton n the offce of the nformaton offcer of
the ureau. Ths e tra copy of the summary sheet w be prepared
as part of the compromse fe and w be detached and routed to the
nformaton offcer by the Compromse ranch of the ppeate Dv-
son after the offer has been accepted. The summary sheet w ncude
a bref descrpton of the reasons for acceptance of the offer. If nfor-
maton n addton to that shown on the summary sheet s requested,
the nformaton offcer w drect the request to the Compromse
ranch of the ppeate Dvson whch w (1) obtan the nforma-
ton from the statement attached to the orgna of the summary sheet
and forward such nformaton to the nformaton offcer for the nspec-
ton, or (2) forward the statement tsef, or a copy thereof, to the
nformaton offcer for such purpose, dependng on the request.
(b) though, wth respect to offers accepted before ugust 20,
19 2, copes of summary sheets w not be on fe for pubc nspecton
n the offce of the nformaton offcer, a copy of the summary sheet w
be made avaabe for nspecton upon request dentfyng the ta -
payer. Such requests w be drected by the nformaton offcer to the
Compromse ranch of the ppeate Dvson whch w compy wth
such requests as drected n (a), above.
(c) Offers w be consdered accepted as of the date of the etter
notfyng the proponent of the acceptance.
. The rues and condtons stated n ths mmeograph for the nspec-
ton of accepted offers n compromse may be modfed by the Comms-
soner as he may from tme to tme determne to be n the pubc
nterest.
ohn . Dunap,
Commssoner.
pproved ugust 27, 19 2.
ohn W. Snyder,
Secretary of the Treasury,
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301 Regs. No. 1.
INTO IC TING LI UORS
INT RN L R NU COD
Reguatons No. 1, coho Ta ct. 19 2-20-13933
T. D. 930
TITL 27 INTO IC TING LI UORS. C PT R I, P RT 1 SIC P RMITS;
ISSU NC ND PROC DINGS TO R O , SUSP ND, OR NNUL
(Reguatons No. 1 under the Federa coho dmnstraton ct)
Washngton 2 , D. C.
To Dstrct Supervsors and Others Concerned:
On une 26, 19 2, a notce of proposed rue makng was pubshed
n the Federa Regster (17 F. R. 73 ) wth respect to certan pro-
posed amendments to Federa coho dmnstraton ct Regua-
tons No. 1, Reatng to the Issuance, Revocaton, Suspenson, and
nnument of asc Permts (27 CFR, part 1), affordng nterested
persons an opportunty to submt wrtten data, facts, or arguments
thereon.
fter consderaton of a reevant matter presented, the foowng
amendments to the sad reguatons are hereby prescrbed:
1. Secton 1.21 of the Federa coho dmnstraton ct Regua-
tons No. 1, Reatng to the Issuance, Revocaton, Suspenson and
nnument of asc Permts (27 CFR, part 1), s amended by addng
at the end thereof a new subsecton (c) to read as foows:
(c) The dstrct supervsor sha cause to be mantaned currenty n hs
offce for pubc nspecton, unt the e praton of 1 year foowng fna acton
on the appcaton, the foowng nformaton wth respect to each appcaton for
basc permt fed:
(1) The name, ncudng trade name or names, f any, and the address
of the appcant; the knd of permt apped for and the ocaton of the
busness; whether the appcant s an ndvdua, a partnershp, or a corpo-
raton; f a partnershp, the name and address of each partner; f a
corporaton, the nane and address of each of the prncpa offcers and of
each stockhoder ownng 10 percent or more of the corporate stock;
(2) The tme and pace set for any hearng on the appcaton;
(3) The fna acton taken upon the appcaton. In the event a hearng
s hed upon an appcaton for a basc permt, the dstrct supervsor sha
make avaabe for nspecton at hs offce upon request therefor: The
transcrpt of the hearng, a copy of the hearng e amner s recommended
decson, a copy of the dstrct supervsor s decson and of hs decson upon
reconsderaton, f any, and, n the event of an appea to the Commssoner,
the decson on appea wth the reasons gven n support thereof.
2. Secton 1.33 of the sad reguatons (27 CFR 1.33) s amended by
addng at the end thereof the foowng new sentence:
earngs upon appcatons for basc permts sha be open to the pubc.
3. The purpose of these amendments s to revse, to the e tent nd-
cated, the ureau s pocy wth respect to the confdenta nature of
appcatons for basc permts under the Federa coho dmnstra-
ton ct ( 9 Stat. 977 et seq. as amended, 27 U. S. C. 201 et sea.) and
admnstratve proceedngs upon such appcatons and to make cer-
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Regs. No. 1.
302
tan nformaton, heretofore treated as confdenta, avaabe for pub-
c nspecton sub|ect to the mtatons and n accordance wth the pro-
cedures set forth above. The provsons of 26 CFR, subchapter F
ecords and Procedure, part 600 Records, sha not be construed so
as to confct wth the authorzaton and drecton conveyed n para-
graphs 1 and 2 above.
. ecause ths Treasury Decson consttutes a statement of pocy
and estabshes a rue of ureau practce, t s found that t s unneces-
sary to ssue ths Treasury Decson sub|ect to the effectve date mta-
ton of secton (c) of the dmnstratve Procedure ct, approved
une 11,19 6.
(Ths Treasurv Decson s ssued under the authorty contaned n
9 Stat. 977, Stat. 1232, 3 Stat. 373, and sec. 161 R. S.; 27 U. S. C.
202,26 U. S. C. 3170, U. S. C. 22.)
ohn . Dunuvp,
pproved September 2,19 2.
Thomas . Lynch,
(Fed wth the Dvson of the Federa Regster September , 19 2, : 1 a. m.)
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303 Regs. 3.
INDUSTRI L LCO OL
INT RN L R NU COD
Reguatons 3 ( ppend ). 19 2-1 -13 76
T. D. 917
TITL 26 INT RN L R NU . C PT R I. SU C PT R C, P RT 1 2.
INDUSTRI L LCO OL
mendng append to Reguatons 3
Washngton 2 , D. C.
1. The append to Reguatons 3, Industra coho (26 CFR,
part 1 2; 7 F. R. 1 ), as amended, s hereby amended as foows:
(a) Competey Denatured coho Formuae Nos. 12, 13, 1 , and
1 are hereby revoked: Provded, That propretors of denaturng
pants who, on the effectve date of ths Treasury Decson, have on
hand suppes of denaturants CS- 01 or dehydro-0 approved by au-
thorzed chemsts for use n Formuae Nos. 12, 1 , or 1 may, on
wrtten appcaton to the Commssoner, n trpcate, be authorzed
by hm to contnue the preparaton of Competey Denatured co-
ho Formuae Nos. 12, 1 , or 1 unt such suppes of denaturants
CS- 01 or dehydro-0 are e hausted.
(b) The foowng formuae are authorzed for the manufacture
of competey denatured acoho:
FORMUL NO. 1
To every 100 gaons of ethy acoho of not ess than 100 proof add;
.0 gaons of ST-11 or a compound smar thereto,
.2 gaon of pyronate or a compound smar thereto,
.2 gaon of acetado (hydro y-butyradehyde).
1.0 gaon of kerosene.
FORMUL NO. 17
To every 100 gaons of ethy acoho of not ess than 160 proof add;
3. gaons of ST-11 or a compound smar thereto,
1. gaons of methy subuty ketone,
1.0 gaon of kerosene.
FORMUL NO. 1
To every 100 gaons of ethy acoho of not ess than 160 proof add:
2. 0 gaons of methy sobuty kutone,
.2 gaon of pyronate or a compound smar thereto,
. 0 gaon of acetado (hydro y-butyradehyde).
1. 0 gaons of kerosene.
(c) The specfcatons for denaturant dehydro-O, sted mmed-
atey foowng the specfcatons for acetado n The Specfcatons
for Denaturants n Competey Denatured coho, are revoked.
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Regs. 3.)
30
(d) The foowng specfcatons for pyronate are nserted n The
Specfcatons for Denaturants n Competey Denatured coho,
mmedatey foowng the specfcatons for methy sobuty ketone:
PYRON T
Pyronate s a product of the destructve dstaton of hardwood meetng
the foowng requrements:
Coor. The coor sha not be darker than the coor produced by 2.0 grams
of potassum dchromate n 1 ter of water. The comparson sha be made
n 07.. o sampe bottes, vewed crosswse.
rdty. Not over 0.1 percent as acetc acd, determned as foows: dd .0
m. sampe to 100 m. dsted water n an enmeyer fask and ttrate wth
N/10 NaO to a bromothymo bue end-pont.
ong range. One hundred m. sha be dsted accordng to the . S. T. M.
method for acquer sovents (D26S- 9). Not over m. sha bo beow 70
C, not ess than 0 m. beow 100 C. and not ess than 90 m. beow 20 C.
Note. ny matera submtted as pyronate must agree n coor, odor, taste,
and denaturng vaue wth a standard sampe as furnshed by the coho and
Tobacco Ta Dvson, ureau of Interna Revenue, to chemsts authorzed to
e amne sampes of denaturants.
(e) The st, Denaturants uthorzed for Competey and Spe-
cay Denatured coho, s amended (1) by deetng therefrom
the foowng:
cetado C. D. 12; 13
Dehydro-O C. D. 12; 1
erosene C. D. 12; 13; 1
Methy sobuty ketone C. D. 12; 13; 1 ;
S. D. 23-G; 23-
ST-11 C. D. 12; 13
and (2) by nsertng theren the foowng:
cetado C. D. 16; 1
erosene C. I 16; 17; 1
Methy sobuty ketone C. D. 17; 1 ;
S. D. 23-G; S. D. 23-
Pyronate C. D. 10; 1
ST-11 C. D. 16; 17
2. The purposes of these amendments are (a) to revoke Formuae
Nos. 12, 13, 1 , and 1 authorzed for the manufacture of competey
denatured acoho; (b) to authorze three new formuae, os. 16, 17,
and 1 , for the preparaton of competey denatured acoho; (c) to
revoke specfcatons for denaturant dehydro-O; (d) to prescrbe
specfcatons for the denaturant pyronate; and (e) to revse the st
of authorzed denaturants, and the formuae n whch they may be
used, to conform wth the changes made n authorzed formuae.
3. Due to dscontnuance of the manufacture of denaturants de-
hydro-C and CS- 01. requred by current reguatons for use n the
manufacture of competey denatured acoho, t has been found nec-
essary to revoke e stng formuae and to prescrbe new formuae
requrng dfferent denaturants. Snce ths s the season when man-
ufacturers produce antfreeze preparatons, t s vta that these
reguatons be made effectve mmedatey. It s, therefore, found
contrary to the pubc nterest to compy wth the notce, pubc rue-
makng procedure, and effectve date requrements of the dmnstra-
tve Procedure ct ( U. S. C. 1001 et seq.).
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30
Regs. 3.
. Ths Treasury Decson sha be effectve upon ts pubcaton
n the Federa Regster.
n 2 Stat. 3 , 3 , 37 ; 26 U. S. C. 3070, 310 , 3176.)
ohn . Dunap,
pproved uy 2, 19 2.
Thomas . Lynch,
(Pubshed n the Federa Regster uy 9, 10 2)
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Regs. 3, , , 10,11,1 , and 29. 306
INDUSTRI L LCO OL ND DISTILL D SPIRITS
INT RN L R NU COD
Reguatons 3, , ,10, 11,1 , and 29. 19 2-16-13 3
T. D. 919
TITL 26 INT RN L R NU C PT R I, SU C PT R C, P RTS 1 2, 1 3.
1 , 1 . 1 9, 190. ND 197
tendng use of dsted sprts e cse ta stamps for removas
of dsted sprts and acoho.
Washngton 2 , D. C.
1. In order to factate the ta payment of dsted sprts removed
n tank cars and tank trucks from regstered dsteres, frut dst-
eres and nterna revenue bonded warehouses, and of acoho removed
by ppene and n tank cars and tank trucks from ndustra acoho
pants and ndustra acoho bonded warehouses, the reguatons are
amended to authorze the use of dsted sprts e cse ta stamps, n
eu of certfcates of ta payment, Form 1 9 . The amendments pro-
vde that where dsted sprts e cse ta stamps are used for the ta -
payment of dsted sprts and acoho removed n tank cars and tank
trucks, a whoesae quor deaer s stamp sha be aff ed to the convey-
ance (n eu of Form 1 9 ) as evdence of ta payment. The ds-
ted sprts e cse ta stamps can be purchased n advance and whoe-
sae quor deaer s stamps can be obtaned from the storekeeper-gauger
at the pant. Ta payment can thus be accompshed mmedatey fo-
owng the gaugng of the dsted sprts or acoho and the deay
ncdent to obtanng a certfcate of ta payment from the coector
after the dsted sprts or acoho are gauged w be obvated. Ds-
ted sprts e cse ta stamps were orgnay prescrbed by Regua-
tons 10 (26 CFR, part 1 ), effectve September 1, 19 0, for the ta -
payment of dsted sprts botted n bond. Subsequenty, ther use
was e tended by Treasury Decson 06 C. . 19 0-2,1 0 (1 F. R.
17 ), effectve September , 19 0, for the ta payment of dsted
sprts transferred by ppene from regstered and frut dsteres
and nterna revenue bonded warehouses to contguous rectfyng
pants and ta pad bottng houses, and for dsted sprts ta pad
n buk gaugng tanks n nterna revenue bonded warehouses and
drawn nto packages to whch whoesae quor deaer s stamps are to
be aff ed; and by Treasury Decson 09 C. . 19 0-2,1 9 (1 F. R.
19 ), effectve October 12, 19 0, for the ta payment of sprts con-
taned n rnsngs from packages dumped at rectfyng pants and
ta pad bottng houses.
2. Other purposes of the amendments are as foows:
(a) to authorze an optona method, to be foowed by the pro-
pretor, of canceng dsted sprts e cse ta stamps, and rectfed
sprts stamps used for the payment of rectfcaton ta on dsted
sprts n bottng tanks n a rectfyng pant, by perforatng, n eu
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307 Regs. 3, , , 10, 11, 1 , and 29.
of stampng, the data requred by reguatons, and to permt parta
advance canceaton of such stamps for dentfcaton n the event of
subsequent oss, by theft or otherwse;
(b) to provde for the ssuance of whoesae quor deaer s stamps
by storekeeper-gaugers, n eu of coectors of nterna revenue, for
aff ng to tank cars and tank trucks where ta payment s by use of
dsted sprts e cse ta stamps, and for aff ng to whoesae quor
deaer packages of unrectfed sprts fed at rectfyng pants, (the
ssuance by storekeeper-gaugers (n eu of coectors) of whoesae
quor deaer s stamps for aff ng to packages fed from buk gaugng
tanks n nterna revenue bonded warehouses was authorzed by Regu-
atons 10 (2G CFR, part 1 )); and
(e) to authorze the retenton of the regstry number when a reg-
stered dstery, frut dstery, nterna revenue bonded warehouse,
ta pad bottng house or rectfyng pant s moved to another oca-
ton wthn the same State or when an ndustra acoho pant, ndus-
tra acoho bonded warehouse or denaturng pant s moved to another
ocaton wthn the Unted States.
3. Reguatons 3 (26 CFR, part 1 2; 7 F. R. 1 ), Industra
coho, as amended, are amended as foows:
(a) Sectons 1 2.30 , 1 2. 69, 1 2. 70, 1 2. 71, 1 2. 72, 1 2. 7 ,
1 2. 7 e, 1 2. 7 g, and 1 2.6 3a are amended; and
(Z ) Sectons 1 2. 66a. 1 2. 6 a, 1 2. 7 a-, 1 2. 7 d-, 1 2. 7 h,
1 2. 7 , 1 2. 7 |, 1 2. 7 k, 1 2. 7 1, 1 2. 7 m, 1 2. 7 n, 1 2. 7 o,
1 2. 7 p, 1 2, 7 q, 1 2. 7 r, 1 2. 7 s, 1 2. 7 t, and 1 2.6 c are added.
cton by Commssoner
orgna estabshment

Sec. 1 2.30 . Regstry and Permt Numbers. Upon request therefor by dstrct
supervsors the Commssoner w assgn regstry and permt numbers to ndus-
tra acoho pants, bonded warehouses and denaturng pants. Such pants
w be numbered seray, rrespectve of states or dstrcts. Symbos and
numbers for basc permts w be assgned as provded n secton 1 2.201.
Regstry and permt numbers prevousy assgned to dscontnued acoho pants,
bonded warehouses, and denaturng pants w not be reassgned to other such
pants. The same regstry number w be contnued whenever there s a change
of propretorshp. In the case of a change n ocaton of the premses, the
same regstry number may be retaned. new basc permt number w be
assgned when there Is a change of propretorshp. The same regstry and permt
number w be assgned to an ndustra acoho pant, bonded warehouse, and
denaturng pant, or any combnaton of such pants on the same premses. ( 3
Stat. 3 , 360, 30 , 37 ; 20 U. S. C. 310 , 311 , 312 , 3176.)
Operaton of Industra coho onded Warehouses

ta pad wthdrawas n tank cars or tank trucks

Sec. 1 2. 06a. Methods of Ta payment. The ta on acoho to be removed
n a tank car or tank truck w be pad by the propretor (a) by use of a cer-
tfcate of ta payment, Form 1 0 , ssued pursuant to appcaton on Form 1 0 ,
or (6) by use of dsted sprts stamps prescrbed by secton 1 2. 7 h. Where
acoho whch s to be removed by tank car or tank truck s ta pad by use of
dsted sprts stamps, a whoesae quor deaer s stamp w be aff ed to
the tank car or tank truck. Where ta payment s by use of a certfcate of ta -
payment, Form 1 9 , the certfcate w be procured and used n accordance
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Regs. 3, , , 10, 11, 1 , and 29. 30
wth sectons 1 2. 67, 1 2. 6 , and 1 2. 09-1 2. 71. Where ta payment s by
use of dsted sprts stamps, such stamps w be procured n accordance wth
sectons 1 2. 7 h-1 2. 7 | and used n accordance wth secton 1 2. 6 a. Where
dsted sprts stamps are used for ta payment of acoho removed by tank car
or tank truck, a whoesae quor deaer s stamp w be procured n accordance
wth secton 1 2. 7 o. ( 3 Stat. 29 as amended, 3 , 360, 36 , 37 ; 26 U. S. O.
2 00, 310 , 3112, 312 , 3172, 3176.)
Sec. 1 2. 6Sa. Use of Dsted Sprts Stamps. Where acoho s to be
ta pad by use of dsted sprts stamps, the propretor, upon recept of the
copes of Form 1 0 from the storekeeper-gauger pursuant to secton 1 2. 66, w
cance the necessary number of stamps n the e act amount of the ta due by
perforaton as prescrbed heren, or by egby wrtng or stampng on each
stamp wth ndebe (nda) nk, hs name, the regstry number of the ware-
house, and the date of Form 1 10; for e ampe, ohn Doe Industres, Incor-
porated. Industra coho onded Warehouse No. 63, New ersey. Form 1 0
une 1, 19 2. Pror to use n ta payment, the propretor, f he so desres, may
partay precance the stamps to the e tent of showng hs name and regstry
number ony. The date of Form 1 0 must not be entered on the stamp In
advance of actua use n ta payment. The dstrct supervsor may, n hs ds-
creton, approve a sutabe abbrevaton of the requred nformaton for cance-
aton, Incudng the ntas for the name of the propretor, f adequate for
dentfcaton; for e ampe, . D. Ind. Inc. I W03-N -1 0-6-1- 2. The
propretor s canceaton must be made on the ower porton of the stamp beow
the fgures and words ndcatng the denomnaton of the stamp. If the pro-
pretor s canceaton Is made by perforaton, each etter and fgure of the
canceaton must be not ess than one-fourth of an Inch n heght and of pro-
portonate wdth and sutaby spaced for egbty and dstnctness, and must
be ceary and sharpy outned ether ( ) by perforaton through the substance
of the stamp, and not merey puncturng t, each perforaton to be not ess than
one thrty-second of an nch n wdth or dameter; or (6) by perforatons n the
form of ncsons through the stamp of at east one thrty-second of an nch n
wdth, cuttng out the form of the etters and fgures from the substance of the
stump, whch etters and fgures must be of the sze, spacng, and dstnctness
as above specfed. The propretor w then attach the canceed dsted
sprts stumps to one copy of Form 1 0 and return a copes of that form to
the Government offcer. The Government offcer, after determnng that the
canceed stamps are n the proper amount of the ta shown due on the Form 1 0,
w then further cance and deface the stamps by cuttng a hoe one-haf nch
square n the upper rght-hand corner, and whoy wthn the border, of each
stump and w e ecute a certfcate on a copes of Form 1 0 (usng the certf-
cate of the coector, propery modfed) certfyng to the recept and further
canceaton of stamps n the amount of ta due. The canceed dsted sprts
stamps w be securey attached to a copy of Form 1 0 by means of a stape,
eyeet, or smar devce. Such copy of Form 1 0 w be attached to the board
on the weghng tank and reman thereon unt the acoho covered by such
stamps has been removed. whoesae quor deaer s stamp for attachment
to the conveyance w be procured by the propretor n accordance wth sectons
1 2. 7 0 and 1 2. 7 p. Form 1 0 w he dsposed of n accordance wth
secton 1 2. 71. ( 3 Stat. 29 as amended, 3 , 3G0, 30 , 37 , 37 , 37 , 39 ; 2
U. S. C. 2 00, 310 , 3112, 312 , 3172, 317 , 3176, 3300.)
Sec. 1 2. 69. of Ladng. The propretor sha ncorporate n the b of
adng, f any, a descrpton of Form 1 9 as foows:
Form 1 9 . Sera Number , Owner and Number of Car (or truck)
, endor , ddress , endee
, ddress
Where a whoesae quor deaer s stamp s used n eu of Form 1 9 , the pro-
pretor sha ncorporate n the b of adng, f any, a descrpton of the stamp
showng the knd of stamp and ts sera number. ( 3 Stat. 3 7, 3 , 360, 36 ,
37 : 26 U. S. C. 3101, 310 , 3112, 312 , 3176.)
Sec. 1 2. 70. Storekeeper-Ga-ger s erfcaton. If ta payment s by means
of a certfcate of ta payment (Form 1 9 ), the propretor sha gve the certf-
cate, the b of adng, f any, and a copes of Form 1 0 to the storekeeper-
gauger. The storekeeper-gauger w verfy the contents of the tank car or
tank truck and the descrpton of Form 1 9 n the b of adng, f any, determne
the securty of the route board, and, f no dscrepances are found, he w note
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309
Regs. 3, , , 10, 11,1 , and 29.
the sera number of the certfcate on Form 1 0, and date and sgn the cer-
tfcate n the space provded therefor. The propretor sha then aff the
certfcate to the route board n the presence of the storekeeper-gauger. The
certfcate must be securey aff ed to the route board wth a good adhesve and
wth a tack In each corner, whereupon t w be canceed In the same manner
as a ta pad stamp after attachment to a package. The certfcate w then
be covered wth a coatng of transparent sheac, acquer or varnsh to prevent ts
easy remova or ateraton. If ta payment s by means of dsted sprts
stamps and evdenced by a whoesae quor deaer s stamp, the propretor sha
gve the b of adng, f any, to the storekeeper-gauger who sha verfy the
contents of the tank car or tank truck, the descrpton of the whoesae quor
deaer s stamp on the b of adng, f any, and determne the securty of the
route board. If no dscrepances are found, the propretor sha aff the
whoesae quor deaer s stamp to the route board n the presence of the
storekeeper-gauger. The whoesae quor deaer s stamp sha be aff ed, can-
ceed and protected n the same manner as a certfcate of ta payment, Form
1 9 . ( Stat. 3 7, 3 , 3C0, 3C , 37 ; 26 U. S. C. 3101, 310 , 3112, 312 , 3170.)
Sec. 1 2. 71. Reease of Tank Car oh Tank Truck. When the certfcate
of ta payment (Form 1 9 ), or whoesae quor deaer s stamp, has been aff ed
to the route board and canceed, and the conveyance ocked or seaed by the
propretor (who sha furnsh the necessary ocks or seas), the storekeeper-
gauger w return the b of adng, f any, to the propretor and reease the
tank car or tank truck for shpment. The storekeeper-gauger w forward one
copy of Form 1 0 to the dstrct supervsor and dever two copes to the pro-
pretor, who w forward one copy to the vendee, and retan the remanng copy
as a permanent record n accordance wth secton 1 2.0 3h. Where dsted
sprts stamps have been used to ta pay the acoho, the copy of Form 1 0 to
whch canceed stamps are attached w be forwarded to the dstrct supervsor.
( 3 Stat. 3r.7. 3 , 3( 0, 36 , 37 ; 26 U. S. C. 3101, 310 , 3112. 312 , 3176.)
Sec. 1 2. 72. Procedure When Tank Car or Tank Truck Is mpted. When
the vendee receves ta pad acoho n a tank car or tank truck he sha, at the
tme the car or truck s empted, dspose of the certfcate of ta payment, Form
1 9 , or whoesae quor deaer s stamp, as the case may be, n accordance wth
the procedure prescrbed by Reguatons 11 (26 CFR, part 1 9), Reguatons
1 (26 CFR, part 190) or Reguatons 29 ( 26 CFR, part 197). The dstrct
supervsor w nvestgate any dscrepancy whch may be found respectng
the shpment n accordance wth such reguatons. ( 3 Stat. 3 , 300, 36 , 37 ;
26 U. S. C. 310 .3112,312 ,3176.)
Sec. 1 2. 7 . Comparson of Scaped Certfcate or Whoesae Lquor
Deaer s Stamp Wth ppcaton. The dstrct supervsor w compare the
cut out porton of the certfcate or whoesae quor deaer s stamp wth the copy
of the appcaton. Form 1 9 or Form 92, as the case mav be, and nvestgate
any dscrepancy. ( 3 Stat. 3 , 360, 30 , 37 ; 26 U. S. C. 310 , 3112, 312 , 3176.)
ta pad wthdrawas by ppene to rectfyng pant or ta pad
bottng house

Sec. 1 2. 7 a-. Methods of Ta payment. The ta on acoho to be removed by
ppene to a contguous rectfyng pant or ta pad bottng house w be pad
by the propretor (a) by use of a certfcate of ta payment. Form 1 9 . Issued
pursuant to appcaton on Form 1 9 , or (6) by use of dsted sprts stamps
prescrbed by secton 1 2. 7 h. Where ta payment s by use of a certfcate
of ta payment, Form 1 9 , the certfcate w be procured and used n accordance
wth secton 1 2. 7 b-1 2. 7 d and 1 2. 7 e. Where ta payment Is by use of
dsted sprts stamps, they w be procured n accordance wth sectons
1 2. 7 h-1 2. 7 . ( 3 Stat. 29 as amended, 3 , 300, 30 , 37 , 37 ; 20 U. S. C.
2 00. 310 , 3112,312 ,3172,3176.)
Sec. 1 2. 7 d-. Use of Dsted Sprts Stamps. Where tn payment s to be
by use of dsted sprts stamps, the propretor, upon recept of the copes of
Form 1 0 from the storekeeper-gauger pursuant to secton 1 2. 7 a, w can-
ce the necessary number of stamps. In the e act amount of the ta due, In the
manner prescrbed by secton 1 2. 0 a. The propretor w attach the canceed
dsted sprts stamps to one copy of Form 1 0 and return a copes of that
form to the Government offcer. The Government offcer w determne that
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Regs. 3, , , 10, 11, 1 , and 29. 310
the canceed stamps are n the fu amount of the ta shown due on the Form
1 0, and w then further cance and deface the stamps n the manner pre-
scrbed by secton 1 2. 6 a and w e ecute a certfcate on a copes of Form
1 0 (usng the certfcate of the coector, propery modfed) certfyng to the
recept and further canceaton of stamps for the amount of ta due. The
canceed dsted sprts stamps w be securey attached to the copy of Form
1 0 by means of a stape, eyeet, or smar devce. Such copy of Form 1 - 0
w be attached to the board on the weghng tank and reman thereon unt
the acoho covered by such stamps has been removed. Form 1 0 w be ds-
posed of n accordance wth secton S2. 7 e. ( 3 Stat. 29 as amended, 3 . 360,
36 , 37 , 37 , 37 , 39 ; 26 U. S. C. 2 00, 310 , 3112, 312 , 3172, 317 , 3176. 3300.)
Sec. 1 2. 7 e. Transfer of coho When a certfcate of ta payment has
been aff ed to the weghng tank and canceed, or when the Form 1 0 to whch
the canceed dsted sprts stamps art attached has been attached to the wegh-
ng tank, the storekeeper-ganger w unock the outet vave and permt the
propretor to transfer the acoho by ppene to the rectfyng pant or ta pad
bottng house. The acoho sha be transferred ony under the Immedate
supervson of the storekeeper-ganger at the ndustra acoho pant or bonded
warehouse and the storekeeper-gauger at the rectfyng pant or ta pad bottng
house who sha verfy by weght or measure the quantty receved. fter the
acoho has been transferred, the stcrekeeper-gauger w forward one copy of
Form 1 0 wth the canceed Form 1 9 , or the canceed dsted sprts stamps,
as the case may be, to the dstrct supervsor and dever two copes of Form
1 0 to the propretor who w dever one copy of such form to the rectfer or
botter. ( 3 Stat. 3 7, 3 , 360, 36 , 37 , 37 ; 26 U. S. C. 3101, 310 , 3112. 312 ,
3172, 3176.)
Sec. 1 2. 7 g. Comparson of Canceed Certfcate Wth ppcaton. The
dstrct supervsor w compare the canceed certfcate wth the copy of the
appcaton, Form 1 9 , and the report of gauge, Form 1 0, as to the num er
of gaons of acoho, the amount of ta , etc., and nvestgate any dscrepancy.
( 3 Stat. 3 , 360, 36 , 37 ; 26 U. S. C 310 , 3112, 312 , 3176.)
DISTILL D sprts stamps for removas ry ppenes, tank cars, and tank trucks
Sec. S2. 7 h. Dsted Sprts cse Ta Stamps. The ta on acoho
removed n tank cars or tank trucks, or by ppene, may be pad by Dsted
Sprts cse Ta stamps (Seres of 19 0). Such stamps may be purchased
n varous denomnatons by the propretor from the coector of nterna revenue
of the dstrct n whch the ndustra acoho pant or ndustra acoho bonded
warehouse s ocated. The stamps may be purchased n advance of actua needs,
n order to he ready avaabe when needed. The stamps may not be purchased
by one propretor from another, nor may they, e cept n cases of emergency, be
purchased from coectors of other dstrcts. Propretors sha not se or trans-
fer stamps, e cept that they may ( ) transfer such stamps to other premses
operated by themseves as provded n secton 1 2. 7 k pursuant to the pror
approva of the dstrct supervsor, or (6) return such stamps for redempton
n accordance wth secton 1 2. 7 1. Dsted sprts stamps for ta payment of
acoho as authorzed by ths part, used or unused, may not be purchased, sod,
or possessed, e cept as specfcay authorzed by ths part. ( 3 Stat. 29 as
amended, 3 . 360, 36 , 37 , 37 , 39 , 399 ; 26 U. S. C 2 00, 310 , 3112, 312 , 3172,
3176, 3300. 330 .)
Sec. 1 2. 7 . Form 27-D. -Wth each purchase of stamps the propretor w
submt to the coector Form 27-D, n trpcate, propery ted out. The co-
ector w stamp the date of sae on a copes of Form 27-D, return one copy to
the propretor wth the stamps and se,d one opy to the approprate dstrct
supervsor. The remanng copy of Form 27-D w be fed n the coector s
offce so that a purchases of stamps may be verfed at any tme. The coector
w refuse to se stamps when such form s not submtted. ( 3 Stat, 29 as
amended, 3 , 36 , 37 , 37 ; 26 U. S. C 2 00, 310 , 312 , 3172, 3176.)
Sec. 1 2. 7 . Remttance: Devery. orders for stamps must be ac-
companed by proper remttance n a sum equa to the vaue of the stamps. Un-
ess the stamps are caed for by the propretor or hs agent n person, they
w be sent to hm by ordnary ma, regstered ma, or e press, at the e pense
of the propretor. When the stamps are not caed for n person the propretor
w specfy on Form 27-D the means (ordnary ma, regstered ma, or e -
press) by whch he desres the stamps sent to hm. If the stamps are ordered
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311 tegs. 3, , , 10, 11, 1 , and 29.
sent by ordnary ma, the propretor sha encose wth hs order suffcent post-
age stamps, or a separate remttance to cover the postage. If the stamps are
ordered sent by regstered ma, the propretor sha ncude the postage and
regstry fee and any requred regstry surcharge, as provded by the posta aws
and reguatons. If the remttance s other than cash, the sum to cover the
postage, regstry fee, or surcharge must not be ncuded In the remttance cover-
ng the cost of the stamps. The oca postmaster shoud be consuted reatve
to the amount of the regstry fee and surcharge requred. Stamps forwarded by
e press w be sent coect. ( 3 Stat. 29 as amended. 3 , 36 , 37 , 37 ,
7 as amended; 26 U. S. C. 2 00, 310 . 312 , 3172, 3176, 36 6.)
Sec. 1 2. 7 k. Transfer to Other Premses. propretor operatng other
pants on the same or contguous premses may transfer stamps to such pants
from tme to tme pursuant to pror approva of the dstrct supervsor. When
the acoho pant or bonded warehouse s permanenty dscontnued, or the pro-
pretor has no use for the stamps thereat and the propretor operates other
premses n whch the stamps coud be used, he may transfer such stamps to
such other premses for use thereat pursuant to pror approva of the dstrct
supervsor. If the premses to whch the stamps are to be transferred s ocated
n another supervsory dstrct, the supervsor grantng authorty to transfer the
stamps w advse the dstrct supervsor of the other dstrct so that he may
know that the recevng promses s entted to receve the stamps. The atter
dstrct supervsor w aso nform the Government offcer assgned to the re-
cevng premses of the authorty to receve the stamps. report of a transfers
of stamps must be made on Form t )7, as provded n secton 1 2.6 c. ( 3
Stat. 29 , as amended, 3 , 3( , 37 , 37 , 37 ; 26 U. S. C. 2 00, 310 , 312 , 3172,
317 , 3176.)
Sec. 1S2. 7 1. Redempton ob Dsted Sprts Stamps. Dsted sprts
stamps, for ta pnyment of acoho to be removed n a tank car or tank truck or
by ppene, may be redeemed pursuant to secton 330 , Interna Revenue Code,
whch rends as foows:
R D MPTION OF ST MPS, (a) uthorzaton The Commssoner, sub-
|ect to reguatons prescrbed by the Secretary, may, upon recept of satsfactory
evdence of the facts, make aowance for or redeem such of the stamps, ssued
under authorty of aw, to denote the payment of any nterna revenue ta , as
may have been spoed, destroyed, or rendered useess or unft for the purpose
ntended, or for whch the owner may have no use, or whch through mstake may
have been mpropery or unnecessary used, or where the rates or dutes repre-
sented thereby have been e cessve n amount, pad n error, or n any manner
wrongfuy coected.
(b) Method and Condtons op owance. Such aowance or redemp-
ton may be made, ether by gvng other stamps In eu of the stamps so aowed
for or redeemed, or by refundng the amount or vaue to the owner thereof, de-
ductng therefrom, n case of repayment, the percentage, f any, aowed to the
purchaser thereof; but no aowance or redempton sha be made n any case
unt the stamps so spoed or rendered useess sha have been returned to the
Commssoner, or unt satsfactory proof has been made showng the reason
why the same cannot be returned; or, f so requred by the sad Commssoner,
when the person presentng the same cannot satsfactory trace the hstory of
sad stamps from ther ssuance to the presentaton of hs cam as aforesad.
(c) Tme For Fng Cams. No cams for the redempton of or aowance
for stamps sha be aowed uness presented wthn four years after the purchase
of such stamps from the Government.
(d) Fnaty of Commssoner s Decson. The fndngs of facts n and
the decson of the Commssoner upon the merts of any cam presented under
or authorzed by ths secton sha, n the absence of fraud or mstake n mathe-
matca cacuaton, be fna and not sub|ect to revson by any accountng offcer.
( 3 Stat. 3 , 36 , 37 , 399 ; 26 U. S. C. 310 , 312 , 3176, 330 .)
Sec. 1 2. 7 m. Cam to Coector. Propretors desrng to have dsted
sprts stamps, descrbed n secton 1 2. 7 1, redeemed under the provsons of
secton 330 , I. It. C, must make cam on Form 3 to the coector of nterna
revenue. The stamps, for whch redempton s camed, must be attached to
the cam, and the number and denomnatons thereof must be sted on the
cam or on a sheet of paper attached thereto. Where the stamps have been
destroyed, evdence satsfactory to the Commssoner estabshng such destruc-
ton must accompany the cam. ( 3 Stat. 29 as amended, 3 , 36 , 37 , 37 ,
399; 26 U. S. C. 2 00, 310 , 312 , 3172, 3176, 330 .)
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Regs. 3, , , 10, 11, 1 , and 29. 312
Sec. 1 2. 7 n. Unredeemabe Stamps. Dsted sprts stamps may not be
redeemed whe acoho on whch the stamps can be used n ta payuent, remans
on hand and whe the acoho pant or bonded warehouse remans n a quafed
status uness t s shown that the manner of ta payng acoho thereat s such
that the stamps may not be used. When an acoho pant or bonded warehouse s
dscontnued and stamps reman on hand, such stamps are not redeemabe f the
propretor operates other premses at whch the stamps coud be used. In such
cases the stamps w be transferred to the other premses for use thereat In
accordance wth secton 1 2. 7 k. Notaton of the transfer must be made on
Form 1697 for both premses. ( 3 Stat. 29 as amended, 3 , 36 , 37 , 37 , 399;
26 U. S. C. 2 00, 310 , 312 , 3172, 3176, 330 .)
W OL S L LI UOR D L R S ST MPS FOR T N C RS ND T N TRUC S
Sec. 1S2. 7 o. ppcaton for Stamps, Form 92. Where acoho, ta pad by
use of dsted sprts stamps authorzed by secton S2. 60a, s to be removed
by tank car or tank truck, the propretor w make appcaton to the store-
keeper-gauger on Form 92, propery modfed, for a whoesae quor deaer s
stamp to be aff ed to such contaner. Form 92 w be prepared n quadrupcate
for ntradstrct shpments and n quntupcate for nterdstrct shpments. U
nformaton ndcated by the headngs of the varous coumns and nes on the
form and the nstructons prnted thereon or ssued n respect thereto, and as
requred by ths part, sha be furnshed. copes of the Form 92 w be
submtted to the storekeeper-ganger n charge of the premses. If the acoho
s correcty descrbed on Form 92 and has been propery ta pad, the storekeeper-
gauger w sgn a copes and return the Form 92 to the propretor. The pro-
pretor w e ecute hs certfcate on Form 92, enterng theren, n approprate
coumns, the name of the owner of the car or truck and the car or truck number,
the net weght, proof, and proof gaons of the acoho as shown on the Form
1 0 coverng ta payment, and the statement Consgned to: foowed by the
name and address of the consgnee. When appcaton s beng made for a
whoesae quor deaer s stamp for acoho whch w be shpped to a ta pad
bottng house or rectfyng pant, there sha aso be entered on the Form 92
a notaton showng the matera from whch the acoho was produced, such as,
coho gran, coho cane, coho frut, coho dsted from
gran, coho dsted from cane, or coho dsted from frut.
copes of Form 92 w be gven to the storekeeper-ganger n charge. ( 3 Stat.
29 as amended, 337, 3 , 360, 30 , 37 , 37 , 37 ; 26 U. S. C. 2 00, 3101, 310 , 3112,
312 , 3172, 317 , 3170.)
Skc 1 2. 7 p. Issuance of Whoesae Lquor Deaer s Stamps. Upon re-
cept of Form 92 wth the appcaton for the whoesae quor deaer s stamps duy
e ecuted, the storekeeper-ganger w ssue a whoesae quor deaer s stamp,
and enter the sera number thereof on a copes of Form 1 0 and n part
on a copes of Form 92. When ssung the stamps, the storekeeper-gauger w
enter on each a the nformaton caed for and sgn each stamp n the space
provded therefor, usng ony such nk as w nether fade nor bur. ( 3 Stat.
3 7, 3 , 360, 30 , 37 ; 20 U. S. C. 3101, 310 , 3112, 312 , 3176.)
Sec. 1 2. 7 q. Dsposton of Form 92. When the whoesae quor deaer s
stamp has been ssued and the sera number thereof recorded on Form 92,
the storekeeper-gauger sha return two copes of Form 92 to the propretor
wth the stamp, forward one copy of the form to the dstrct supervsor and
retan one copy. The storekeeper-guater sha pace hs retaned copy of Form
92 n a permanent e as authorty for ssuance of the stamp. The propretor
w forward one copy of Form 92 to the vendee. Where the vendee s ocated
n a dfferent supervsory dstrct, the storekeeper-gauger w send the remanng
copy of Form 92 to the supervsor of the dstrct n whch the vendee s ocated.
( 3 Stat. 3 7, 3 , 360, 30 , 37 ; 26 U. S C. 3101, 310 , 3112, 312 , 3170.)
Sec 1 2. 7 r. Stamp Stub. The storekeeper-gauger sha enter on the stub
connected wth each whoesae quor deaer s stamp data smar to that
entered on the stamp, to preserve a perfect record of the detached stamp. ( 3
Stat. 3 7, 3 , 360, 30 , 37 ; 26 U. S. C. 3101, 310 , 3112, 312 , 3176.)
Sec 1 2. 7 s. Whoesae I-quob Deaer s Stamp ooks. Whoesae quor
deaer s stamps w be furnshed by coectors to dstrct supervsors upon
request. Dstrct supervsors w suppy storekeeper-gaugers n charge of
Industra acoho pants or bonded warehouses where such stamps are used
wth such quanttes of stamps as may be requred. When a the stamps In
a book have been ssued the storekeeper-gauger n charge w return the stub
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313 Regs. 3, , , 10, 11, 1 , and 29.
book to the dstrct supervsor. ( 3 Stat. 3 7, 3 , 360, 30 , 37 ; 26 U. S. C.
3101,310 ,3112,312 ,3176.)
Sec. 1 2. 7 t. Record and Report of Whoesae Lquor Deaer s Stamps.
Storekeeper-gaugers havng custody of whoesae quor deaer s stamps at
Industra acoho pants or bonded warehouses w keep a record of such
stamps receved and used on part 1 of Form 11 , propery modfed for the pur-
pose, and as requred by nstructons on the form or as ssued n respect thereto.
The record w be kept n bound form avaabe for nspecton by other Gov-
ernment offcers. The storekeeper-gauger w prepare hs monthy report on
part 2 of Form 11 , propery modfed and n dupcate, retan one copy and
furnsh one copy to the dstrct supervsor. ( 3 Stat. 3 7, 3 , 360, 30 , 37 ;
20 U. S. C. 3101, 310 , 3112, 312 , 3176.)
FORM 1 0

Sec. 1 2.6 3a. ppcaton for Wthdrawa. When the propretor desres
to wthdraw acoho from the bonded warehouse for any awfu purpose and
has comped wth a the requrements of the aw and the reguatons n ths
part respectng the partcuar wthdrawa, he w make appcaton on the back
of each copy of Form 1 0, coverng the wthdrawa, to the storekeeper-gauger
n charge for permsson to wthdraw the acoho. If wthdrawa s to be
made upon ta payment, the propretor sha present to the storekeeper-gauger
the prescrbed ta pad stamps, dsted sprts stamps, or certfcate of ta -
payment coverng the acoho to he wthdrawn. If the acoho s to be trans-
ferred n bond to another bonded warehouse or shpped to a denaturng pant
or wthdrawn for e port or other awfu ta -free purpose, the propretor w
present to the storekeeper-ganger the necessary permt authorzng such wth-
drawa. The storekeeper-gauger w e amne the ta pad stamps, dsted
sprts stamps, certfcate of ta payment, or the permt authorzng transfer
n bond or ta -free wthdrawa, and f he fnds that the ta has been pad or,
n the case of transfer n bond or ta -free wthdrawa, that proper wthdrawa
permt s hed by the propretor, the storekeeper-gauger w sgn the author-
zaton on Form 1 0 for the wthdrawa of the acoho. ( 3 Stat. 3 7, 3 ,
360, 36 , 373, 37 , 37 ; 26 U. S. C. 3101, 310 , 3112. 312 , 3171, 3172, 3170.)
R CORDS ND R PORTS OF PROPRI TOR

Sec. 1 2.6 c. Dsted Sprts Stamp Report, Form 1697. very propretor
of an ndustra acoho pant or bonded warehouse who ta pays acoho by
use of dsted sprts stamps sha make a report on Form 1697, propery
modfed, of a dsted sprts stamps receved and used at hs acoho pant
or bonded warehouse. ntres w be made thereon and the report submtted
n accordance wth the headngs of the varous nes and coumns on the form
and the nstructons prnted thereon or ssued n respect thereto and as re-
qured by ths part. When dsted sprts stamps are surrendered for redemp-
ton, n accordance wth sectons 1 2. 7 1 and 1 2. 7 m, or are transferred to,
or receved from other premses operated by the propretor, as authorzed by
secton 1 2. 7 k. a report thereof must be made on Form 1697, gvng the reason
for such surrender, transfer, or recept, the date thereof, and the denomnatons
of the stamps surrendered, transferred, or receved, and, n cases of transfer or
recept, the name, regstry number, and ocaton of the premses to whch the
stamps were transferred or from whch they were receved. ( 3 Stat. 29 as
amended, 3 , 360, 30 , 37 , 37 : 26 U. S. C. 2 00, 310 , 3112. 312 , 3172. 3176.)
. Reguatons (26 CFR, part 1 3; 1 F. R. 33 ), Producton
of Dsted Sprts, as amended, are amended as foows:
(a) Sectons 1 3.301, 1 3. 6, 1 3. 9, 1 3. 0, 1 3. 1, 1 3. 2,
1 3. 3 and 1 3. are amended;
(b) Sectons 1 1. 6a. 1 3. a, 1 3. a, 1 3. b, 1 3. c,
1 3. d, 1 3. e, 1 3. f, 1 3. g, 1 3. h, 1 3. , 1 3. ,
1 3. k, 1 3. 1. 1 3. m and 1 3. n are added; and
(c) Secton 1 3. 2a s revoked.
2 2160 3 21
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Regs. 3, , , 10, 11, 1 , and 29. 31
Subpart N cton, by Dstrct Supervsor
ORIGIN L ST LIS M NT

Sec. 1 3.301. Regstry Numbers. Regstered dsteres w be numbered
seray n the order of ther estabshment. separate seres w be used for
each State. Regstry numbers heretofore assgned w be retaned, and new
dsteres w be assgned numbers n sequence thereto. Regstry numbers
prevousy assgned to dscontnued dsteres w not be reassgned to other
dsteres. In the ease of a successor takng over the dstery, the same reg-
stry number w be retaned. In the case of a change n ocaton of the ds-
tery wthn the same State, the same regstry number may be retaned. ( 3
Stat. 37 ; 20 O. S. C. 3176.)
Subpart W Ta payment, Remova, and Transfer of Dsted Sprts From
Cstern Room

ta payment for remova by ppene ob n tank cars or tank trucks
Sec. 1 3. 6. ppcaton, Form 179. Whenever the dster desres to ta -
pay and remove dsted sprts drect from the cstern room by approved ppe-
nes to contguous premses, or n tank cars or tank trucks, he sha e ecute
appcaton therefor on Form 179, n quadrupcate. The dster sha state,
n addton to other appcabe data on the form, the appro mate quantty to
be wthdrawn and whether such remova w be by ppene, or by tank car
or tank truck. If the sprts are to be removed n a tank car or tank truck,
the number thereof, and the name or symbos of the owner, sha aso be stated
on the Form 179. copes of Form 179 sha be devered to the storekeeper-
ganger, whereupon such sprts w be run nto a weghng tank and gauged
for remova. The storekeeper-gauger sha enter the detas of the gauge on
Form 1 20, n quntupcate. The proof at whch the sprts were dsted,
and n the case of tank car or tank truck shpments, the number and name or
symbos of the owner of the tank car or tank truck, sha be noted on Form
1 20 by the storekeeper-gauger. The storekeeper-gauger w e ecute hs report
on each copy of Form 179 and w return a copes thereof, wth four copes
of Form 1 20 attached, to the dster, who w enter n the space provded
therefor on each copy of Form 179, the descrpton of the sprts gauged. ( 3
Stat. 29 as amended, 33 as amended, 37 , 92 ; 26 U. S. C. 2S00, 2 3, 3176,
017.)
Sec. 1 3. 0a. Methods of Ta payment. The ta on dsted sprts to
be removed by ppene to a contguous rectfyng pant or ta pad bottng
house or to be removed n a tank car or tank truck w be pad by the ds-
ter (a) by use of a certfcate of ta payment, Form 1 9 , ssued pursuant
to appcaton on Form 1 9 , or (6) by use of dsted sprts stamps pre-
scrbed by secton 1 3. a. Where dsted sprts whch are to be removed
by tank car or tank truck are ta pad by use of dsted sprts stamps, a whoe-
sae quor deaer s stamp w be aff ed to the tank car or tank truck. Where
ta payment Is by use of a certfcate of ta payment, Form 1 9 , the certfcate
w be procured and used n accordance wth sectons 1S3. 7 and 1 3. and
sectons 1 3. 9-1 3. 3. Where ta payment s by use of dsted sprts stamps,
they w be procured n accordance wth sectons 1 3. a-1 3. c and used
n accordance wth secton 1 3. a. Where dsted sprts stamps are used
for ta payment of dsted sprts removed by tank cur or tank truck, a whoe-
sae quor deaer s stamp for aff ng thereto w be procured n accordance
wth sectons 1 3. and 1 3. . ( 3 Stat. 29 as amended, 33 as amended,
37 , 37 ; 26 U. S. C. 2 00, 2 3, 3172, 3170.)
Sec. 1 3. a. Use of Dsted Sprts Stamps. Where sprts arc to be
ta pad by use of dsted sprts stamps, the dster, upon recept of the copes
of Forms 179 and 1 20 from the storekeeper-gauger pursuant to secton 1 3. 6,
w cance the necessary number of stamps n the e act amount of the ta due
by perforaton, as prescrbed heren, or by egby wrtng or stampng on each
stamp wth ndebe (Inda) nk, hs name, the regstry number of the dstery,
and the sera number of Form 179; for e ampe, ohn Doe Dstng Company,
Regstered Dstery No. 63, New ersey, Form 179 Sera Number
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31 Regs. 3, , , 10, 11, 1 , and 29.
Pror to use In ta payment, the dster, f he so desres, may partay pre-
eance the stamps to the e tent of showng hs name and regstry numher ony.
The sera number of the Form 179 must not be entered on the stamp n ad-
vance of actua use n ta payment. The dstrct supervsor may, n hs dscre-
ton, approve a sutabe abbrevaton of the requred nformaton for cancea-
ton, Incudng the ntas for the name of the dster, f adequate for
dentfcaton; for e ampe, . D. Dst. Co. RD 63-N -179 /N The
dster s canceaton must be made on the ower porton of the stamp beow
the fgures and words ndcatng the denomnaton of the stamp. If the dst-
er s canceaton Is made by perforaton, each etter and fgure of the cancea-
ton must be not ess than one-fourth of an nch n heght and of proportonate
wdth and sutaby spaced for egbty and dstnctness, and must be ceary
and sharpy outned ether ( ) t y perforaton through the substance of the
stamp, and not merey puncturng t, each perforaton to be not ess than one
thrty-second of an nch n wdth or dameter; or (6) by perforatons In the form
of ncsons through the stamp of at east one thrty-second of an nch n wdth,
cuttng out the form of the etters and fgures from the substance of the stamp,
whch etters and fgures must be of the sze, spacng, and dstnctness as above
specfed. The dster w then attach the canceed dsted sprts stamps
to one copy of Form 179 and submt a copes of Forms 179 and 1 20 to the
Government offcer. The Government offcer, after determnng that the can-
ceed stamps are In the proper amount of the ta shown due on the Form 179,
w then further cance and deface the stamps by cuttng a hoe one-haf nch
square n the upper rght-hand corner, and whoy wthn the border of each
stamp and w e ecute a certfcate on a copes of Form 179 (usng the cer-
tfcate of the coector, propery modfed) certfyng to the recept and further
canceaton of stamps n the amount of ta due. The sera number of the
Form 179 w be entered on Form 1 20 n the coumn provded for the knd and
sera number of the stamp as an ndcaton that ta payment was by use of
dsted sprts stamps. The canceed dsted sprts stamps w be securey
attached to a copy of Form 179 by means of a stape, eyeet, or smar devce.
Such copy of Form 179, and the accompanyng copy of Form 1 20. w be
attached to the board on the weghng tank and reman thereon unt the sprts
covered by such stamps have been removed. Where remova s to be by tank
car or tank truck, the dster w procure a whoesae quor deaer s stamp to
be aff ed thereto n accordance wth sectons 1 3. 1 and 1 3. . Forms
179 and 1 20 w be dsposed of n accordance wth secton 1 3. 2 or secton
1 3. 3. as the case may be. ( 3 Stat. 29 as amended, 33 as amended, 37 ,
37 , 37 , 39 ; 20 U. S. C. 2 00, 2 3, 3172, 317 , 3176, 3300.)
Sec. 1 3. 9. Route oard. Tank cars and tank trucks used for the trans-
portaton of ta pad dsted sprts must be equpped wth a route board at
east 10 by 12 nches n sze, to whch Form 1 9 or a whoesae quor deaer s
stamp can be attached. Such board sha be of substanta matera and sha
be aff ed permanenty and securey to the tank car or tank truck by round-
headed or carrage bots, nutted and rveted, battered or weded. ( 3 Stat. 33
as amended. 37 ; 2( U. S. C. 2 3, 3170.)
Sec. 1 3. 0. of Ladno. The dster sha ncorporate n the b of
adng, f any, a descrpton of Form 1 9 , as foows:
Form 1 9 , Sera No Owner and No. of Car (or
Truck) endor
ddress
endee ddress
Where no b of adng s ssued, as n the case of transfer of a tank car between
pants by swtchng arrangements, the dster sha ncorporate n Form 1 20
such descrpton of Form 1 9 . Where a whoesae quor deaer s stamp s
used n eu of Form 1 9 , the dster sha ncorporate n the b of adng, If
any, a descrpton of the stamp, showng the knd of stamp and the sera
number. ( 3 Stat. 33 as amended, 37 ; 26 U. S. C. 2S 3, 3176.)
Sec. 1 3. 1. Storkkeeper-G auger s erfcaton. If ta payment s by means
of a certfcate of ta payment (Form 1 9 ). the dster sha gve the certfcate,
the b of adng, f any, and a copes of Form 179 and Form 1 20 to the store-
keeper-ganger. The storekeeper-gauger w transcrbe the sera number of the
certfcate, Form 1 9 , to hs retaned copy of Form 1 20 and w verfy the con-
tents of the weghng tank and the descrpton of Form 1 9 n the b or adng or
on Form 1 20, as the case may be, and w date and sgn the certfcate. Form 1 9 ,
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Regs. 3, , , 10, 11, 1 , and 29. 316
In the space provded therefor. The certfcate must be attached to a board on
the weghng tank. If ta payment s by means of dsted sprts stamps
and evdenced by a whoesae quor deaer s stamp (tank car or tank truck
removas ony), the dster sha gve the b of adng, f any, to the store-
keeper-gauger at the dstery who w verfy the descrpton of the whoesae
quor deaer s stamp on the b of adng, f any. ( 3 Stat. 29 as amended,
33 as amended, 37 ; 26 U. S. C. 2 00, 2 3, 3176.)
R L S OF SPIRITS FOR TR NSF R
Sec. 1 3. 2. y Ppene to Contguous Premses. When the certfcate of
ta payment, Form 1 9 , has been aff ed to the weghng tank, n the case of
ppene transfers to contguous premses, t w be canceed n the same manner
as the ta pad stamp on a package. If ta payment has been by means of
dsted sprts stamps, n eu of Form 1 9 , the copy of Form 179 to whch
the canceed stamps are attached and the accompanyng Form 1 20 sha be
aff ed to the weghng tank. The storekecper-gauger w unock the outet vave
and permt the dster to transfer the sprts by ppene to the contguous
premses. The sprts sha be transferred ony under the mmedate super-
vson of the storekeeper-ganger who, after reease of the sprts, w e -cute
hs statement of the date of wthdrawa on the three copes of Form 179, forward
one copy of each of Form 179 and Form 1 20 wth the canceed Form 1 9 ,
or the canceed dsted sprts stamps, as the ease may be, attached thereto,
to the dstrct supervsor, retan one copy of Form 179 and Form 1 20. and
dever one copy of Form 179 and two copes of Form 1 20 to the dster.
The dster w dever mmedatey, one copy of Form 1 20 to the propretor
of the contguous estabshment. ( 3 Stat. 29 as amended. 33 as amended.
37 ; 2G C. S. C. 2S00, 2 S3, 3170.)
Sec. 1 3. 3. y Tank Car oh Tank Truck. When sprts are to be trans-
ferred to a tank car or tank truck for shpment the storekeeper-gauger, after
the certfcate of ta payment, or the Form 179 wth the dsted sprts stamps
attached thereto, has been aff ed to the weghng tank, sha unock the outet
vave nnd permt the sprts to be transferred to the tank car or tank track.
The sprts sha be transferred ony under the mmedate supervson of the
storekeeper-gauger. If a certfcate of ta payment, Form 1 9 , s used, the
dster, upon de| st of the sprts n the tank car or tank truck, w remove
the certfcate from the weghng tank and aff t securey to the route board
on the tank car or tank truck, whereupon t w be canceed n the same manner
as the ta pad stamp on a package and then covered wth a coatng of transparent
sheac, aquer, or varnsh. If dsted sprts stamps are used and a whoe-
sae quor deaer s stamp ssued to evdence ta payment, the whoesae quor
deaer s stamp sha be smary aff ed to the tank car or tank truck, canceed
and protected. The storekeeper-gauger w verfy the contents of the tank car
or tank truck, reease same for shpment, e ecute hs statement of the date of
wthdrawa on the three copes of Form 179, and note on a copes of Form 1 20
the date of the reease. When the tank car or tank truck s reeased, the
storekeeper-gauger w forward one copy each of Form 179 and Form 1 20 to
the dstrct supervsor, retan one copy of each form, and dever one copy of
Form 179 and two copes of Form 1 20 together wth the b of adng, If any,
to the dster. Where dsted sprts stamps have been used to ta pay the
sprts, the copy of Form 179 to whch the canceed stamps are attached w be
forwarded to the dstrct supervsor. The dster w forward mmedatey
one copy of Form 1 20 to the vendee. ( 3 Stat. 29S as amended, 33 as amended,
37 ; 20 U. S. C. 2 00, 2 S3, 3176.)
PROC DUR W N T N C R OR T N TRUC IS MPTI D
Sec 1 3. . Requrements. When the vendee receves ta pad dsted
sprts n a tank car or tank truck, he sha, at the tme the car or truck s emp-
ted, dspose of the certfcate of ta payment, Form 1 9 , or whoesae quor
deaer s stamp, as the case may be, n accordance wth the procedure prescrbed
by Reguatons 11 (26 CFR, part 1 9), Reguatons 1 (26 CFR, part 190) or
Reguatons 29 (26 CFR, part 197). The dstrct supervsor w nvestgate
any dscrepancy whch may be found respectng the shpment n accordance wth
such reguatons. ( 3 Stat 33 as amended, 37 ; 26 U. S. C. 2 3,3176.)
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317 Regs. 3, , , 10,11, 1 , and 29.
DISTILL D SPIRITS ST MPS FOR R MO LS T PIP LIN S, T N C RS, ND T N TRUC S
Sec. 1 3. a. Dsted Sprts cse Ta Stamps. The ta on dsted
sprts removed In tank cars or tank trucks, or by ppene, may be pad by ds-
ted sprts e cse ta stamps (seres of 19 0). Such stamps may be purchased
n varous denomnatons by the propretor from the coector of nterna revenue
of the dstrct In whch the dstery s ocated. The stamps may be purchased
n advance of actua needs, n order to be ready avaabe when needed. The
stamps may not be purchased by one propretor from another, nor may they,
e cept n cases of emergency, be purchased from coectors of other dstrcts.
Dsters sha not se or transfer stamps e cept that they may (a) transfer such
stamps to other premses operated by themseves as provded n secton 1 3. d
pursuant to the pror approva of the dstrct supervsor; or (h) return such
stamps for redempton n accordance wth secton 1 3. e. Dsted sprts
stamps for ta payment of dsted sprts as authorzed by ths part, used or
unused may not be purchased, sod, or possessed, e cept as specfcay author-
zed by ths part. ( 3 Stat. 29 as amended, 33 as amended, 37 , 37 , 37 , 39S,
399; 26 U. S. C. 2 00, 2 S3, 3172, 317 , 3176, 3300. 330 .)
Sec. 1 3. b. Form 27-D. Wth each purchase of stamps the dster w
submt to the coector Form 27-D, n trpcate, propery fed out. The co-
ector w stamp the date of sae on a copes of Form 27-D, return one copy
to the dster wth the stamps and send one copy to the approprate dstrct
w refuse to se stamps when such form Is not submtted. ( 3 Stat. 29 as
amended. 37 . 37 ; 26 U. S. C. 2 00, 3172, 3176.)
Sec. 1 3. c. Remttance ; Devery. orders for stamps must be accom-
paned by proper remttance n a sum equa to the vaue of the stamps. Uness
the stamps are caed for by the dster or hs agent n person, they w be sent
to hm by ordnary ma, regstered ma, or e press, at the e pense of the ds-
ter. When the stamps are not caed for n person the dster w specfy on
Form 27-D the means (ordnary ma, regstered ma, or e press) by whch he
desres the stamps sent to hm. If the stamps are ordered sent by ordnary ma,
the dster sha encose wth hs order suffcent postage stamps, or a separate
remttance to cover the postage. If the stamps are ordered sent by regstered
ma, the dster sha ncude the postage and regstry fee and any requred
regstry surcharge, as provded by the posta aws and reguatons. If the
remttance s other than cash the sum to cover the postage, regstry fee, or sur-
charge must not be ncuded n the remttance coverng the cost of the stamps.
The oca postmaster shoud be consuted reatve to the amount of the regstry
fee and surcharge requred. Stamps forwarded by e press w be sent coect.
( 3 Stat. 20 as amended, 37 , 7 as amended; 26 U. S. C. 2 00, 3172, 36 6.)
Sec 1 3. d. Transfer to Other Premses. propretor operatng other
the dstery s permanenty dscontnued, or the propretor has no use for the
stamps thereat and the propretor operates other premses n whch the stamps
coud be used, he may transfer such stamps to such other premses for use thereat
pursuant to pror approva of the dstrct supervsor. If the premses to
whch the stamps are to be transferred s ocated n another supervsory dstrct,
the supervsor grantng authorty to transfer the stamps w advse the dstrct
supervsor of the other dstrct so that he may know that the recevng premses
s entted to receve the stamps. The atter dstrct supervsor w aso nform
the Government offcer assgned to the recevng premses of the authorty to
receve the stamps. report of a transfers of stamps must be made on Form
1697, as provded n secton 1 3. h. ( 3 Stat. 29S as amended, 37 , 37 ; 26
D. S. C. 2 00, 3172, 317G.)
Sec. 1 3. e. Redempton of Dsted Sprts Stamps. Dsted sprts
stamps for ta payment of dsted sprts to be removed by ppene or n tank
cars or tank trucks may be redeemed pursuant to secton 330 , Interna Revenue
Code, whch reads as foows:
R D MPTION OF ST MFS. fa) uthorzaton. The Commssoner,
sub|ect to reguatons prescrbed by the Secretary, may, upon recept of sats-
factory evdence of the facts, make aowance for or redeem such of the stamps,
Issued under authorty of aw, to denote the payment of any nterna revenue
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Regs. 3, , , 10, 11, 1 , and 29.) 31
ta , as may have been spoed, destroyed, or rendered useess or unft for the
purpose ntended, or for whch the owner may have no use, or whch through
mstake may have been mpropery or unnecessary used, or where the rates or
dutes represented thereby have been e cessve n amount, pad n error, or n
any manner wrongfuy coected.
(b) Method and Condtons of owance. Such aowance or redemp-
ton may be made, ether by gvng other stamps n eu of the stamps so aowed
for or redeemed, or by refundng the amount or vaue to the owner thereof,
deductng therefrom, n case of repayment, the percentage, f any, aowed to
the purchaser thereof; but no aowance or redempton sha be made n any
case unt the stamps so spoed or rendered useess sha have been returned to
the Commssoner, or unt satsfactory proof has been made showng the
reason why the same cannot be returned; or, f so requred by the sad Com-
mssoner, when the person presentng the same cannot satsfactory trace
the hstory of sad stamps from ther ssuance to the presentaton of hs cam as
aforesad.
(c) Tme for Fng Cams. No cams for the redempton of or aow-
ance for stamps sha be aowed uness presented wthn four years after the
purchase of such stamps from the Government.
(d) Fnaty of Commssoner s Decson. The fndngs of facts n and
the decson of the Commssoner upon the merts of any cam presented under
or authorzed by ths secton sha, n the absence of fraud or mstake n mathe-
( 3 Stat. 37 , 399 ; 26 U. S. C. 3176, 330- .)
Skc. 1 3. f. Cam to Coector. Dsters desrng to have dsted
sprts stamps descrbed n secton 1 3. e redeemed under the provsons of
secton 330 , I. R. C, must make cam on Form 3 to the coector of nterna
revenue. The stamps, for whch redempton s camed, must be attached to
the cam, and the number and denomnatons thereof must be sted on the
cam or on a sheet of paper attached thereto. Where the stamps have been
destroyed, evdence satsfactory to the Commssoner estabshng such de-
structon must accompany the cam. ( 3 Stat. 29 as amended, 37 , 37 , 399;
26 U. S. C. 2 00, 3172, 3176, 330 .)
Sec. 1 3. g. Unredeemabe Stamps. Dsted sprts stamps may not be
redeemed whe dsted sprts on whch the stamps can be used n ta pay-
ment, reman on hand and whe the dstery remans n a quafed status
uness t s shown that the manner of ta payng sprts thereat s such that
the stamps may not be used. When a dstery s dscontnued and stamps
reman on hand, such stamps are not redeemabe f the propretor operates
other premses at whch the stamps coud be used. In such cases the stamps
w be transferred to the other premses for use thereat n accordance wth
secton 1 3. d. Notaton of the transfer must be made on Form 1697 for
both premses. ( 3 Stat. 29 as amended, 37 , 37 , 399; 26 U. S. C. 2 00, 3172.
3176. 330 .)
Skc. 1 3. h. Dsted Sprts Stamp Report, Form 1697. The dster
sha make a report on Form 1697, propery modfed, of a dsted sprts
stamps receved and used at hs dstery. ntres w be made thereon and
the report submtted n accordance wth the headngs of the varous nes and
coumns on the form and tte nstructons prnted thereon or ssued n respect
thereto and as requred by ths part. When dsted sprts stamps are sur-
rendered for redempton, n accordance wth sectons 1 3. e and 1 3. f,
or are transferred to, or receved from other premses operated by the dster,
as authorzed n secton 1 3. d, a report thereof must be made on Form 1697,
gvng the reason for such surrender, transfer, or recept, the date thereof, and
the denomnatons of the stamps surrendered, transferred, or receved, and,
n cases of transfer or recept, the name, regstry number, and ocaton of the
premses to whch the stamps were transferred or from whch they were receved.
( 3 Stat. 29 as amended, 33 as amended, 37 , 37 ; 26 U. S. C. 2S00, 2 3,
3172, 3170.)
whoesae quor deaer s stamps for tank cars and tank trucks
Sec. 1 3. 1. ppcatons for Stamps, Form 92. Where dsted sprts, ta -
pad by use of dsted sprts stamps authorzed by secton 1 3. 6a, are to be
removed by tank car or tank truck, the dster w make appcaton to the
Storekeeper-gauger on Form 92, propery modfed, for a whoesae quor deaer s
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319 Regs. 3, , , 10, 11, 1 , and 29.
stamp to be aff ed to such contaner. Form 92 w be prepared n quadrup-
cate for ntradstrct shpments and n quntupcnte for nterdstrct shpments.
nformaton ndcated by the headngs of the varous coumns and nes on
the form and the Instructons prnted thereon or ssued n respect thereto, and
as requred by ths part, sha be furnshed. copes of the Form 92 w
be submtted to the storekeeper-gauger n charge of the dstery. If the
sprts are correcty descrbed on Form 92 and have been propery ta pad,
the storekeeper-gauger w sgn a copes and return the Form 92 to the ds-
ter. The dster w e ecute hs certfcate on Form 92, enterng theren,
n approprate coumns, the knd of sprts, the name of the owner of the car
or truck and the car or truck number, the net weght, proof, and proof gaons
of the sprts as shown on the Form 1 20 coverng ta payment, and the state-
ment Consgned to: foowed by the name and address of the consgnee.
copes of Form 92 w be gven to the storekeeper-gauger n charge. ( 3 Stat.
29 as amended, 301, 33 as amended, 37 , 37 ; 20 U. S. C. 2 00, 2S02, 2 3,
3172. 3170.)
Sec. 1 3. . Issuance of Stamps. Upon recept of Form 92 wth the app-
caton for the whoesae quor deaer s stamp duy e ecuted, the storekeeper-
gauger n charge w ssue a whoesae quor deaer s stamp for the tank car
or tank truck, as the case may be, and enter the sera number thereof on a
copes of Form 1D20 and n part on a copes of Form 92. When ssung
the stamps, the storekeeper-gauger w enter on each a the nformaton caed
for and sgn each stamp n the space provded therefor, usng ony such nk
as w nether fade nor bur. ( 3 Stat. 301, 33 as amended, 37 ; 20 U. S. C.
2 02. 2 . 3170.)
Sec. 1 3. k. Dsposton of Form 92. When the whoesae quor deaer s
stamp has been ssued and the sera number thereof recorded on Form 92, the
storekeeper-gauger sha return two copes of Form 92 to the dster wth the
stamp, forward one copy of the form to the dstrct supervsor and retan one
copy. The storekeeper-gauger sha pace hs retaned copy n a permanent
fe as authorty for ssuance of the stamp. The dster w forward one
copy of Form 92 to the vendee. Where the vendee Is ocated n a dfferent
supervsory dstrct, the storekeeper-gauger w send the remanng copy of
Form 92 to the supervsor of the dstrct n whch the vendee s ocated. ( 3
Stat. 301, 33 as amended, 37 ; 26 U. S. C. 2 02, 2 3, 3170.)
Sec. 1 3. 1. Stamp Stuh. The storekeeper-gauger sha enter on the stub
connected wth each whoesae quor deaer s stamp data smar to that
entered on the stamp, to preserve a perfect record of the detached stamp.
( 3 Stat. 301, 33 as amended, 37 ; 20 U. S. C. 2 02, 2 3, 3170.)
Sec. 1 3. m. Whoesae Lquor Deaer s Stamp ooks. Whoesae
quor deaer s stamps w be furnshed by coectors to dstrct supervsors
upon request. Dstrct supervsors w suppy storekeeper-gangers n charge
of regstered dsteres where such stamps are used wth such quanttes of
stamps as may be requred. When a the stamps n a book have been ssued
the storekeeper-gauger n charge w return the stub book to the dstrct super-
vsor. ( 3 Stat. 301, 33 as amended, 37 ; 26 U. S. C. 2S02, 2 3, 3176.)
Sec. 1 3. n. Record and Report of Whoesae Lquor Deaer s Stamps.
Storekeeper-gangers havng custody of whoesae quor deaer s stamps at
regstered dsteres w keep a record of such stamps receved and used on
part 1 of Form 11 , propery modfed for the purpose, and as requred by
nstructons on the form and as ssued n respect thereto. The record w be
kept n bound form avaabe for nspecton by other Government offcers.
The storekeeper-gauger w prepare hs monthy report on part 2 of Form 11 ,
propery modfed and n dupcate, retan one copv and furnsh one copv to the
dstrct supervsor. ( 3 Stat. 301, 33 as amended, 37 ; 26 U. S. C. 2 02, 2 3,
3170.)
. Reguatons (26 CFR, part 1 ; 1 F. R. 2), Producton
of randy, as amended, are amended as feows:
(a) Sectons 1 . 1, 1 .33 , 1 . 7, 1 . 90, 1 . 91, 1 . 92,
1 . 93 and 1 . 9 are amended;
(b) Sectons 1 . 7a, 1 . 9a, 1 . 9 a, 1 . 9 b, 1 . 9 c,
1 . 9 d, 1 . 9 e, 1 . 9 f, 1 . 9 g, 1 . 9 h, 1 . 9 , 1 . 9 |,
1 . 9 k, 1 . 9 1, 1 . 9 m and 1 . 9 n, are added; and
(c) Secton 1 . 93a s revoked.
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Regs. 3, , ,10,11, 1 , and 29. 320
Subpart C empton of Frut Dsters From Certan Provsons of Law
MPTIONS

Sec. 1 . 1. Sectons 2 7 (a) and 2 3, I. R. C Frut dsters are e -
empted from the provsons of sectons 2 7 (a) and 2 3, I. R. C, to the e tent
that brandy of any desred proof may be drawn from recevng tanks and (a)
removed from the dstery n packages or by ppe ne or n tank ears or tank
trucks n the manner prescrbed n ths part, or (b) stored n the brandy depost
room of the dstery temporary as provded n ths part. ( 3 Stat. 316 as
amended, 37 ; 26 U. S. C. 2 2 , 3176.)
Subpart O cton by Dstrct Supervsor

Sec 1 .33 . Regstry Numbers. Frut dsteres w be numbered seray
n the order of ther estabshment. separate seres w be used for each State.
Regstry numbers heretofore assgned w be retaned, and new dsteres w
be assgned numbers n sequence thereto. Regstry numbers prevousy assgned
to dscontnued dsteres w not be reassgned to other dsteres. In the
case of a successor takng over the dstery, the same regstry number w be
retaned. In the case of a change n ocaton of the dstery wthn the same
State, the same regstry number may be retaned. ( 3 Stat. 37 ; 26 U. S. C.
3176.)
Subpart Ta payment, Remova and Transfer of randy From Dstery

ta payment for remova by ppene or n tank cars or tank trucks
Sec 1 . 7. ppcaton Form 179. Whenever the dster desres to ta pay
and remove brandy from the dstery by approved ppenes to contguous
premses, or n tank cars or tank trucks, he sha e ecute appcaton therefor on
Form 179, n quadrupcate. The dster sha state, n addton to other ap-
pcabe data on the form, the appro mate quantty to be wthdrawn and whether
such remova w be by ppene, tank ear or tank truck. If the brandy s to be
removed n a tank car or tank truck, the number thereof, and the name or symbos
of the owner, sha aso be stated on the Form 179. copes of Form 179 sha
be devered to the storekeeper-gauger, whereupon such brandy w be run Into a
weghng tank and gauged for remova. The storekeeper-gauger sha enter the
detas of the gauge on Form 1 20, n quntupeate. The proof at whch the
brandy was dsted, and n the case of tank car or tank truck shpments, the
number and name or symbos of the owner of the tank car or tank truck, sha
be noted on Form 1 20 by the storekeeper-gauger. The storekeeper-gauger w
e ecute hs report on each copy of Form 179 and w return a copes thereof,
wth four copes of Form 1 20 attached, to the dster, who w enter n the
space provded therefor on each copy of Form 179, the descrpton of the brandy
gauged. ( 3 Stat. 29 as amended, 333, 33 as amended, 37 , 92 ; 26 U. S. C.
2 00, 2 7 , 2SN3, 3176, 017.)
Sec 1 . 7a. Methods of Ta payment. The ta on brandy to be removed
by ppene to a contguous rectfyng pant or ta pad bottng house or to be
removed n a tank car or tank truck w be pad by the dster (a) by use of
a certfcate of ta payment, Form 1 9 , ssued pursuant to appcaton on Form
1 9 , or (6) by use of dsted sprts stamps prescrbed by secton 1 . 9 a.
Where brandy whch s to be removed by tank car or tank truck s ta pad by
use of dsted sprts stamps, a whoesae quor deaer s stamp w be aff ed
to the tank car or tank truck. Where ta payment s by use of a certfcate of
ta payment, Form 1 9 , the certfcate w be procured and used n accordance
wth sectons 1 . , 1S . 9 and 1 . 90-1 . 9 . Where ta payment s by use
of dsted sprts stamps, they w be procured n accordance wth sectons
1 . 9 a-1 . 9 c and used n accordance wth secton 1 . 9a. Where dsted
sprts stamps are used for ta payment of brandy removed by tank car or tank
truck, a whoesae quor deaer s stamp w be procured n accordance wth
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321 Regs. 3, , , 10,11, 1 , and 29.
sectons S . 9 and 1 . 9 . ( 3 Stat. 29 as amended, 33 as amended, 37 ,
37 ; 26 U. S. C. 2 00, 2 3, 3172, 3176.)
Sec. 1 . 9a. Use of Dsted Sprts Stamps. Where brandy Is to be ta -
pad by use of dsted sprts stamps, the dster, upon recept of the copes of
Forms 179 and 1 20 from the storekeeper-gauger, pursuant to secton 1 . 7, w
cance the necessary number of stamps n the e act amount of the ta due by
perforaton as prescrbed heren, or by egby wrtng or stampng on each
stamp wth ndebe (nda) nk, hs name, the regstry number of the dstery,
and the sera number of Form 179; for e ampe, ohn Doe Dstng Company,
Frut Dstery No. 03. New ersey, Form 109 Sera Number Pror
to use n ta payment, the dster, f he so desres, may partay precance the
stamps to the e tent of showng hs name and regstry number ony. The sera
number of the Form 179 must not be entered oc the stamp n advance of actua
use n ta payment. The dstrct supervsor may, n hs dscreton, approve a
sutabe abbrevaton of the requred nformaton for canceaton, ncudng
the ntas for the name of the dster f adequate for Identfcaton: for e -
ampe, - . D. Dst. Co. FD 03-N -179 S/N The dster s canceaton
must be made on the ower porton of the stamp beow the fgures and words
ndcatng the denomnaton of the stamp. If the dster s canceaton Is made
by perforaton, each etter and fgure of the canceaton must be not ess than
one-fourth of an nch n heght and of proportonate wdth and sutaby spaced
for egbty and dstnctness, and rust be ceary and sharpy outned ether
(a) by perforaton through the substance of the stamp, and not merey punc-
turng t, each perforaton to be not ess than one thrty-second of an nch n
wdth or dameter; or (6) by perforatons n the form of ncsons through the
stamp of at east one thrty-second ot an nch n wdth, cuttng out the form of
the etters and fgures from the sus.nce of the stamp, whch etters and fgures
must be of the sze, spacng, and dstnctness as above specfed. The dster w
then attach the stamps to one copy of Form 179 and 1 20 to the Government offcer.
The Government offcer, after determnng that the canceed stamps are n the
proper amount of the ta shown due on the Form 179. w then further cance
and deface tbe stamps by cuttng a hoe one-haf nch square n the upper rght-
hand corner, and whoy wthn the border, of each stamp and w e ecute a
certfcate on a copes of Form 179 (usng tbe certfcate of the coector,
propery modfed) certfyng to the recept and further canceaton of stamps
In the amount of ta due. The sera number of the Form 179 w be entered
on Form 1 20 n the coumn provded for the knd and sera number of the
stamp as an ndcaton that ta payment was by use of dsted sprts stumps.
The canceed dsted sprts stamps w be securey attached to a copy of Form
179 by means of a stape, eyeet, or smar devce. Such copy of Form 179, and
the accompanyng copy of Form 1 20, w be attached to the board on the
weghng tank and reman thereof unt the brandy covered by such stamps has
been removed. Where remova s to be by tank car or tank truck, the dster
w procure a whoesae quor deaer s stamp to be aff ed thereto n accordance
wth sectons 1 . and 1S . 9 . Forms 179 and 1 20 w be dsposed of In
accordance wth secton 1 . 93 or secton 1 . 9 , as the case may be. ( 3 Stat.
29 as amended. .33 as amended, 37 , 37 , 37 , 39 ; 20 U. S. C. 2 00, 2 3, 3172,
317 , 3176, 3300.)
Sec. 1 . 90. Route Roard. Tank cars and tank trucks used for the trans-
portaton of ta pad brandy must be equpped wth a route board at east 10 by
12 Inches n sze, to whch Form 1 9 or a whoesae quor deaer s stamp can
be attached. Such board sha be of substanta matera and sha be aff ed
permanenty and securey to the tank car or tank truck by roundheaded or car-
rage bots, nutted and rveted, battered, or weded. ( 3 Stat. 33 as amended,
37 ; 26 U. S C. 2 3, 3176.)
Sec. 1 . 91. of Ladng. The dster sha ncorporate n the b of
adng. If any, a descrpton of Form 1 9 as foows:
Form 1 9 , Sera No Owner and No. of Car (or Truck) ,
endor
ddress endee
ddress
Where no b of adng s ssued, as In the case of transfer of a tank car be-
tween pans by swtchng arrangements, the dster sha ncorporate n Form
1 20 such descrpton of Form 1 0 . Where a whoesae quor deaer s stamp
Is used n eu of Form 1 9 , the dster sha ncorporate n the b of adng,
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Regs. 3, , , 10,11, 1 , and 29. 322
f any, a descrpton of the stamp, showng the knd of stamp and ts sera
number. ( 3 Stt. 33 as amended, 37 ; 26 U. P. C. 2 3, 3176.)
Sec. 1 . 92. STOR r R-O UO R s erfcaton. If ta payment s by means
of a certfcate of ta payment (Form 1 9 ), the dster sha gve the certfcate,
the b of adng, f any, and a copes of Form 179 and Form 1 20 to the store-
keeper-gauger at the dstery. The storekeeper-gauger w transcrbe the
sera number of the certfcate, Form 1 9 , to hs retaned copy of Form 1 20
and w verfy the contents of the weghng tank and the descrpton of Form
1 9 n the b of adng or on Form 1 20, as the case may be, and w date and
sgn the certfcate, Form 1 9 , n the space provded therefor. The certfcate
must e attached to a board on the weghng tank. If ta payment s by means
of dsted sprts stamps and evdenced by a whoesae quor deaer s stamp
(tank car or tank truck removas ony), the dster sha gve the b of adng,
f any, to the storekeeper-gauger at the dstery who w verfy the descrpton
of the whoesae quor deaer s stamp on the b of adng, f any. ( 3 Stat.
29 as amended, 33 as amended, 37 ; 26 U. S. C. 2 00, 2 3, 3176.)
R L S OF R NDY FOR TR NSF R
Sec. 1 . 93. y Ppene to Contguous Premses. When the certfcate of
ta payment, Form 1 9 , has been aff ed to the weghng tank, n the case of
ppene transfers to contguous premses, t w be canceed n the same manner
as the ta pad stamp on a package. If ta payment has been by means of ds-
ted sprts stamps, n eu of Form 1 9 , the copy of Form 179 to whch the
canceed stamps are attached and the accompanyng Form 1 20 sha be aff ed
to the weghng tank. The storekeeper-gauger w unock the outet vave and
permt the dster to transfer the brandy by ppene to the contguous premses.
The brandy sha be transferred ony under the mmedate supervson of the
storekeeper-gauger who, after reease of the brandy w e ecute hs statement
of the date of wthdrawa on the three copes of Form 179, forward one copy
each of Form 179 and Form 1 20 wth the canceed Form 1 9 , or the canceed
dsted sprts stamp, as the case may be, attached thereto, to the dstrct
supervsor, retan one copy of Form 179 and Form 1 20, aud dever one copy
of Form 179 and two copes of Form 1 20 to the dster. The dster w
dever mmedatey one copy of Form 1 20 to the propretor of the contguous
estabshment. ( 3 Stat. 29 as amended, 33 as amended, 37 ; 20 U. S. C.
2 00, 2 3, 3176.)
Sec. 1 . 9 . y Tank Car or Tank Truck. When brandy s to be trans-
ferred to a tank car or tank truck for shpment the storekeeper-gauger, after
the certfcate of ta payment or the Form 179 wth the dsted sprts stamps
attached thereto, has been aff ed to the weghng tank, sha unock the out-
et vave and permt the brandy to be transferred to the tank car or tank truck.
The brandy sha be transferred ony under the mmedatey supervson of the
storekeeper-gauger. If a certfcate of ta payment, Form 1 9 , s used, the
dster, upon depost of the brandy n the tank car or tank truck, w remove
the certfcate from the weghng tank and aff t securey to the route board of
the tank car or tank truck whereupon t w be canceed n the same manner
as the ta pad stamp on a package and then covered wth a coatng of trans-
parent sheac, acquer, or varnsh. If dsted sprts stamps are used and a
whoesae quor deaer s stamp ssued to evdence ta payment, the whoesae
quor deaer s stamp sha be smary aff ed to the tank car or tank truck,
canceed and protected. The storekeeper-gauger w verfy the contents of the
tank car or tank truck, reease same for shpment, e ecute hs statement of the
date of wthdrawa on the three copes of Form 179, and note on a copes
of Form 1 20 the date of the reease. When the tank car or tank truck s re-
eased, the storekeeper-gauger w forward one copy each of Form 179 and Form
1 20 to the dstrct supervsor, retan one copy of each form, and dever one
copy of Form 179 and two copes of Form 1 20 together wth the b of adng,
f any, to the dster. Where dsted sprts stamps have been used to ta pay
the brandy, the copy of Form 179 to whch the canceed stamps are attached w
be forwarded to the dstrct supervsor. The dster w forward mmedate-
y one copy of Form 1 20 to the vendee. When the vendee receves ta pad
brandy n a tank car or tank truck, he sha, at the tme the car or truck s
empted, dspose of the certfcate of ta payment, Form 1 9 , or whoesae quor
deaer s stamp, as the case may be, n accordance wth the procedure prescrbed
by Reguatons 11 (26 CFR, part 1 9), Reguatons 1 (26 CFR, part 190), or
Reguatons 29 (26 CFR, part 197). The dstrct supervsor w Investgate any
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323 Regs. 3, , , 10,11, 1 , and 29.
dscrepancy whch may be found respectng the shpment In accordance wth
such reguatons. ( 3 Stat. 20 as amended, 33 as amended, 37 ; 20 U. S. C.
2 00, 2 3. 3170.)
DISTILL D SPIRITS ST MPS FO R MO LS Y PIP LIN S, T N C RS ND T N TRUC S
Sec. 1 . 9 a. Dsted Sprts cse Ta Stamps. The ta on brandy
removed n tank cars or tank trucks, or by ppene, may be pad by dsted
sprts e cse ta stamps (Seres of 19 0). Such stamps may be purchased n
varous denomnatons by the propretor from the coector of nterna revenue of
the dstrct n whch the dstery s ocated. The stamps may be purchased n
advance of actua needs, n order to be ready avaabe when needed. The
stamps may not be purchased by one propretor from another, nor may they,
e cept n cases of emergency, be purchased from coectors of other dstrcts.
Dsters sha not se or transfer stamps, e cept that they may (a) transfer
such stamps to other premses operated by themseves as provded n secton
1 . 9 d pursuant to the pror approva of the dstrct supervsor; or (6) return
such stamps for redempton n accordance wth secton 1 . 9 e. Dsted sprts
stamps for ta payment of brandy as authorzed by ths part, used or unused, may
not be purchased, sod, or possessed, e cept as specfcay authorzed bv ths
part. ( 3 Stat. 29 as amended, 33 as amended, 37 , 37 , 37 , 39 , 399; 20
U. S C. 2 00. 2 3, 3172. 317 , 3170. 3300, 330 .)
Sec. 1 . 9 b. Form 27-D. Wth each purchase of stamps the dster w
submt to the coector Form 27-D, n trpcate, propery fed out. The co-
ector w stamp the date of sae on a copes of Form 27-D, return one copy
to the dster wth the stamps and send one copy to the approprate dstrct
w refuse to se stamps when such form s not submtted. ( 3 Stat. 29 as
amended. 37 . 37 ; 20 U. S. C. 2 00 ; 3172, 3170.)
Sec. 1 . 9 c. Remttance: Devery. orders for stamps must be ac-
companed by proper remttance n a sum equa to the vaue of the stamps.
Uness the stamps are caed for by the dster or hs agent n person, they w
be sent to hm by ordnary ma, regstered ma, or e press, at the e pense of the
dster. When the stamps are not caed for n person the dster w specfy
on Form 27-D the means (ordnary ma, regstered ma, or e press) by whch
he desres the stamps sent to hm. If the stamps are ordered sent by ordnary
ma, the dster sha encose wth hs order suffcent postage stamps, or a
separate remttance to cover the postage. If the stamps are ordered sent by
regstered ma, the dster sha ncude the postage and regstry fee and any
requred regstry surcharge, as provded by the posta aws and reguatons. If
the remttance s other than cash the sum to cover the postage, regstry fee, or
surcharge must not be ncuded n the remttance coverng the cost of the stamps.
The oca postmaster shoud be consuted reatve to the amount of the regstry
fee and surcharge requred. Stamps forwarded by e press w he sent coect.
( 3 Stat. 29 as amended, 37 , 7 as amended; 20 U. S. C. 2 00, 3172, 30 0.)
Sec. 1 . 9 d. Transfer to Other Premses. propretor operatng other
the dstery s permanenty dscontnued, or the propretor has no use for the
stamps thereat and the propretor operates other premses n whch the stamps
coud be used, he may transfer such stamps to such other premses for use thereat
pursuant to pror approva of the dstrct supervsor. If the premses to whch
the stamps are to he transferred s ocated n another supervsory dstrct, the
supervsor grantng authorty to transfer the stamps w advse the dstrct
supervsor of the other dstrct so that he may know that the recevng premses
s entted to receve the stamps. The atter dstrct supervsor w aso nform
the Government offcer assgned to the recevng premses of the authorty to re-
ceve the stamps. report of a transfers of stamps must be made on Form
1097, as provded n secton 1 . 9 h. ( 3 Stat. 29 as amended, 37 , 37 ; 20
U. S. C. 2 00, 3172. 3170.)
Sec. 1 . 9 e. Redempton of Dsted Sprts Stamps. Dsted sprts
for ta payment of brandy to he removed by ppene or n tank cars or tank
trucks may be redeemed pursuant to secton 330 , Interna Revenue Code,
whch reads as foows:
R D MPTION OF ST MPS, (a) uthorzaton The Commssoner, sub-
|ect to reguaton prescrbed by the Secretary, may, upon recept of satsfactory
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Regs. 3, , , 10, 11, 1 , and 29. 32
evdence of the facts, make aowance for or redeem such of the stamps. Issued
under authorty of aw, to denote the payment of any Interna revenue ta .
as may have been spoed, destroyed, or rendered useess or unft for the purpose
ntended, or for whch the owner may have no use, or whch through mstake
may have been mpropery or unnecessary used, or where the rates or dutes
represented thereby have been e cessve In amount, pad In error, or n any
manner wrongfuy coected.
(b) Method and Condtons of owance. Such aowance or redempton
may be made, ether by gvng other stamps n eu of the stamps so aowed
for or redeemed, or by refundng the amount or vaue to the owner thereof,
deductng therefrom, In case of repayment, the percentage, f any, aowed to
the purchaser thereof; but no aowance or redempton sha be made n any case
unt the stamps so spoed or rendered useess sha-have been returned to
the Commssoner, or unt satsfactory proof has been made showng the
reason why the same cannot be returned; or, f so requred by the sad Com-
mssoner, when the person presentng the same cannot satsfactory trace
the hstory of sad stamps from ther ssuance to the presentaton of hs cam
as aforesad.
(c) Tme fob Fng Cams. No cams for the redempton of or aowance
for stamps sha be aowed uness presented wthn four years after the pur-
chase of such stamps from the Government.
(d) Fnaty of Commssoner s Decson. The fndngs of facts In and
the decson of the Commssoner upon the merts of any cam presented
under or authorzed by ths secton sha, n the absence of fraud or mstake
n mathematca cacuaton, be fna and not sub|ect to revson by any account-
ng offcer.
( 3 Stat. 37 , 399 ; 26 U. S. C 3176, 330 .)
Sec. 1 . 9-f. Cam to Coector. Dsters desrng to have dsted sprts
stamps, descrbed n secton 1 . 9 e, redeemed under the provsons of secton
330 , I. R. C, must make cam on Form 3 to the coector of nterna revenue.
The stamps, for whch redempton s camed, must be attached to the cam,
and the number and denomnatons thereof must be sted on the cam or on
a sheet of paper attached thereto. Where the stamps have been destroyed,
evdence satsfactory to the Commssoner estabshng such destructon must
accompany the cam. ( 3 Stat. 29 as amended, 37 , 37 , 399; 26 U. S. G
2 00, 3172, 3176, 330 .)
Sec. 1 . 9 g. Unredeemabe Stamps. Dsted sprts stamps may not be re-
deemed whe brandy on whch the stamps can be used n ta paynent, remans
on hand and whe the dstery remans n a quafed status uness t s shown
that the manner of ta payng brandy thereat s such that the stamps may not be
used. When a dstery s dscontnued and stamps reman on hand, such stamps
are not redeemabe f the propretor operates other premses at whch the stamps
coud be used. In such cases the stamps w be transferred to the other premses
for use thereat n accordance wth secton 1 . 9 d. Notaton of the transfer
must be made on Form 1697 for both premses. ( 3 Stat. 29 as amended, 37 ,
37 , 399; 20 U. S. C. 2S00, 3172, 3176, 330 .)
Sec. 1 . 9 h. Dsted Sprts Stamp Report, Form 1697. The dster sha
make a report on Form 1697, propery modfed, of a dsted sprts stamps
receved and used at hs dstery. ntres w be made thereon and the report
submtted n accordance wth the headngs of the varous nes and coumns on
form and the nstructons prnted thereon or ssued n respect thereto and as
requred by ths part. When dsted sprts stamps are surrendered for re-
dempton n accordance wth sectons S . 9 e and 1 . 9 f, or are transferred
to, or receved from other premses operated by the dster, as authorzed n
secton 1 ..r9 d, a report thereof must be made on Form 1697, gvng the reason
recept, the name, regstry number, and ocaton of the premses to whch the
amended, 37 , 37 ; 26 U. S. C. 2S0O, 3172, 3176.)
whoesae quor deaer s stamps for tank cars and tank trucks
Sec. 1 . 9 L ppcaton for Stamps. Form 92. Where brandy, ta pad by
use of dsted sprts stamps authorzed by secton 1 . 7a, s to be removed
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32 Regs. 3, , , 10, 11, 1 , and 29.
by tank car or tank truck, the dster w make appcaton to the storekeeper-
gauger on Form 92, propery modfed, for a whoesae quor deaer s stamp to
be aff ed to such contaner. Form 92 w be prepared n quadrupcate for
ntradstrct shpments and n quntupcate for nterdstrct shpments.
nformaton ndcated by the headngs of the varous coumns and nes on the
submtted to the storekeeper-gauger n charge of the dstery. If the brandy
s correcty descrbed on Form 92 and has been propery ta pad, the storekeeper-
ganger w sgn a copes and return the Form 92 to the dster. The dster
w e ecute hs certfcate on Form 92, enterng theren, n approprate coumns,
the knd of brandy, the name of the owner of the car or truck and the car or
truck number, the net weght, proof, and proof gaons of the brandy as shown
on the Form 1 20 coverng ta payment, and the statement Consgned to:
foowed by the name and address of the consgnee. copes of Form 92 w
be gven to the storekeeper-ganger n charge. ( 3 Stat. 29 as amended, 301,
33 as amended, 37 , 37 ; 20 U. S. C. 2 00. 2 02, 2 3, 3172, 3176.)
Sec. 1 . 9 |. Whoesae Lquor Deaer s Stamps. Upon recept of Form
92 wth the appcaton for the whoesae quor deaer s stamp duy e ecuted,
the storekeeper-ganger w ssue a whoesae quor deaer s stamp for the tank
car or tank truck, as the case may be, and enter the sera number thereof on a
copes of Form 1 20 and n part on a copes of Form 92. When ssung the
stamps, the storekeeper-gauger w enter on each a the nformaton caed for
and sgn each stamp n the space provded therefor, usng ony such nk as w
nether fade nor bur. ( 3 Stat. 301, 33 as amended, 37 ; 20 U. S. C. 2 02, 2 S3,
3176.)
Sec. 1 . 9 k. Dsposton or Form 92. When the whoesae quor deaer s
stamp has been ssued and the sera number thereof recorded on Form 92, the
storekeeper-gauger sha return two copes of Form 92 to the dster wth the
stamp, forward one copy of the form to the dstrct supervsor and retan one
copy. The storekeeper-gauger sha pace hs retaned copy n a permanent fe
as authorty for ssuance of the stamp. The dster w forward one copy
of Form 92 to the vendee. Where the vendee s ocated n a dfferent supervsory
dstrct, the storekeeper-gauger w send the remanng copy of Form 92 to the
supervsor of the dstrct n whch the vendee s ocated. ( 3 Stat. 301, 33 as
amended, 37 ; 20 U. S. C. 2 02, 2 S3, 3176.)
Sec. 1S . 9 1. Stamp Stub. The storekeeper-gauger sha enter on the stub
connected wth each whoesae quor deaer s stamp data smar to that entered
on the stamp, to preserve a perfect record of the detached stamp. ( 3 Stat. 301,
33 as amended, 37 ; 20 U. S. C. 2 02, 2 3, 3176.)
Sec. 1 . 9 m. Whoesae Lquor Deaer s Stamp ooks. Whoesae quor
deaer s stamps w be furnshed by coectors to dstrct supervsors upon re-
quest. Dstrct supervsors w suppy storekeeper-gangers n charge of pants
where such stamps are used wth such quanttes of stamps as may be requred.
When a the stamps n a book have been ssued the storekeeper-gauger n charge
w return the stub book to the dstrct supervsor. ( 3 Stat. 301, 33 as
amended, 37 ; 26 U. S. C. 2 02, 2 . 3, 3176.)
Sec. 1 . 9 n. Record and Report of Whoesae Lquor Deaer s Stamps.
Storekeeper-gaugers havng custody of whoesae quor deaer s stamps at frut
dsteres w keep a record of such stamps receved and used on part 1 of
Form 11 , propery modfed for the purpose, and as requred by the nstructons
on the form and as ssued n respect thereto. The record w he kept n bound
form avaabe for Inspecton by other Government offcers. The storekeeper-
gauger w prepare hs monthy report on part 2 of Form 11 , propery modfed,
and n dupcate, retan one copy and furnsh one copy to the dstrct supervsor.
( 3 Stat. 301, 33 as amended, 37 ; 20 U. S. C. 2 02, 2 S3, 3176.)
6. Reguatons 10 (26 CFR, part 1 ; 1 F. R. 233), Warehousng
of Dsted Sprts, as amended, are amended as foows:
(a) Sectons 1 .311, 1 .626, 1 .626a, 1 .631, 1 .633, 1 .6 ,
1 .6 , 1 .6 6, 1 .6 7, 1 .6 , 1 .670, 1 .672, 1 .67 , 1 .676,
1 .677, 1 .67 , 1 .679, and 1 .6 0 are amended; and
(b) Sectons 1 .6 3a, 1 .6 3b, 1 .6 3c and 1 .67 a are added.
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Regs. 3, , ,10,11,1 , and 29. 326
Subpart O cton by Dstrct Supervsob

Sec. 1 .311. Regstry Numbers. Interna revenue bonded warehouses w
be numbered seray n the order of ther estabshment. separate seres
w be used for each State. Regstry numbers heretofore assgned w be
retaned, and new warehouses w be assgned numbers n sequence thereto.
Regstry numbers prevousy assgned to dscontnued warehouses w not be
reassgned to other warehouses. In the case of a successor takng over the
warehouse, the same regstry number w be retaned. In the case of a change
n ocaton of the warehouse wthn the same State, the same regstry number
may be retaned. ( 3 Stat. 332, 37 ; 26 . S. C. 2S73, 3176.)
Subpart CC Ta pad Wthdrawas by Gauge Tank

Sec. 1S .626. Reease of Sprts From Gaugng Tank. When the certfcate
of ta payment has been aff ed to the gaugng tank, and canceed when requred,
the storekeeper-gauger w unock the outet vave to permt the remova of
the sprts. The remova of sprts from the gaugng tank must be under the
mmedate supervson of the storekeeper-ganger. When the sprts have been
removed, the storekeeper-gauger w e ecute hs statement of the date of
wthdrawa on the three copes of Form 170. If the sprts are transferred by
ppene, the storekeeper-gauger w forward one copy each of Forms 179 and
1 20 and the canceed Form 1 9 to the dstrct supervsor, retan one copy
each of Forms 179 and 1 20 and dever one copy of Form 179 and two copes
of Form 1 20 to the warehouseman, who w mmedatey dever one copy of
Form 1 20 to the vendee. If the sprts are to be drawn nto packages from the
gaugng tank for transfer to bottng premses, the procedure prescrbed n sec-
tons 1S .627-1 .C36 w be foowed and when a sprts have been drawn
nto packages, the storekeeper-gauger w dspose of Forms 179, 1 20, and 1 9
n the manner provded n ths secton for removas by ppene. If the sprts
are to be removed by tank car or tank truck the procedure w be n accord-
ance wth the appcabe provsons of sectons 1 .6 3a-1 .0 9. ( 3 Stat. 29S
as amended, 37 ; 26 U. S. C. 2 00, 3176.)
Sec 1 .626a. Ta paymknt by Stamps. Dsted sprts stamps prescrbed
by secton 1 .672 may be used, n eu of a certfcate of ta payment I Form
1 9 ), to ta pay sprts to be removed by ppene to a contguous rectfyng pant
or ta pad bottng house, or to be drawn nto packages, tank cars, or tank
trucks, to whch whoesae quor deaer s stamps w he aff ed. When sprts
are to be so ta pad, the propretor, upon recept of the copes of Forms 179
and 1 20 from the storekeeper-gauger pursuant to secton 1 .622, w cance
the necessary number of stamps n the e act amount of the ta due by perfora-
ton (as prescrbed by secton 1 .67 a), or by egby wrtng or stampng on
each stamp wth ndebe (nda) nk, hs name, the regstry number of the
warehouse, and the sera number of Form 179; for e ampe. ohn Doe Dstng
Company, Interna Revenue onded Warehouse 63, New ersey, Form 179, Se-
ra Number Pror to use n ta payment, the propretor, f he so desres,
may partay precanee the stamps to the e tent of showng hs name and regs-
try number ony as authorzed by secton 1 .67 . The dstrct supervsor may,
n hs dscreton, approve a sutabe abbrevaton of the requred nformaton
for canceaton, ncudng the ntas for the name of the propretor f ade-
quate for dentfcaton; for e ampe, . D. Dst. Co. IR W 63-N -179 S/N
The propretor s canceaton must be made on the ower porton of
tte stamp beow the fgures and words ndcatng the denomnaton of the
stamp. The propretor w then attach the canceed dsted sprts stamps
to one copy of Form 179 and submt a copes of Forms 179 and 1 20 to the
Government offcer. The Government offcer w determne that the canceed
stamps are n the fu amount of the ta shown due on the Form 179 and w
then further cance and deface the stamps by cuttng a hoe one-hnf nch square
n the upper rght-hand corner, and whoy wthn the border, of each stamp,
and w e ecute a certfcate on a copes of Form 179 (usng the certfcate of
the coector, propery modfed) certfyng to the recept and further can-
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327 Regs. 3, , , 10, 11, 1 , and 29.
ceaton of stamps n the amount of ta due. The sera number of the Form
170 w be entered on Form 1 20 n the coumn provded for the knd and sera,
number of the stamp, as an ndcaton that ta payment was by use of dsted
sprts stamps. The canceed dsted sprts stamps w be securey attached
to a copy of Form 179 by means of a stape, eyeet, or smar devce. Such
copy of Form 179 and the accompanyng copy of Form 1 20 w be attached to the
board on the gaugng tank and reman thereon unt the sprts covered by
the stamps have been removed. The reease of the sprts from the tank and
the dsposton of the forms w be n accordance wth the provsons of sec-
ton 1 .626. ( 3 Stat. 29 as amended, 33 as amended, 37 , 37 , 37 , 39 ; 26
U. S. C. 2 00, 2 3, 3172, 317 , 3176, 3300.)
Sec. 1 .631. Issuance of Whoesae Lquor Deaer s Stamps. Upon re-
cept of Form 92 wth the appcaton for whoesae quor deaer s stamps duy
e ecuted, the storekeeper-gauger n charge w ssue a whoesae quor deaer s
stamp for each package sted on the form. When ssung the stamps, the store-
keeper-gauger w enter on each stamp a the nformaton caed for and sgn
the stamps n the space provded therefor. The storekeeper-gauger may enter
hs sgnature by means of a facsme stamp, provded care s taken to use ony
such nk as w nether fade nor bur. Where an apprecabe number of
whoesae quor deaer s packages w be fed, the warehouseman must provde
the storekeeper-gauger n charge wth sutabe rubber stamps for the nserton
of nformaton common to a whoesae quor deaer s stamps to be used
by hm. The tota gaonage for whch whoesae quor deaer s stamps are
ssued sha n no case e ceed the ta abe gaons shown on Form 179 uness due
to norma varatons n gauge. ( 3 Stat. 301, 329, 37 ; 26 U. S. C. 20 2,
2 63, 3176.)
Sec. 1 .633. Whoesae Lquor Deaer s Stamp Rooks. Whoesae quor
deaer s stamps w be furnshed by coectors to dstrct supervsors upon
request. Dstrct supervsors w suppy storekeeper-gangers n charge of
bonded warehouses where such stamps are used wth such quanttes of stamps
as may be requred. When a the stamps n a book have been ssued, the
storekeeper-gauger n charge w return the stub book to the dstrct supervsor.
( 3 Stat. 301, 329, 37 ; 26 U. S. C. 2 02, 2 03, 3176.)
Subpart DD Ta pad Wthdrawas n Tank Cars and Tank Trucks

Sec. 1 .6 3a. Ta payment by Stamps. Dsted sprts stamps prescrbed
by secton 1 .672 may be used, n eu of a certfcate of ta payment (Form 1 9 ),
to ta pay sprts to be removed by tank car or tank truck to whch a whoesae
quor deaer s stamp w he aff ed. When sprts are to be so ta pad, the
propretor, upon recept of the copes of Forms 179 and 1 20 from the store-
keeper-gauger pursuant to secton 1 .6 1, w cance the necessary number
of stamps n the e act amount of the ta due by perforaton (as prescrbed by
secton 1 .67 a) or by egby wrtng or stampng on each stamp wth ndebe
(nda) nk, hs name, the regstry number of the warehouse, and the sera
number of Form 179; for e ampe, ohn Doe Dstng Company, Interna
Revenue onded Warehouse 03. New ersey, Form 179. Sera Number
Pror to use n ta payment, the propretor, f he so desres, may partay pre-
cance the stamps to the e tent of showng hs name and regstry number ony
as authorzed by secton 1 .07 . The dstrct supervsor may, n hs dscreton,
approve a sutabe abbrevaton of the requred nformaton for canceaton,
ncudng the ntas for the name of the propretor, f adequate for dentfca-
ton ; for e ampe, . D. Dst. Co. IR W 63-N -179 S/N The propr-
etor s canceaton must be made on the ower porton of the stamp beow the
fgures and words ndcatng the denomnaton of the stamp. The propretor w
then attach the canceed dsted sprts stamps to one copy of Form 179 and sub-
mt a copes of Forms 179 and 1 20 to the Government offcer. The Government
offcer w determne that the canceed stamps are n the fu amount of the
ta shown due on the Form 179 and w then further cance and deface the
stamps by cuttng a hoe one-haf nch square n the upper rght-hand corner,
and whoy wthn the border, of each stamp, and w e ecute a certfcate on
Form 179 (usng the certfcate of the coector, propery modfed) certfyng
to the recept and further canceaton of stamps n the amount of the ta due.
The sera number of the Form 179 w be entered on Form 1 20 n the coumn
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Regs. 3, , , 10, 11, 1 , and 29. 32
provded for the knd and sera number of the stamp, as an ndcaton that ta -
payment was by nse of dsted sprts stamps. The canceed dsted sprts
stamps w be securey attached to a copy of Form 179 by means of a stape,
eyeet, or smar devce. Such copy of Form 179, and the accompanyng Form
1 20, w be attached to the board on the gaugng tank and reman thereon unt
the sprts covered by the stamps have been removed. Forms 179 and 1 20 w
be dsposed of n accordance wth secton 1 .6 7. ( 3 Stat. 29 as amended,
33 as amended, 37 , 37 , 37 , 39 ; 26 U. S. C. 2 00, 2 3, 3172, 317 , 3176, 3300.)
Sec. 1 .6 3b. Form 92. When the Form 179 to whch the canceed stamps
are attached, and Form 1 20 have been attached to the board on the gaugng
tank, the propretor w make appcaton to the storekeeper-gatger on Form 92,
propery modfed, for a whoesae quor deaer s stamp to be aff ed to the
tank car or tank truck. Form 92 w be prepared n quadrupcate for ntra-
dstrct shpments and n quntupcate for nterdstrct shpments. nfor-
maton ndcated by the headngs of the varous coumns and nes on the
submtted to the storekeeper-gauger n charge of the warehouse. If the sprts
are correcty descrbed on Form 92 and have been propery ta pad, the store-
keeper-gauger w sgn a copes and return the Form 92 to the warehouseman.
e w then reease the sprts for transfer to the tank car or tank truck. The
warehouseman w e ecute hs certfcate on Form 92, enterng theren n
approprate coumns, the knd of sprts, the name of the owner of the car or
truck and the car or truck number, the net weght, proof, and proof gaons
of the sprts as shown on the Form 1 20 coverng ta payment, and the state-
ment Consgned to : foowed by the name and address of the consgnee.
copes of Form 92 w be gven to the storekeeper-gauger n charge of the ware-
house. ( 3 Stat. 301, 33 as amended. 37 ; 26 U. S. C. 2 02, 2 3, 3176.)
Sec. 1 .6 .3c. Whot.ksa.e Lquor Deaer s Stamp. Upon recept of Form 92
wth the appcaton for the whoesae quor deaer s stamp duy e ecuted the
storekeeper-gauger n charge w ssue a whoesae quor deaer s stamp for
the tank car or tank truck, as the case may be. n accordance wth the appcabe
provsons of sectons 1 .631 and 1 .632 e cept that a facsme sgnature
w not be paced on the whoesae quor deaer s stamp ssued for such tank
car or tank truck. e w enter the number of the whoesae quor deaer s
stamp on a copes of Form 1 20 and part of Form 92. and return two copes
on Form 92 and the whoesae quor deaer s stamp to the warehouseman. ( 3
Stat. 301, 33 as amended. 37 ; 26 U. S. C. 2S02, 2 3, 3176.)
Sec. 1 .6 . oute oard. Tank cars and tank trucks used for the trans-
portaton of ta pad dsted sprts must be equpped wth a route board at
east 10 by 12 nches n sze, to whch Form 1 9 or whoesae quor deaer s
stamp can Ik attached. Such board sha be of substanta matera and sha
be aff ed permanenty and securey to the tank car or tank truck by round-
headed or carrage bots, nutted and rveted, battered, or weded. ( 3 Stat.
33 as amended, 37 ; 26 U. S. C. 2 S3. 3176.)
Sec. 1 .6 . u. of Ladng. The propretor sha ncorporate n the b of
adng, f any, a descrpton of Form 1 9 as foows:
Form 1 9 , Sera Number , Owner and Number of Car (or Truck)
, endor ,
ddress , endee , ddress
Where no b of adng s ssued, as c the case of transfer of a tank car between
pants by swtchng arrangement, the warehouseman sha ncorporate n Form
1 20 such descrpton of Form 1 9 . Where a whoesae quor deaer s stamp
Is used n eu of Form 1 9 , the propretor sha ncorporate n the b of
adng, f any, a descrpton of the stamp, showng the knd of stamp and ts
sera number. ( 3 Stat. 33 as amended, 37 ; 26 U. S. C. 2 3, 3176.)
Sec. 1 .0 6. Storekeeper-Gauger s erfcaton. If ta payment s by means
of a certfcate of ta paynent (Form 1 0 ), the propretor sha gve the certf-
cate, the b of adng, f any, and a copes of Form 179 and Form 1 20, to
the storekeeper-gauger. The storekeeper-gnuger w verfy the contents of the
tank car or tank truck, and the descrpton of Form 1 9 on the b of adng
or Form 1 20, as the case may be, determne the securty of the route board,
and, f no dscrepances are found he w note the sera number of the certf-
cate, on hs retaned copy of Form 1 20, and date and sgn the certfcate In the
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329 Regs. 3, , , 10, 11, 1 , and 29.
space provded therefor. The propretor sha then aff the certfcate to the
route board n the presence of the storekeeper-gauger. The certfcate must be
securey aff ed to the route board wth a good adhesve and wth a tack n each
corner, whereupon t w be canceed In the same manner as a ta pad stamp
after attachment to a package. The certfcate w then be covered wth a
coatng of transparent sheac, acquer, or varnsh, to prevent ts easy remova
or ateraton. If ta payment s by means of dsted sprts stamps and ev-
denced by a whoesae quor deaer s stamp, the propretor sha gve the b
of adng, f any, to the storekeeper-gauger who sha verfy the contents of the
tank car or tank truck, the descrpton of the whoesae quor deaer s stamp on
the b of adng, f any, and determne the securty of the route board. If no
dscrepances are found, the propretor sha aff the whoesae quor deaer s
stamp to the route board n the presence of the storekeeper-gauger. The whoe-
sae quor deaer s stamp sha be ::ff ed, canceed, and protected n the same
manner as a certfcate of ta payment. Form 1 9 . ( 3 Stat. 33 as amended,
37 : 26 U. S. C. 2 3, 3176.)
Sec. 1 .6 7. Reease of Tank Car or Tank Truck. When the certfcate of
ta payment (Form 1 9 ) or whoesae quor deaer s stamp has been aff ed to
the route board and canceed, and the tank car or tank truck seaed by the
propretor, the storekeeper-gauger w return the b of adng, f any, to the
propretor, reease the tank car or tank truck for shpment, e ecute hs state-
ment of wthdrawa on the three copes of Form 179, and note on a copes of
Form 1 20 the date of the reease of the tank car or tank truck. The store-
keeper-ganger w forward one copy of Form 179 and Form 1 20 to the dstrct
supervsor, retan one copy of each form, and dever one copy of Form 179 and
two copes of Form 1 20 to the propretor, who w forward one copy of Form
1 20 to the vendee and retan the remanng copy. Where ta payment s by
means of dsted sprts stamps, the storekeeper-gauger w forward to the
dstrct supervsor the Form 179 wth the stamps attached and the accompanyng
Form 1 20 and one copy of Form 92. The storekeeper-gauger w retan one
copy of Form 92 n a permanent fe as authorty for ssuance of the whoesae
quor deaer s stamp. Where the vendee s ocated n a dfferent supervsory
dstrct, the storekeeper-gauger w send the e tra copy of Form 92, prepared
n accordance wth secton 1 .6 3b, to the supervsor of the dstrct n whch
the vendee s ocated. ( 3 Stat. 33 as amended, 373 as amended, 37 ; 26 D. S. C.
2 3, 3170, 3176.)
procedure when tank car or tank truck s empted
Sec. 1 .6 . Scapng Certfcate or Whoesae Lqtor Deaer s Stamp.
When the vendee receves ta pad dsted sprts n a tank car or tank truck he
sha, at the tme the car or truck s empted, dspose of the certfcate of ta -
payment, Form 1 9 , or whoesae quor deaer s stamp, as the case may be, n
accordance wth the procedure prescrbed by Reguatons 11 (26 CFR, part 1 9),
Reguatons 1 (26 CFR, part 190) or Reguatons 29 ( 26 CFR, part 197). The
dstrct supervsor w nvestgate any dscrepancy whch may be found respect-
ng the shpment n accordance wth such reguatons. ( 3 Stat. 33 as amended,
37 ; 26 U. S. C. 2 3, 3176.)
Subpart Ta pad Wthdrawas n Cases
Sec 1 .670. ppcaton, Form 1 19. ppcaton for ta payment and wth-
drawa of dsted sprts n cases botted n bond sha be made by the ware-
houseman on Form 1 19, n trpcate. ach wthdrawa w be made on a sepa-
rate Form 1 19, e cept that two or more wthdrawas on the same day of sprts
produced by the same dster at the same dstery may be made on one form.
The storekeeper-gauger w nspect the cases to be removed, and f any case
bears evdence of unusua oss that cannot be satsfactory e paned, or of
tamperng, such case w be detaned by hm pendng further nvestgaton n
accordance wth the appcabe provsons of sectons 1 . 0-1 . 96. The ware-
houseman w cance the necessary stamps n the e act amount of the ta due
n the manner provded by secton 1 .67 . e w then attach the stamps to
Form 1 19 and submt a copes to the Government offcer. The Government of-
fcer w determne that the canceed stamps are n the fu amount of the ta
shown due on the Form 1 19 and w then compete the canceaton of the
stamps as provded by secton 1 .67 and e ecute the certfcate on Form 1 19
certfyng to the recept and canceaton of stamps for the amount of ta es due.
( 3 Stat. 29 as amended, 37 ; 26 U. S. C. 2 00, 3176.)
2 2160 3 22
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Regs. 3, , , 10, 11, 1 , and 29. 330
DISTILL D SPIRITS ST MPS FOR R MO LS IN C S S, T N C RS, T N TRUC S N
Y PIP LIN
Sec 1 .072. Dsted Sprts cse Ta Stamps. The ta on dsted
sprts removed n cases, tank cars, tank trucks and by ppenes may be pad
by dsted sprts e cse ta stamps (seres of 19 0). Such stamps may be
purchased n varous denomnatons by the warehouseman from the coector of
nterna revenue of the dstrct n whch the nterna revenue bonded warehouse
s ocated. The stamps may be purchased n advance of actua needs, n order to
be ready avaabe when needed. The stamps may not be purchased by one
warehouseman from another, nor may they, e cept n cases of emergency, be
purchased from coectors of other dstrcts. Warehousemen sha not se or
transfer stamps, e cept that they may (a) transfer such stamps to other premses
operated by themseves as provded n secton 1S .070 pursuant to the pror
approva of the dstrct supervsor; or (6) return such stamps for redempton
n accordance wth secton 1 .077. Dsted sprts stamps for ta payment of
dsted sprts as authorzed by ths part, used or unused may not be purchased,
sod, or possessed, e cept as specfcay authorzed by ths part. ( 3 Stat. 2 )
as amended, 333 as amended, 37 , 37 , 39 , 399; 20 U. S. C. 2SS0, 2SS3, 3172,
317 , 3170, 3300, 330 .)
Sec. 1 .07 . Manner of Canceng Stamps. t the tme of devery of the
stamps to the Government offcer for payment of the dsted sprts ta on
dsted sprts botted-n-bond, the warehouseman sha cance the stamps by
perforaton (as prescrbed by secton 1 .07 a) or by egby wrtng or stamp-
ng on each stamp wth ndebe (nda) Ink, hs name, regstry number, and the
sera number of Form 1 19; for e ampe, ohn Doe Dstng Company, In-
terna Revenue onded Warehouse No 03, New ersey, Form 1 19, Sera Num-
ber Pror to use n ta payment, the propretor, f he so desres, may
partay precance the stamps to the e tent of showng hs name and regstry
number ony. The sera number of the wthdrawa form must not be entered
on the stamp n advance of actua use n ta payment. The dstrct supervsor
may, n hs dscreton, approve a sutabe abbrevaton of the requred nforma-
ton for canceaton, ncudng the ntas for the name of the propretor, f
adequate for dentfcaton; for e ampe, . D. Dst. Co. IR W 03-N -1 19
S/N The propretor s canceaton must be made on the ower porton
of the stamp beow the fgures and words ndcatng the denomnaton of the
stamp. The Government offcer, after determnng that the canceed stamps are
In the proper amount, w further cance and deface the stamps by cuttng a
hoe one-haf nch square n the upper rght-hand corner, and whoy wthn the
border of each stamp. ( 3 Stat. 29 as amended, 33 as amended, 37 , 37 , 37 ,
39 ; 20 U. S. C. 2 00, 2 3, 3172, 317 , 3176, 3300.)
Sec. 1 .07 a. Manner of Perforatng Stamps.- If the propretor s cancea-
ton s made by perforaton, each etter and fgure of the canceaton must e
not ess than one-fourth of an nch n heght nud of proportonate wdth and
sutaby spaced for egbty and dstnctness, and must be ceary and sharpy
outned, ether (a) by perforaton through the substance of the stamp, and not
merey puncturng t, each perforaton to be not ess than one thrty-second of
an nch n wdth or dameter; or (b) by perforatons n the form of ncsons
through the stamp of at east one thrty-second of an Inch n wdth, cuttng out
the form of the etters and fgures from the substance of the stamp, whch etters
and fgures must be of the sze, spacng, and dstnctness as above specfed. ( 3
Stat. 29 as amended, 37 , 399; 26 U. S. O. 2 00, 3176, 3303.)
Sec. 1 .070. Transfer to Other Premses. propretor operatng other
the nterna revenue bonded warehouse s permanenty dscontnued, or the pro-
pretor has no use for the stamps thereat and the propretor operates other
promses n whch the stamps coud be used, he may transfer such stamps to such
other premses for use thereat pursuant to pror approva of the dstrct super-
vsor. If the premses to whch the stamps are to be transferred s ocated n
another supervsory dstrct, the dstrct supervsor grantng authorty to trans-
fer the stamps w advse the dstrct supervsor of the other dstrct so that
he mny know that the recevng premses s entted to receve the stamps. The
atter dstrct supervsor w aso Inform the Government offcer assgned to
the recevng premses of the authorty to receve the stamps. report of a
transfers of stamps must be made on Form 1697, as provded In secton 1 .6S0.
( 3 Stat. 29 as amended, 37 , 37 ; 26 U. S. C. 2 00, 3172, 3176.)
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331 Regs. 3, , , 10, 11, 1 , and 29.
Sec. 1 .677. Redempton of Dsted Sprts Stamps. Dsted sprts
stamps for ta payment of dsted sprts botted n bond or to be removed by
ppene or n tank cars or tank trucks, may be redeemed pursuant to secton
330 , Interna Revenue Code, whch reads as foows:
R D MPTION OF ST MPS, (a) uthorzaton. The Commssoner,
sub|ect to reguatons prescrbed by the Secretary, may, upon recept of sats-
factory evdence of the facts, make aowance for or redeem such of the stamps,
ssued under authorty of aw, to denote the payment of any nterna revenue
ta , as may have been spoed, destroyed, or rendered useess or unft for the
purpose ntended, or for whch the owner may have no use, or whch through
mstake may have been Impropery or unnecessary used, or where the rates or
dutes represented thereby have been e cessve n amount, pad n error, or n
any manner wrongfuy coected.
(b) Method and Condtons of owance. Such aowance or redempton
may be made, ether by gvng other stamps n eu of the stamps so aowed
for or redeemed, or by refundng the amount or vaue to the owner thereof, de-
ductng therefrom, n case of repayment, the percentage, f any, aowed to the
purchaser thereof; but no aowance or redempton sha be made n any case
unt the stamps so spoed or rendered useess sha have been returned to the
Commssoner, or unt satsfactory proof has been made showng the reason why
the same cannot be returned ; or, f so requred by the sad Commssoner, when
the person presentng the same cannot satsfactory trace the hstory of sad
stamps from ther ssuance to the presentaton of hs cam as aforesad.
(c) Tme for Fng Cams. No cams for the redempton of or aowance
for stamps sha be aowed uness presented wthn four years after the pur-
chase of such stamps from the Government.
(d) Fnaty of Commssoner s Decson. The fndngs of facts In and the
decson of the Commssoner upon the merts of any cam presented under or
authorzed by ths secton sha, n the absence of fraud or mstake n mathe-
( 3 Stat. 37 , 399; 26 U. S. C. 3176, 3: 0 .)
Sec. 1 .67 . Cam to Coector. Propretors of nterna revenue bonded
warehouses desrng to have dsted sprts stamps, descrbed n secton 1 .677,
redeemed under the provsons of secton 330 , I. R. C, must make cam on
Form 3 to the coector of nterna revenue. The stamps, for whch redempton
s camed, must be attached to the cam, and the number and denomnatons
thereof must be sted on the cam or on a sheet of paper attached thereto.
Where the stamps have been destroyed, evdence satsfactory to the Commssoner
estabshng such destructon must accompany the cam. ( 3 Stat. 29S as
amended, 37 , 37 , 399; 26 U. S. C. 2 00, 3172, 3176, 330 .)
Sec. 1 .679. Unredeemabe Stamps. Dsted sprts stamps may not be
redeemed whe dsted sprts on whch the stamps can be used n ta payment
reman on hand and whe the nterna revenue bonded warehouse remans n a
quafed status uness t s shown that the manner of ta payng sprts thereat
s such that the stamps may not be used. When an nterna revenue bonded
warehouse s dscontnued and stamps reman on hand, such stamps are not
redeemabe f the propretor operates other premses at whch the stamps coud
be ased. In such cases the stamps w be transferred to the other premses for
use thereat n accordance wth secton 1 .676. Notaton of the transfer must
be made on Form 1097 for both premses. ( 3 Stat. 29 as amended, 37 , 37 ,
399; 26 U. S. C. 2 00, 3172, 3176, 330 .)
Sec. 1 .6 0. Stamp Report. The propretor of the nterna revenue bonded
warehouse sha make a report on Form 1097 of a dsted sprts stamps re-
ceved and used at hs warehouse. ntres w be made thereon and 1 he report
submtted n accordance wth the headngs of the varous nes and coumns on
the form and the nstructons prnted thereon or ssued In respect thereto and
as requred by ths part. When dsted sprts stamps are surrendered for
redempton, n accordance wth sectons 1 .077 and 1 .67 , or are transferred
to, or receved from, other premses operated by the propretor, as authorzed n
secton 1 .670, a report thereof must be made on Form 1697, gvng the reason
recept, the name, regstry numher, and ocaton of the premses to whch the
amended, 37 , 37 ; 20 U. S. C. 2 00, 3172, 3176.)
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Regs. 3, , , 10, 11, 1 , and 29. 332
7. Reguatons 11 (26 CFR, part 1 9; 1 F. R. 1), ottng of
Ta pad Dsted Sprts, as amended, are hereby amended as
foows:
(a) Sectons 1 9.132, 1 9.167, 1 9.16 , 1 9.169, 1 9.1 6, 1 9.1 9,
1 9.203, 1 9.20 a, and 1 9.376 are amended; and
(b) Secton 1 9.20 b s added.
Subpart M cton by Dstrct Supervsor

Sec. 1 9.132. Regstry Numbers. Ta pad bottng houses w be numbered
.seray n the order of ther estabshment. separate seres w be used for
each State. Regstry numbers heretofore assgned w be retaned, and new
ta pad bottng houses w be assgned numbers n sequence thereto. Regstry
numbers prevousy assgned to dscontnued ta pad bottng houses w not be
reassgned to other ta pad bottng houses. In the case of a successor takng
over the ta pad bottng house, the same regstry number w be retaned. In
the case of a change n ocaton of the ta pad bottng house wthn the same
State, the regstry number may be retaned. ( 3 Stat. 303 as amended, 331,
37 ; 20 U. S. C. 2 03, 2 71, 3176.)
Subpart R Recept of Dsted Sprts

FROM PR MIS S OT R T N CTIFYI G PL NTS

Sec. 1 9.167. Certfcate of Ta paymf.nt, Form 1 9 , or Whoesae Lquor
Deaer s Stamp. When dsted sprts are receved n a tank car or tan truck
at a ta pad bottng house, the propretor sha at the tme the ear or truck s
empted sea : the certfcate of ta payment, Form 1 9 , or the whoesae quor
deaer s stamp, as the case may be, by cuttng out a of that porton of the
certcate or stamp wthn the border. The propretor sha then send the cut-
out porton of the certcate or stamp to the supervsor of the dstrct n whch
the propretor s ocated, and sha obterate the remander of the certfcate or
stamp. ( 3 Stat. 303 as amended, 331, 33 as amended, 37 ; 26 U. S. C. 2 03,
2 71, 2 3, 3176.)
Sec. 1 0.16 . bsence of Form 1 9 ot Whoesae Lquor Deaer s Stamp to
Re Reported. If the tank car or tank truck s receved wthout the certfcate
or whoesae quor deaer s stamp attached thereto, the propretor sha note such
fact on the b of adng, f any, or on Form 1 20 or 1 0, as the case may e,
coverng such tank car or tank truck and mmedatey notfy the dstrct super-
vsor, who w cause such nqury to be made respectng the shpment and recept
of the car or truck as he may deem approprate. Where a tank car or tank
truck wth the certfcate or whoesae quor deaer stamp mssng s receved at
a ta pad bottng house, the storekeeper-gauger w furnsh a compete report
to the dstrct supervsor. ( 3 Stat. 3(13 as amended, 331, 33 as amended, 37 ;
26 U. S. C. 2 (13, 2 71, 2 3, 3176.)
Sec. 1 9.169. Comparson of Scaped Certfcate or Whoesae Lqor
Deaer s Stamp Wth ppcaton. The dstrct supervsor w compare the
cut-out porton of the certfcate of ta -payment, Form 1 , wth the copy
of the appcaton therefor, Form 1 1 , forwarded to hm by the coector at
the tme Form 1 9 was ssued. The certcate and the appcaton w be
compared as to sera number, names of vendor and vendee, number of gaons,
amount of ta , etc., and any dscrepancy w be nvestgated. If a whoesae
quor deaer s stamp has been used n eu of a certfcate, Form 1 9 , the
dstrct supervsor w compare the cut-out porton of the stamp wth the
copy of the appcaton. Form 92. forwarded to hm at the tme the stamp was
ssued. The stamp and the appcaton w be compared as to sera number,
consgnor, number of gaons, etc., and any dscrepancy w be nvestgated.
( 3 Stat. 303 as amended, 331, 33 as amended, 37 ; 26 U. S. C. 2 03, 2S71,
2 3, 3170.)
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333 Regs. 3, , , 10, 11,1 , and 29.
Subpart S Dumpng and ottng

Sec. 1 9.1 6. Dster s Orgna or Whoesae Lquor Deaer s Pack-
ages. Where the sprts to be dumped are contaned n dster s orgna pack-
ages, the propretor w cut out wth a sharp nstrument that porton of each ta -
pad stamp upon whch s shown the sera number of the stamp, the date,
the name of the dster or warehouseman, the proof gaons, and the sera
number of the package. In the case of whoesae quor deaer s packages,
that porton of each stamp e tendng from the top to the bottom and embracng
the entre wdth between the borders of the stamp w be cut out. The cut-
out portons of the stamps w be securey attached by means of a stape,
eyeet, or smar devce, to a sp of paper n such manner that the data thereon
may be ready e amned, and such sp of paper bearng the cut-out portons
of the stamps w be securey attached to the orgna Form 230. ( 3 Stat.
303 as amended, 329, 331, 37 ; 26 U. S. C. 2 03, 2 G3, 2 71, 3176.)
Sec. 1 9.1 9. Unstamped Sprts. When a stamp has been ost or mutated
so that the requred porton thereof cannot, be returned, an affdavt settng
forth a the facts n the case w be made by the propretor and attached
to each copy of Form 230. When sprts are receved n a tank car or tank truck
bearng a certfcate of ta payment. Form 1 9 , or a whoesae quor deaer s
stamp, or when sprts are receved by ppene, or where sprts n stamped
bottes are to be dumped, an e panatory statement w be made n the coumns
provded for the descrpton of stamps on Form 230, as Form 1 9 , Sera
No , dated , heretofore submtted, or whoesae
quor deaer s stamp, Sera No , dated , hereto-
fore submtted, or Form 1 20, dated , ppene transfer
on Form 1 9 , Sera No , or Form 1 10, dated ,
ppene transfer ou Form 1 9 , Sera No , or See Form 230, Sera
No , date , or See Form 237, Sera No ,
dated , or In Stamped ottes, as the case may be.
If the sprts receved by ppene were ta pad by the use of dsted sprts
stamps, an e panatory statement w be made n the coumns provded for the
descrpton of stamps on Form 230, as, Dsted sprts stamps, Form 1 20
dated , or Dsted sprts stamps, Form 1 0 dated
, as the case may be. ( 3 Stat. 303 as amended, 329,
331, 33 as amended, 37 ; 26 U. S. C. 2 03, 2 63, 2 71, 2 3, 3176.)
Sec. 1 9.203. Destructon of Stamps, Marks, and rands. When packages
of sprts are dumped for bottng, a stamps, e cept the cut-out portons
attached to Form 230, and a marks and brands whch such packages are
requred by aw to bear, must be competey effaced and obterated. Ths
shoud be done mmedatey upon competon of the dumpng, dranng, and
rnsng of the packages. Certfcates of ta -payment or whoesae quor
deaer s stamps aff ed to tank cars or tank trucks of dsted sprts, e cept
the porton thereof scaped for submsson to the dstrct supervsor, must
kewse be mmedatey destroyed when such cars or trucks are empted. When
packages of wnes are empted by any person, a stamps and marks whch
such packages are requred by aw and reguatons to bear must be destroyed
by scrapng or obteratng Immedatey the packages are empted. abes
and stamps aff ed to tank cars, tanks, tank trucks, or smar contaners of wne
ndcatng ta payment of the contents must aso be scraped or obterated
Immedatey such contaners are empted. ( 3 Stat. 329, 330, 331, 33 as
amended, 37 , 39 ; 26 U. S. C. 2 63, 2 66, 2 71, 2 3, 3176, 3301.)
Sec. 1 9.20 a. Ta payment or Rnsngs. In eu of the procedure prescrbed
n secton 1 9.20 concernng the rnsngs of packages, the propretor may rnse
and save the rnsngs from packages, to any e tent desred, whch were not
rnsed n the nterna revenue bonded warehouse at the tme of ta payment and
are so marked n accordance wth the provsons of Reguatons 10 (26 CFR,
part 1 ) : Provded, That the rnsngs are run nto a cosed, ocked tank for
ta payment of the proof gaon contents. Such rnsngs may be used for reduc-
ton purposes n the ta pad bottng house, or n a contguous rectfyng pant
n the manufacture of rectfed sprts or products sub|ect to the rectfcaton
ta . When used for reducton, the rnsngs must be used n smar sprts.
When used n the manufacture of rectfed sprts or products, the rnsngs may
be used wth any other approprate sprts. The tank nto whch the rnsngs
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Regs. 3, , , 10, 11, 1 , and 29.
33
are run w be mounted on accurate scaes, or equpped wth a sutabe measur-
ng devce whereby the contents can be accuratey determned. Upon com-
peton of the rnsng of the packages, the contents of the tank w be gauged
by the Government offcer and the proof gaon contents determned. The gauge
of the tank w be made by weght (where the tank s mounted on scaes) or
by measure. The Government offcer w prepare Form 1 20, n trpcate,
governng the gauge of the tank showng the proof gaons, and the knd and
age of the sprts from whch the rnsngs were obtaned and w dever a copes
to the propretor. The propretor w cance the necessary number of dsted
sprts stumps prescrbed by Reguatons 10 (20 CFR, part 1 ) for the ta pay-
ment of dsted sprts botted-n-bond, n the e act amount of the ta due,
n the manner prescrbed by secton 1 9.20 b. The propretor w then attach
the stamps to the orgna copy of Form 1 20 and submt t wth a copes of
Form 1 20 to the Government offcer. The Government offcer, after determn-
ng that the canceed stamps are n the proper amount of the ta due, w
then further cance the stamps n the manner prescrbed by secton 1 9.20 b, and
w e ecute a certfcate on the back of Form 1 20, certfyng to the recept and
further canceaton of stamps for the amount of ta due. The canceed dsted
sprts stamps w be securey attached to the copy of Form 1 20 by means of
a stape, eyeet, or smar devce. The storekeeper-gauger w attach the
copy of Form 1 20 to whch the canceed stamps are attached to the tank,
and then reease the rnsngs for reducton purposes or for transfer by ppe-
ne to a contguous rectfyng pant for use n rectfcaton, as authorzed
heren. The Government offcer w gve one copy of Form 1 20 to the propretor
and retan the remanng copy. To dentfy propery the sprts n the tank,
Form 1 20 to whch the stamps are attached w contnue to reman on the
tank unt a the rnsngs covered by such stamps have been removed, at whch
tme such form, wth the stamps attached, w be forwarded to the dstrct
supervsor. Where the rnsngs are transferred by ppene to a contguous
rectfyng pant, an addtona copy of Form 1 20 w be forwarded to the Gov-
ernment offcer assgned to such pant. When so transferred, the rnsngs w
be accounted for n the rectfyng pant n the same manner as other sprts
receved for rectfcaton. Packages of mported sprts may smary be rnsed
and the rnsngs saved f ta pad n accordance wth ths procedure. The pro-
pretor sha make a report on Form 1097, propery modfed, of a dsted
sprts stamps receved and used at the ta pad bottng house for ta payment
of rnsngs authorzed by ths secton. The form sha be dsposed of n accord-
ance wth the nstructons prnted thereon. ( 3 Stat. 29 as amended, 303 as
amended, 331, 33 as amended. 37 ; 26 U. S. C. 2 00, 2S03, 2 71, 2 3, 3176.)
Sec. 1 9.20 b. Manner of Canceng Stamps Used To Ta pay nsnos. t
the tme of devery of the stamps to the Government offcer for payment of
the dsted sprts ta , the propretor sha cance the stamps by perforaton as
prescrbed heren, or by egby wrtng or stampng on each stamp wth ndebe
(nda) nk, hs name, the regstry number of the ta pad bottng house, and
the date of the Form 1 20; for e ampe, ohn Doe Dstng Company, Ta -
pad ottng ouse No. G3, New ersey, Form 1 20, dated une 1, 19 2. Pror
to use n ta payment, the propretor, f he so desres, may partay precance
the stamps to the e tent of showng hs name and regstry number ony. The
date of the Form 1 20 must not be entered on the stamp n advance of actua
use n ta payment. The dstrct supervsor may, n hs dscreton, approve
a sutabe abbrevaton of the requred nformaton for canceaton, ncudng
the ntas for the name of the propretor, f adequate for dentfcaton; for
e ampe, . D. Dst. Co. TP 03-N -1 20-O-1- 2. - The propretor s can-
ceaton must be made on the ower porton of the stamp beow the fgures and
words ndcatng the denomnaton of the stamp. If the propretor s canceaton
s made by perforaton, each etter and fgure of the canceaton must be not
ess than one-fourth of an nch n heght and of proportonate wdth and sutaby
spaced for egbty and dstnctness, and must be ceary and sharpy outned
ether ( ) by perforaton through the substance of the stamp, and not merey
puncturng t, each perforaton to be not ess than one thrty-second of an nch
n wdth or dameter ; or (b) by perforatons n the form of ncsons through
the stamp of at east one thrty-second of an nch n wdth, cuttng out the form
of the etters and the fgures from the substance of the stamp, whch etters and
fgures must be of the sze, spacng, and dstnctness as above specfed. The
Government offcer, after determnng that the canceed stamps are n the fu
amount of the ta due, w further cance and deface the stamps by cattng a
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33 Regs. 3, , , 10, 11, 1 , and 29.
hoe one-haf nch square n the upper rght-hand corner, and whov wthn
the border of each stamp. ( 3 Stat. 29 as amended, 37 , 309; U. S. C. 2S00, 3170,
3303.)
Subpart GO Dutes of Storekeeper-Gaugers

Sec. 1 9.376. Degree of Supervson. The storekeeper-Ranker, who supervses
the operatons of a ta pad bottng house n addton to hs other dutes, w
mantan such supervson as w enabe hm to know that no unauthorzed
mngng of sprts occurs: that ony awfuy ta pad sprts arc botted; and
that the requrements of ths part n other respects are beng observed by the
propretor. e w, nsofar as hs other dutes permt, e amne tank cars or
tank trucks of sprts before they are unoaded to determne that the seas are
ntact and that each bears a coector s certfcate of ta payment or whoesae
quor deaer s stamp, as the case may be; supervse the recept of sprts by
ppene; e amne packages of sprts to be dumped for bottng to determne
whether they bear proper evdence of ta payment; e amne storage tanks from
whch sprts are to e removed for bottng to determne whether the contents
correspond wth the record on Fomn 703- , 1 0 or Form 1 20 attached to the
tank; verfy cases fed; supervse the bottng and storng of dsted sprts
and wnes especay for e port, wth beneft of drawback, n accordance wth
Reguatons 2 (26 .CFR, part 17( ) ; nspect bottes used for packagng sprts
to determne whether the provsons of Reguatons 13 (20 CFR, part 17 ) are
beng comped wth; nspect abes to determne whether the provsons of
Subpart U are beng observed; determne whether proper use s made of strp
stamps; and determne whether proper records are kept by the propretor of
the recept, dumpng, bottng, and dsposton of sprts. The requred super-
vson may be accompshed by observatons made at such tmes as the store-
keeper-ganger must necessary vst the bottng bouse for the e amnaton of
packages of sprts to be dumped for bottng, the verfcaton of cases fed, the
ssuance of stamps, etc., and by nspecton made at Irreguar ntervas from tme
to tme as bs dutes at the dstery, bonded warehouse, or rectfyng pant
permt. ( 3 Stat. 303 as amended, 331, 37 ; 20 U. S. C. 2S03, 2 71, 3176.)
. Reguatons 1 (26 CFR, part 190; 1 F. R. 790), Rectfcaton
of Sprts and Wnes, as amended, are amended as foows:
(a) Sectons 190.312, 190. 09, 190. 10, 190. 29. 190. 32, 190. 1,
190. 3a, 190.6 7, 190.71 , 190.73 , 190.7 0, 190.7 2, 190.7 3, 190.7 ,
190.7 and 190.7 6 are amended;
(6) Sectons 190. 3b, 190.71 a, 190.73 a and 190.7 7a are added;
and
(c) Sectons 190.73 and 190.7 1 are revoked.
Subpart O cton by Dstrct Supervsor
orgna estabshment

Sec. 190.312. Regstry Numbers. Rectfyng pants w be numbered seray
n the order of ther estabshment. separate seres w be used for each
State. Regstry numbers heretofore assgned w be retaned, and new rec-
tfyng pants w be assgned numbers n sequence thereto. Regstry num-
bers prevousy assgned to dscontnued rectfyng pants w not be reassgned
to other rectfyng pants. In the case of a successor takng over the rectfyng
pant, the same regstry number mny bo retaned. In the case of a change n
ocaton of the rectfyng pant wthn the same State, the same regstry number
may be retaned. ( 3 Stat. 300 as amended, 37 ; 20 U. S. C. 2 01, 3176.)
Subpart W Recept of Sprts

Sec. 190. 09. Certfcate of Ta payment or Whoesae Lquor Deaer s
Stamp. When dsted sprts are receved n a tank car or tank truck at a
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Regs. 3, , , 1 , 11, 1 , and 29. 336
rectfyng pant, the rectfer sha at the tme the car or truck Is empted scap
the certfcate of ta payment. Form 1 9 , or the whoesae quor deaer s stamp,
as the case may be, by cuttng out a of that porton of the certfcate or stamp
wthn the border. The rectfer sha then send the cut-out porton of the cer-
tfcate or stamp to the supervsor of the dstrct In whch the rectfer s ocated,
and sha obterate the remander of the certfcate or stamp. If the tank car
or tank truck s receved wthout the certfcate or whoesae quor deaer s
stamp attached thereto, the rectfer sha note such fact on the b of adng
(f any) or on Form 1 20 or 1 0, as the case may be, coverng such tank car or
tank truck and mmedntey notfy the dstrct supervsor, who w cause such
nqury to be made respectng the shpment and recept of the car or truck as
he may deem approprate. Where a tank car or tank truck wth the certfcate or
whoesae quor deaer stamp mssng s receved at a rectfyng pant, the
storekeeper-gauger w furnsh a compete report to the dstrct supervsor.
( 3 Stat, 300 as amended, 33 as amended. 37 ; 26 U. S. C. 2 01, 2 3. 3176.)
Sec. 190. 10. Comparson of Scaped Certfcate or Whoesae Lquor Dea-
er s Stamp Wth ppcaton. The dstrct supervsor w compare the cut-out
porton of the certfcate of ta payment, Form 1 9 , wth the copy of the appca-
ton therefor, Form 1 9 , forwarded to hm by the coector at the tme Form
1 9 was ssued. The certfcate and the appcaton w be compared as to
sera number, names of vendor and vendee, number of gaons, amount of ta ,
etc., and any dscrepancy w be nvestgated. If a whoesae quor deaer s
stamp has been used n eu of a certfcate. Form 1 9 . the dstrct supervsor
w compare the cut-out porton of the stamp wth the copy of the appcaton.
Form 92, forwarded to hm at the tme the stamp was Issued. The stamp and
the appcaton w be compared ns to sera number, consgnor, number of ga-
ons, etc., and any dscrepancy w be nvestgated. ( 3 Stat. 300 as amended,
33 as amended, 37 ; 26 D. S. C. 2S01, 2S 3, 3176.)
Subpart Gaugng and Dumpng Sprts for Rectfcaton

Sec. 190. 29. Whoesae Lquor Deaer s Packages. Where sprts con-
taned n whoesae quor deaer s packages are to be dumped, that porton of
each whoesae quor deaer s stamp e tedng from the top to the bottom and
embracng the entre wdth between the borders of the stamp w be cut out
and attached to Form 122 n the same manner as ta -pad stamps. ( 3 Stat
300 as amended, 310, 329, 37 ; 20 U. S. C. 2 01, 2 13, 2 63, 3176.)
Sec 190. 32. Notaton on Form 122. When sprts are receved n a tank
car or tank truck bearng a certfcate of ta payment, Form 1 9 , or a whoesae
quor deaer s stamp, or where sprts are receved by ppene, or where sprts
In stamped bottes are to be dumped, an e panatory statement w be made
n the coumns provded for the descrptons of stamps on Form 122, as Form
1 9 . Sera No , dated , heretofore submtted, or
Whoesae quor deaer s stamp. Sera No , dated ,
heretofore submtted, or Form 1 20, dated , ppene
transfer on Form 1 9 , Sera No , or Form 1 0, dated .
ppene transfer on Form 1 9 , Sera No , or In stamped bottes,
as the case may he. If the sprts receved by ppene were ta pad by the
use of dsted sprts stamps, an e panatory statement w be made n the
coumns provded for the descrpton of stamps on Form 122, as Dsted
sprts stamps. Form 1 20 dated , or Dsted sprts
stamps, Form 1 10 dated , as the case may be. ( 3 Stat.
310, 33 as amended. 37 ; 26 U. S. C. 2 13, 2 3, 3176.)
Skc. 190. 1. Destructon of Certfcate or Whoesae Lquor Deaer s
Stamp. Certfcates of ta payment, or whoesae quor deaer s stamps, aff ed
to tank cars or tank trucks of dsted sprts, e cept the porton thereof
sea ed for submsson to the dstrct supervsor, must kewse be mmedatey
destroyed when such cars or trucks are empted. ( 3 Stat. 300, 33 as amended,
37 ; 26 IT. S. C. 2 01, 2 3, 3176.)
Sue. 190. 3a. Ta payment of Rnsngs. In eu of the procedure prescrbed
In secton 190. 3 concernng the rnsng of packages, the propretor may rnse
and save the rnsngs from packages, to any e tent desred, whch were not
rnsed n the nterna revenue bonded warehouse at the tme of ta payment
and are so marked n accordance wth the provsons of Reguatons 10 (26
CFR, part 1 ) : Provded, That the rnsngs are run Into a cosed, ocked tank
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337 Regs. 3; , , 10, 11,1 , and 29.
for ta payment of the proof gaon contents. Such rnsngs may be used for
reducton purposes, or n the manufacture of rectfed sprts or products sub|ect
to the rectfcaton ta . When used for reducton, the rnsngs must be used
n smar sprts. When used n the manufacture of rectfed sprts or products,
the rnsngs may be used wth any other approprate sprts. The tank nto
whch the rnsngs are run w be mounted on accurate scaes, or equpped
wth a sutabe measurng devce whereby the contents can be accuratey deter-
mned. Upon competon of the rnsng of the packages, the contents of the tank
w be gauged by the Government offcer and the proof gaon contents deter-
mned. The gauge of the tank w be made by weght (where the tank s
mounted on scaes) or by measure. The Government offcer w prepare Form
1 20, n trpcate, coverng the gauge of the tank showng the proof gaons,
and the knd and age of the sprts from whch the rnsngs were obtaned
and w dever a copes to the propretor. The propretor w cance the
necessary number of dsted sprts stamps prescrbed by Reguatons 10 (20
CFR, part 1 ) for the ta payment of dsted sprts botted n bond, n the
e act amount of the ta due, n the manner prescrbed by secton 100. 3b.
The propretor w then attach the stamps to the orgna copy of Form 1 20
and submt t wth a copes of Form 1 20 to the Government offcer. The Gov-
ernment offcer w determne that the canceed stamps are n the fu amount
of the ta due, and w then further cance the stamps n the manner prescrbed
by secton 190. 31), and w e ecute a certfcate on the back of Form 1 20 cert-
fyng to the recept and further canceaton of stamps for the amount of ta
due. The canceed dsted sprts stamps w be securey attached to the copy
of Form 1 20 by means of a stape, eyeet, or smar devce. The storekeeper-
gauger w attach the copy of Form 1 20 to whch the canceed stamps are
attached to the tank, and then reease the rnsngs for reducton purposes or
for use n rectfcaton, as authorzed heren. The Government offcer w gve
one copy of Form 1 20 to the propretor and retan the remanng copy. To
dentfy propery the sprts n the tank, Form 1 20 to whch the stamps are
attached w contnue to reman on the tank unt a rnsngs covered by such
stamps have been removed, at whch tme such form, wth the stamps attached,
w be forwarded to the dstrct supervsor. Packages of mported sprts
may smary be rnsed and the rnsngs saved f ta pad n accordance wth
ths procedure. The propretor sha make a report on Form 1697, propery
modfed, of a dsted sprts stamps receved and used at the rectfyng
pant for ta payment of rnsngs authorzed by ths secton. The form sha
be dsposed of n accordance wth the nstructons prnted thereon. ( 3 Stat.
2 ) as amended, 300, 33 as amended, 37 ; 26 U. S. C. 2S00, 2 01, 2 3, 3176.)
Sec. 190. 3b. Manner of Canceng Stamps. t the tme of devery of
the stamps to the Government offcer for payment of the dsted sprts ta ,
the rectfer sha cance the stamps by perforaton as prescrbed heren, or by
egby wrtng or stampng on each stamp wth ndebe (Inda) nk, hs name,
the regstry number of the rectfyng pant, and the date of the Form 1 20;
for e ampe, ohn Doe Company, Rectfyng Pant No. 63, New ersey, Form
1 20, dated une 1, 19 2. Pror to use n ta payment, the propretor, f he so
desres, may partay precance the stamps to the e tent of showng hs name
and regstry number ony. The date of the Form 1 20 must not be entered on
the stamp n advance of actua use n ta payment. The dstrct supervsor
may, n hs dscreton, approve a sutabe abbrevaton of the requred nforma-
ton for canceaton, ncudng the ntas for the name of the propretor, If
adequate for dentfcaton; for e ampe, . D. Co. R. P. 63-N - 20-6-1- 2.
The propretor s canceaton must be made on the ower porton of the stamp
beow the fgures and words ndcatng the denomnaton of the stamp. If
the propretor s canceaton s made by perforaton, each etter and fgure of the
canceaton must be not ess than one-fourth of an nch n heght and of
proportonate wdth and sutaby spaced for egbty and dstnctness, and
must be ceary and sharpy outned ether (a) by perforaton through the
substance of the stamp, and not merey puncturng t, each perforaton to be not
ess than one thrty-second of an nch n wdth or dameter; or (6) by perfora-
tons n the form of ncsons through the stamp of at east one thrty-second
of an nch n wdth, cuttng- out the form of the etters and fgures from the
substance of the stamp, whch etters and fgures must be of the sze, spacng,
and dstnctness as above specfed. The Government offcer, after determn-
ng that the canceed stamps are n the fu amount of the ta due, w further
cance and deface the stamps by cuttng a hoe one-haf nch square n the upper
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Regs. 3, , , 10, 11, 1 , and 29. 33
rght-hand corner, and whoy wthn the border, of each stamp. ( 3 Stat.
29 as amended, 300, 37 , 390; 20 U. S. C. 2 00, 2 01, 3176, 3303.)
Subpart FF ottng or Unrectfed Spbts and Wnes

Sec. 190.6 7. Unstamped Sprts. Where the stamp on a package of sprts
to be dumped for bottng wthout rectfcaton has been ost or mutated,
so that the requred porton thereof cannot be returned, or where sprts re-
ceved n tank cars or tank trucks bearng certfcate of ta -payment. Form
1 9 , or a whoesae quor deaer s stamp, or where sprts are receved by
ppene from premses other than a rectfyng pant, or where sprts n stamped
bottes, or wnes, are to be dumped for bottng wthout rectfcaton, the same
procedure w be foowed as that prescrbed n sectons 190. 30-190. 33 n
the case of the dumpng of sprts or wnes from such contaners for rectf-
caton. When sprts are receved by ppene from a rectfyng pant, an
e panatory statement w be made n the coumn provded for the descrpton
of stamps on Form 230, as see Form 230, Sera o , dated
( 3 Stat. 300 as amended, 329, 33 as amended, 37 ; 26 U. S. C. 2 01, 2 03,
2 3, 3176.)
Subpart GG Stamps
R CTIFI D SPIRITS ST MPS (FOR OTTLING T N S)

Sec. 190.71S. Manner of Canceng Stamps. t the tme of devery of the
stamps to the Government offcer for payment of the rectfed sprts ta , the
rectfer sha cance the stamps by perforaton (as prescrbed by secton
190.71 a) or by egby wrtng or stampng ou each stamp wth ndebe (nda)
nk, hs name, regstry number, and the sera number of Form 237; for e ampe.
ohn Doe Company, Rectfyng Pant No. 63, New ersey, Form 237. Sera
No Pror to use n ta payment, the propretor, f he so desres,
may partay precance the stamps to the e tent of showng hs name and
regstry number ony. The sera number of the Form 237 must not be entered
on the stamp n advance of actua use n payment of the rectfcaton ta . The
dstrct supervsor may, n hs dscreton, approve a sutabe abbrevaton of
the requred nformaton for canceaton, ncudng the ntas for the name
of the propretor, f adequate for dentfcaton; for e ampe, . D. Co. P
63-N -237-S/N The propretor s canceaton must be made on the
ower porton of the stamp beow the fgures and words ndcatng the denom-
naton of the stamp. The Government offcer, after determnng that the can-
ceed stamps are n the proper amount of the ta due, w then further cance
and deface the stumps by cuttng a hoe one-haf nch square n the upper
rght-hand corner, and whoy wthn the border, of each stamp. ( 3 StaL.
300 as amended, 37 ; 26 U. S. C. 2 01. 3176.)
Sec. 190.71 a. Manner of Perforatng Stamps. If the rectfer s canceaton
s made by perforaton, each etter and fgure of the canceaton must be not
ess than one-fourth of an nch n heght and of proportonate wdth and sutaby-
spaced for egbty and dstnctness, and must be ceary and sharpy outned
ether (a) by perforaton through the substance of the stamp, and not merey
puncturng t, each perforaton to be not ess than one thrty-second of an nch
n wdth or dameter; or (6) by perforatons n the form of ncsons through
the stamp of at east one thrty-second of an nch n wdth, cuttng out the form
of the etters and the fgures from the substance of the stamp, whch etters and
fgures must be of the sze, spacng, and dstnctness as above specfed. ( 3
Stat. 300 as amended, 37 , 399; 26 U. S. C. 2 01, 3176, 3313.)
whoesae quor deaer s stamps

Sec. 190.73 a. Whoesae Lquor Deaer s Stamp ooks. Whoesae quor
deaer s stamps w be furnshed by coectors to dstrct supervsors upon re-
quest. Dstrct supervsors w suppy storekeeper-gaugers n charge of rect-
fyng pants where such stamps are used wth such quanttes as may be requred.
When a the stamps n a book have been ssued, the storekeeper-gauger In charge
w return the stub book to the dstrct supervsor. ( 3 Stat. 300 as amended,
301, 329, 37 ; 26 U. S. C. 2 01, 2.S02, 2 03, 3176.)
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339 Regs. 3, , , 10, 11, 1 , and 29.
Sec. 190.73 . ppcaton to Package. Rectfers desrng to draw dsted
sprts nto whoesae quor deaer s packages of wne gaons or more, as au-
thorzed n secton 190.733, w make appcaton therefor on Form 92, n quad-
rupcate, gvng a of the nformaton caed for by the form. Where the sprts
to be so packaged have been dumped from the stamped contaners n whch re-
ceved, the appcaton sha show, n addton to other appcabe data, the date
and number (122 or 230) of the form pursuant to whch the sprts were dumped.
If the sprts were receved n a tank car or tank truck, the appcaton sha
show, n addton to other appcabe data, the date the certfcate of ta pay-
ment (Form 1 9 ) or whoesae quor deaer s stamp, as the case may be, was
submtted to the dstrct supervsors. Shoud the sprts, whch t s perms-
sbe to transfer to whoesae quor deaer s packages under secton 190.733, be
contaned n stamped packages, the stumps thereon must be cut out and the
cut-out porton securey attached by means of a stape, eyeet, or smar
devce, to a sp of paper n such manner that the data thereon may be ready
e amned, and such sp of paper bearng the cut-out portons of the stamps
w be securey attached to one copy of the appcaton. ( 3 Stat. 300 as
amended. 329, 37 ; 26 U. S. C. 2 01, 2 63, 3176.)
Sec. 190.7 0. ppcaton for Stamps. When the sprts have been propery
packaged and the detas of the gauge thereof entered on Form 92, the rectfer
w make appcaton on such form for the ssuance of whoesae quor deaer s
stamps for the packages and dever a copes of the form to the storekeeper-
gauger. ( 3 Stat. 300 as amended, 301, 329, 37 ; 26 U. S. C. 2 01, 2 02, 2S63,
3176.)
Sec. 190.7 2. Issuance of Stamps. Upon recept of Form 92 wth appcaton
for whoesae quor deaer s stamps duy e ecuted, the storekeeper-ganger n
charge w ssue a whoesae quor deaer s stamp for each package sted on
the form. When ssung the stamps, the storekeeper-gauger w enter on each
stamp a the nformaton caed for and sgn the stamps n the space provded
therefor. The storekeeper-gauger may enter hs sgnature by means of a fac-
sme stamp, provded care s taken to use ony such nk as w nether fade
nor bur. Where an apprecabe number of whoesae quor deaer s packages
w be fed, the rectfer must provde the storekeeper-ganger n charge wth
sutabe rubber stamps for the nserton of nformaton common to a whoe-
sae quor deaer s stamps to be used by hm. ( 3 Stat. 300 as amended, 301,
329, 37 ; 26 U. S. C. 2 01, 2 02, 2 63, 3176.)
Sec 190.7 3. Stamp Stub. The storekeeper-gauger n charge sha enter on the
stub connected wth each whoesae quor deaer s stamp data smar to that
entered on the stamp, to preserve a perfect record of the detached stamp. ( 3
Stat. 300 as amended, 301, 329, 373; 26 U. S. C. 2S01, 2 02, 2 63, 3176.)
Sec 190.7 . Dsposton of Form 92. The storekeeper-gauger n charge w
enter the sera numbers of the whoesae quor deaer s stamps n the proper
coumn on each Form 92, opposte the descrpton of the package for whch the
stamp s ssued. e w then return two copes of Form 92 to the rectfer wth
the stamps, forward one copy of the form to the dstrct supervsor and retan
the remanng copy. The storekeeper-gauger n charge sha pace hs retaned
copy n a permanent fe as authorty for ssuance of the stamps. The rectfer
w forward one copy of Form 92 to the vendee. ( 3 Stat. 300 as amended, 301,
329, 37 ; 26 U. S. C. 2 01, 2 02, 2 63. 3176.)
Sec 190.7 . Whoesae Lquor Deaer s Stamps for Rectfed Sprts.
Storekeeper-gangers may not furnsh whoesae quor deaer s stamps n eu
of and n e change for stamps for rectfed sprts, uness the package covered
by the stamp for rectfed sprts s to be broken nto smaer packages. ( 3
Stat. 300 as amended, 301, 329, 37 ; 26 U. S. C. 2 01, 2 02, 2S63. 3176.)
Sec. 190.7 0. ff ng and Canceng of Stamps. Upon recept from the
storekeeper-gauger n charge of Form 92 and the accompanyng stamps, the rect-
fer w aff the stamps to the packages and cance the same under the superv-
son of the Government offcer. The stamps w be aff ed and canceed n the
same manner as rectfed sprts stamps are requred n ths subpart to be aff ed
and canceed. ( 3 Stat. 300 as amended. 37 , 39 ; 26 U. S. C. 2 01, 3176, 3301.)
Sec 190.7 7a. Record and Report of Whoesae Lquor Deaer s Stamps.
Storekeeper-gaugers havng custody of whoesae quor deaer s stamps at
rectfyng pants w keep a record of such stamps receved and used on part 1
of Form 11 , propery modfed for the purpose, and as requred by nstructons
on the form or as ssued n respect thereto. The record w be kept n bound
form avaabe for nspecton by other Government offcers. The storekeeper-
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Regs. 3, , , 10, 11, 1 , and 29. 3 0
gauger w prepare hs monthy report on part 2 of Form 11 , propery modfed
and In dupcate, retan one copy and furnsh one copy to the dstrct supervsor.
( 3 Stat. 300 as amended, 301, 37 ; 26 U. S. C. 2 01, 2 02, 3176.)
9. Secton 197.2 ( ) and 197.2 (c) of Reguatons 29 (26 CFR,
part 197; 7 F. R. 9111), Drawback of Ta on Dsted Sprts Used
m the Manufacture of Nonbeverage Products, as amended, are
amended as foows:
Cams fob Drawback
Sec. 197.2 . Supportng Data. ach cam w be accompaned by state-
ments of supportng data whch sha be prepared n dupcate. One copy sha
be attached to the orgna and one copy sha be attached to the dupcate
of the cam.
(a) Data wth respect to payment of speca ta : statement showng
(1) sera number of speca ta stamp, (2) denomnaton, (3) fsca year for
whch ssued, ( ) date o ssuance, and ( ) coecton dstrct where ssued.
(6) Data wth respect to ta payment and recept of the dsted sprts on
whch the drawback s camed :
(1) If the dsted sprts were receved In tank cars, a statement showng
date of recept, the name and address of the vendor, whether ta payment was
evdenced by a certfcate of ta payment, Fcrm 1 9 , or a whoesae quor
deaer s stamp, the sera number of the certfcate of ta payment (Form 1 9 ),
or the whoesae quor deaer s stamp, the date of ssuance of the certfcate
or whoesae quor deaer s stamp, and the name of the producer, knd, quantty,
and proof of the sprts. (When a tank car or tank truck s empted, the
certfcate of ta payment. Form 1 9 , or the whoesae quor deaer s stamp,
as the case may be, aff ed thereto sha be scaped by cuttng out a of the
porton of the certfcate or stamp wthn the borders and the cut-out porton of
the certfcate or stamp sha be mmedatey forwarded to the dstrct supervsor.
If the tank car or tank truck s receved wthout the certfcate or stamp
attached thereto, the vendee sha note such fact on the b of adng, f any,
or on Form 1 0 or 1 20, as the case may be, and mmedatey notfy the dstrct
supervsor who w cause such nqury to be made respectng the shpment and
recept of the conveyance as he may deem approprate.)
(2) If the dsted sprts were receved n contaners, such as barres, drums,
cans, or cases, bearng ta pad or whoesae quor deaer s stamps, a statement
showng the date of recept, the name and address of the vendor, the sera num-
ber of the ta pad or whoesae quor deaer s stamp aff ed to the contaner, the
date of ssuance appearng on the stamp, the sera number, f any, of the
contaner, and the name of the producer, knd, quantty, and proof of the sprts.
(When the package s empted, the stamp sha be scaped and attached to the
ne t cam fed for drawback on the sprts whch were n such package. The
scaped stamp w be retaned by the dstrct supervsor wth the cams record
of the camant.)
(3) If the dsted sprts were receved n bottes, a statement showng the
date of recept, the name and address of the vendor, the sera number of the
strp stamp aff ed over the mouth and neck of the botte, and the name of the
botter, knd, quantty, and proof of the sprts.
(c) Data wth respect to use of dsted sprts upon whch drawback s
camed n the manufacture of nonbeverage products:
(1) statement showng the name, descrpton, and formua number, f any,
of each nonbeverage product n the manufacture of whch dsted sprts were
used, the acohoc content by voume of each such product, the number of proof
gaons and knd of dsted sprts used n manufacture thereof, and the quantty
produced.
(2) Revoked by Treasury Decson 72, effectve ugust 23, 19 7; 12 F. R.
S 2.
(. ) Manufacturers ntendng to fe drawback cams coverng dsted sprts
used n the manufacture of nonbeverage products sha submt quanttatve
formuas coverng a such preparatons drect to the Deputy Commssoner,
coho and Tobacco Ta Dvson, Washngton 2 , D. C, on Form No. 167 , n
trpcate; e cept that quanttatve formuas need not be submtted f the prod-
ucts are medcna preparatons, tnctures, or fud e tracts produced under
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3 1 Regs. 3, , , 10, 11, 1 , and 29.
formuas prescrbed by the Unted States Pharmacopoea, the Natona Formu-
ary, or the mercan Insttute of omeopathy, and such products are dentfed
n the supportng data by name and foowed by the etters U. S. P., N. P.,
or . I. ., as the case may be. In the case of food products, such as preserved
fruts, cakes, buns, soups, etc., t w be suffcent f the formuas therefor show
the quantty of proof gaons of dsted sprts used n the producton of a gven
quantty of fnshed product. seres of numbers w be gven the formuas
commencng wth number 1 and contnung thereafter n numerca sequence.
mended or revsed formuas w be consdered as new formuas and seray
numbered accordngy.
( ) Formuas for nonbeverage products sha be submtted to the Deputy
Commssoner, coho and Tobacco Ta Dvson, Washngton 2 , D. C, before
or at the tme of manufacture of the products. Upon recept by the Deputy
Commssoner, the formuas w be e amned and f found to be medcnes,
medcna preparatons, food products, favors, or favorng e tracts whch are
unft for beverage purposes, they w be approved. If the formuas do not meet
the requrements of the aw for drawback products, they w be dsapproved.
No drawback w be aowed on dsted sprts used n a dsapproved product,
uness such product s ater used n the manufacture of an approved nonbeverage
product. One copy of each formua w be retaned by the Deputy Commssoner,
one copy returned to the manufacturer, and one copy w be sent to the dstrct
supervsor for fng. The formuas returned to manufacturers sha be fed
n sera order by the manufacturer and made avaabe for e amnaton by
nterna revenue offcers n the nvestgaton of drawback cams. The copes
sent to dstrct supervsors sha kewse be fed n sera order, avaabe for
e amnaton by drawback cerks and aboratory chemsts.

( 3 Stat. 67 ; 26 U. S. C. 3791.)
10. It s found that compance wth the notce and pubc rue-
makng procedure, and effectve date requrements of the dmnstra-
tve Procedure ct ( U. S. C. 1001 et seq.), s unnecessary n connec-
ton wth the ssuance of these amendments for the reason that the
changes made are of a berazng character.
11. These reguatons sha be effectve upon pubcaton n the
Federa Regster.
3 Stat. 29 as amended. 300 as amended, 301, 303 as amended, 310,
316 as amended, 329, 330, 331, 332. 333, 33 as amended, 3 7, 3 , 360,
36 . 373 as amended, 373. 37 , 37 , 39 , 399. 7 as amended, 67, 92;
26 U. S. C. 2 00, 2 01, 2 02, 2 03, 2 13, 2 2 , 2 63, 2 66, 2 71, 2 73,
2 7 , 2 3, 3101, 310 , 3112, 311 , 312 , 3170, 3171, 3172, 317 , 3176,
3300, 3301, 3303, 330 , 36 6, 3791, 017.)
ohn . Dunap,
C orrwssoner of Interna Revenue.
. . Foey,
(Pubshed n the Federa Regster uy 19, 19 2)
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Regs. 1 , 190.122, etc. 3 2
DISTILL D SPIRITS
INT RN L R NU COD
Reguatons 1 , Sectons 190.122, tc. 19 2-1 -13 6
T. D. 912
R CTIFIC TION OF SPIRITS ND WIN S
Producton of vodka
Washngton 2 , D. C.
1. Secton 2 00(a) ( ) of the Interna Revenue Code was amended
by Pubc Law 3 ( 2d Cong.) C. . 19 2-1, 2G2 , effectve uy
1,19 2, by deetng the perod at the end thereof and addng the fo-
owng : or to vodka produced from pure sprts n the manner author-
zed at regstered dsteres. The secton now reads:
INT RN L R NU COD
SUDC PT DISTILL D SPIRITS
Part I Provsons Reatng to Ta
S C. 2 00 T .
(a) Rate.
(1)

( ) Rectfed sprts and wnes. In addton to the ta mposed by
ths chapter on dsted sprts and wnes, there sha be eved, assessed,
coected, and pad, a ta of 30 cents on each proof gaon and a propor-
tonate ta at a ke rate on a fractona parts of such proof gaon on a
dsted sprts or wnes rectfed, purfed, or refned In such manner, and
on a m tures produced n such manner, that the person so rectfyng, pur-
fyng, refnng, or m ng the same s a rectfer wthn the meanng of sec-
ton 32 (g) : Provded, That ths ta sha not appy to gn produced by the
redstaton of a pure sprt over |unper berres and other aromatcs or to
vodka produced from pure sprts n the manner authorzed at regstered
dsteres.

2. In order to conform Reguatons 1 (26 CFR, part 190) to such
amendment, the reguatons are hereby amended as foows:
(a) Secton 190.122 s amended; and
(b) Sectons 190. G a, 190. 6 b, 190. 6 c, 190. 6 d, 190. 6 e,
190. 6 f, and 190. 6 g are added.
Subpart I qupment

Sec. 100.122. Recevng Tanks. Where rectfed products are produced by
redstaton, such as gn or cordas, or where sprts are redsted, or where
vodka s produced, the rectfer must provde a requste number of recevng
tanks. ach tank sha be constructed of meta or other sutabe matera and
equpped wth a sutabe devce whereby the contents can be accuratey deter-
mned. Maneads, nets, and outets of such tanks must be provded wth
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Regs. 1 , ISO. 122, etc.
factes for ockng wth Government ocks. ach tank sha have pany and
egby panted thereon words ndcatng ts use, as Gn Recevng Tank, Cor-
da Recevng Tank, eads and Tas Recevng Tank, odka Recevng
Tank, etc., foowed by ts sera number and capacty n gaons. Recevng
tanks must be ocated n the rectfyng room. ( 3 Stat. 300 as amended, 31 , 37 ;
26 U. S. C. 2 01, 2 29, 3176.)
Subpabt Y Rectfcaton

T - MPT OD
Sec. 190. 6 a. Producton. odka may be produced e empt from the rect-
fcaton ta n accordance wth the procedure prescrbed by secton 190. 6 b.
odka so produced must be run nto a recevng tank from whch t must be
prompty (a) drawn nto meta, porcean or cass contaners or paraffn-ned
contaners, gauged, stamped, and removed to the fnshed products room or (b)
transferred to a bottng tank, gauged, and botted and removed to the fnshed
products room or conveyed by ppene to a contguous ta -pad bottng house or
rectfyng pant for bottng. (See sectons 190.61 to 190.672.) ( 3 Stat. 29 as
amended. 300 as amended, 37 ; 26 U. S. C. 2 00, 2 01,3176.)
Sec. 190. 6 b. Methods of Producton. odka may be produced, e empt
from the rectfcaton tn , from pure sprts whch are reduced to not more than
110 of proof and not ess than 0 of proof and whch, after such reducton n
proof, are so treated by one of the foowng methods as to be wthout dstnctve
character, aroma, or taste :
(a) y causng the sprts to fow contnuousy through a tank or a seres
of tanks contanng at east W pounds of charcoa for each gaon of sprts
contaned theren at any one tme so that the sprts are n ntmate contact
wth the charcoa for a perod of not ess than hours, not ess than 10
percent of the charcoa beng repaced by new charcoa at the e praton of
each 0 hours of operaton, at a rate whch w repace at east 6 pounds of
charcoa for every 100 gaons of sprts treated;
(b) y keepng the sprts n constant movement by mechanca means
In contact for not ess than hours wth at east 6 pounds of new charcoa
for every 100 gaons of sprts ;
(c) y purfyng or refnng the sprts by any other method whch the
Deputy Commssoner fnds w resut n a product equay wthout dstnc-
tve character, aroma, or taste, and whch method has been approved by hm.
( 3 Stat. 29 as amended, 300 as amended, 37 ; 26 U. S. C. 2 00, 2 01, 3176.)
Sec. 190. 6 c. Defnton of Pure Sprt. The term pure sprt as used
n secton 190. 6 b s hed to mean acoho or neutra sprts, dsted at or
above 190 of proof (whether or not such proof s subsequenty reduced), and free
from mpurtes. ( 3 Stat. 300 as amended, 37 ; 26 U. S. C. 2 01, 3176.)
Sec. 190. 6 d. M ng Wth Other Sprts or Materas Prohbted. odka
produced n accordance wth secton 190. 6 1), under e empton from the rect-
fcaton ta cannot be m ed wth other sprts or treated by the addton or
abstracton of any substance or matera other than pure water after producton,
nor can any substance or matera other than pure water and that specfed
n secton 190. 6 b be added to te sprts pror to or durng producton. ( 3 Stat.
29 as amended, 300 as amended. 37 , 391; 26 U. S. C. 2 00, 2 01, 3176, 32 .)
Sec 190. 6 e. Reducton and Fterng. odka e empt from the rectfca-
ton ta may be reduced wth water n the recevng or bottng tanks and may
be ftered when necessary to remove materas hed n suspenson. The subse-
quent use of fters or fter-ads whch change the composton and character
of the vodka w sub|ect the product to the rectfcaton ta . Whether such
subsequent fterng changes the composton of the vodka s a queston of fact
determnabe bv chemca anavss of sampes of the vodka before and after
ftraton. ( 3 Stat. 29 as amended, 300 as amended, 37 , 391; 26 U. S. C. 2 00,
2 01, 3176, 32 .)
T L vodka
Sec. 190. 6 f. Producton. odka produced at a rectfyng pant n any
manner or by any means, other than that specfed n secton 190. 0 b, s sub|ect
to the rectfcaton ta . ( 3 Stat. 29 as amended, 300 as amended, 37 , 391;
26 U. S. C. 2 00, 2 01, 3176, 32 .)
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Regs. 1 , 190.122, etc.
3
Sec. 190. 6 g. Treatment of odka. The treatment of vodka, after Its pro-
ducton n accordance wth secton 190. 6 b, wh any materas or process whch
changes ts composton, sub|ects the product to the rectfcaton ta . Such
treatment ncudes the favorng of vodka In any manner, and the manpuaton
of vodka by a physca or chemca process, such as redstaton, ftraton, or
treatment wth actvated carbon or other materas, whch changes ts com-
poston or character. ( 3 Stat. 29 as amended, 300 as amended, 37 , 391; 26
U. S. C. 2 00, 2 01, 3176, 32 .)
3. The purpose of these amendments s to gve effect to the Pubc
Law 3 , ghty-second Congress, whch amends secton 2 00(a)( )
of the Interna Revenue Code, to reeve from the rectfcaton ta
of 30 cents a proof gaon mposed by that secton vodka produced
by rectfers by treatng pure sprts n the same manner as such sprts
are authorzed to be treated n producng vodka at regstered
dsteres.
. ecause the amendments made by ths Treasury Decson merey
conform Reguatons 1 to the amendment of the Interna Revenue
Code, t s found that t s unnecessary to ssue ths Treasury Decson
dmnstratve Procedure ct, approved une 11 19 6 ( U. S. C.
1001 et seq.), or sub|ect to the effectve date mtaton of secton (c)
of that ct.
. Ths Treasury Decson sha be effectve uy 1, 19 2, and sha
appy ony to vodka produced on or after such date.
3 Stat. 29 as amended. 300 as amended, 31 , 37 , 391; 26 U. S. C.
2 00, 2 01, 2 29, 3176, 32 .)
ohn . Dunap,
pproved une 17, 19 2.
Thomas . Lynch,
(Fed wth the Dvson of the Federa Regster une 1 , 19 2, : 6 a. m.)
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3
Regs. , rte. 20, etc.
TO CCO, SNUFF, CIG RS, CIG R TT S, TC.
INT RN L R NU COD
Reguatons , rtces 20, tc. 19 2-1 -13 7
T. D. 913
TITL 2 INT RN L R NU . C PT R L SU C PT R C. P RT 1 0.
T S ON TO CCO. SNUFF. CIG RS. CIG R TT S. CIG R TT P P RS ND
TU S. ND PURC S ND S L OF L F TO CCO
nnua regstraton by deaers n eaf tobacco, manufacturers
of tobacco, snuff, cgars, and cgaretes, and pedders of tobacco,
emnated.
Washngton 2 , D. C.
Concerned:
In order to emnate requrements n Reguatons 26 CFR, part
1 0 , pertanng to annua regstraton by deaers n eaf tobacco,
manufacturers of tobacco, snuff, cgars, and cgarettes, and pedders
of tobacco, such reguatons, but ony as prescrbed and made app-
cabe to the Interna Revenue Code bv Treasury Decson C. .
1939-1 (part 1), 396 , approved February 11, 1939 26 CFR, Cum.
Supp., page 76 , are amended as foows:
Paragraph 1. Secton 26. ct of October 1, 1 99, set forth mmed-
atey precedng artce 12 26 CFR 1 0.12 , and artces 12 and 13
26 CFR 1 0.12, 1 0.13 are strcken out.
Par. 2. There s nserted mmedatey precedng artce 20 26 CFR
1 0.20 , the foowng:
S C. 20 1. R GISTR TION INT RN L R NU COD .
very dener n eaf tobacco sha regster wth the coector of the
dstrct hs name, or stye, pace of resdence, trade, or busness, and the
pace where such trade or busness s to be carred on.
S C. 21 0. F ILUR TO R GIST R, P N LTY INT RN L
R NU COD .
very deaer n eaf tobacco who fas to regster wth the
coector as requred under sectons 20 1, sha be sub|ect to
a penaty of 0.
Par. 3. rtce 20 26 CFR 1 0.20 s amended to read as foows:
rt. 20. Regstry. (a) very person, before commencng busness as a deaer
n eaf tobacco, sha regster wth the dstrct supervsor hs name or stye,
pace of resdence, and pace where the busness s to be carred on. Such regs-
traton w be requred wth respect to each estabshment or warehouse where
eaf tobacco s receved
(1) for sae or shpment,
(2) for packng, rehandng. redr.vng, or stemmng, or
(3) soey for storage, f such warehouse consttutes the deaer s ony
pace of busness.
Where a person operates or contros a group of warehouses soey for the storage
of eaf tobacco, regstraton of each warehouse w not be requred, provded a
consodated record coverng a eaf tobacco receved nto and shpped from a
such paces s mantaned at the warehouse or estabshment havng drecton
2 2100 3 23
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Regs. , rts. 20, etc.
3 6
and contro of such paces. owever, the warehouse or estabshment havng
drecton and contro of a group of storage warehouses must be regstered.
(6) In order to regster, the deaer In eaf tobacco sha fe wth the dstrct
supervsor a propery competed return for regstry, Form 277, showng a the
nformaton caed for on the form and the nstructons prnted thereon.
(c) very deaer n eaf tobacco sha aso fe a return for regstry, Form 277,
whenever he furnshes a new bond.
(rf) When a propery competed return for regstry, Form 277, supported by
satsfactory bond and statement, s receved by the dstrct supervsor from a
deaer n eaf tobacco, he w ssue to the deaer a certfcate of regstry. Form
2 2, whch certfcate sha be conspcuousy posted by the deaer n hs pace of
busness.
(c) The oss or destructon of a certfcate shoud be reported to the dstrct
supervsor at once for the purpose of obtanng from hm a dupcate certfcate
to be posted as requred.
Par. . There s nserted mmedatey precedng artce 3 26 CFR
1 0.3 , the foowng:
S C. 2011. R GISTR TION INT RN L R NU COD .
very manufacturer of tobaeco sha regster wth the coector of the
dstrct hs name, or stye, pace of resdence, trade, or busness, and the
pace where such trade or busness s to be carred on.
R NU COD .
very manufacturer of tobacco who fas to
regster wth the coector as requred under sectons 2011,
sha be sub|ect to a penaty of 0.
Par. . rtce 3 26 CFR 1 0.3 s amended to read as foows:
rt. 3 . Reostky. (a) very person, before commencng busness as a manu-
facturer of tobacco or snuff, sha regster wth the dstrct supervsor hfs name
or stye, pace of resdence, and pace where the busness s to be carred on.
Separate regstraton sha be requred n respect to each pace where such a
busness s to be carred on.
(6) In order to regster, the manufacturer of tobacco or snuff sha fe wth
the dstrct supervsor a propery competed return for regstry, Form 277, show-
ng a the nformaton caed for on the form and the nstructons prnted
thereon.
(c) very manufacturer of tobacco or snuff sha aso fe a return for regstry.
Form 277, whenever he furnshes a new bond.
(d) When a propery competed return for regstry, Form 277, supported by
manufacturer of tobacco or snuff, he w ssue to the manufacturer a certfcate
of regstry, Form 2 , whch certfcate sha be conspcuousy posted by the
manufacturer n hs factory.
(e) The oss or destructon of a certfcate shoud be reported to the dstrct
Par. 6. There s nserted mmedatey precedng artce 63 26 CF
1 0.63 , the foowng:
S C. 2031. R GISTR TION INT RN L R NU COD .
very manufacturer of cgars or cgarettes sha regster wth the
coector of the dstrct hs name, or stye, pace of resdence, trade, or
busness, and the pace where such trade or busness s to be carred on.
R NU COD .
very manufacturer of cgars or cgarettes wno
fas to regster wth the coector as requred nnder sectons
2031, sha be sub|ect to a penaty of 0.
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Regs. , rts. 23, eto.
rt. 63. Regstry. (a) very person, before commencng busness as a manu-
facturer of cgars or cgarettes, sha regster wth the dstrct supervsor hs
name or stye, pace of resdence, and pace where the busness s to be carred
on. Separate regstraton sha be requred n respect to each pace where such
a busness s to be carred on.
(6) In order to regster, the manufacturer of cgars or cgarettes sha fe
wth the dstrct supervsor a propery competed return for regstry, Form
277, showng a the nformaton caed for on the form and the nstructons
prnted thereon.
(c) very manufacturer of cgars or cgarettes sha aso fe a return for
regstry, Form 277, whenever he furnshes a new bond.
(d) When a propery competed return for regstry, Form 277, supported
by satsfactory bond and statement, s receved by the dstrct supervsor from
a manufacturer of cgars or cgarettes, he w ssue to the manufacturer a
certfcate of regstry, Form 2 3. whch certfcate sha be conspcuousy posted
by the manufacturer n hs factory.
(e) The oss or destructon of a certfcate shoud be reported to the dstrct
Par. . There s nserted mmedatey precedng artce 17 26
CFR 1 0.17 , the foowng:
S C. 2071. R GISTR TION INT RN L R NU COr .
very pedder of tobacco sha regster wth the coector of the
dstrct hs name, or stye, pace of resdence, trade, or busness, and
the pace where such trade or busness s to be carred on.
R NU COD .
very pedder of tobacco who fas to regster wth the
coector as requred under sectons 2071, sha
be sub|ect to a penaty of 0.
S C. 207 . C RTIFIC T INT RN L R NU COD .
very pedder of tobacco sha obtan a certfcate from the coector
of hs coecton dstrct, who s authorzed and drected to ssue the
same, gvng the name of the pedder, hs resdence, and the fact of hs
havng fed the requred bond ; and sha on demand of any offcer of
nterna revenue produce and e hbt hs certfcate.
S C. 2102. INSP CTION OF P DDL R S C RTIFIC T INT R-
N L R NU COD .
ny nterna revenue agent may demand producton of and nspect
the coector s certfcate for pedders.
S C. 21 3. P DDL R S C RTIFIC T , R FUS L TO P RMIT
INSP CTION, P N LTY INT RN L R NU COD .
Refusa or faure to produce for nspecton the coector s certfcate
for pedders, when demanded by any nterna revenue agent, sha sub|ect
the party guty thereof to a fne of not more than 00 and to mprson-
ment not more than tweve months.
S C. 21 . P DDL RS, FORF ITUR S R L TING TO IN-
T RN L R NU COD .

(b) Refusa To Permt Inspecton of Certfcate. Whenever any
pedder refuses to e hbt the coector s certfcate for pedders on
demand of any offcer of nterna revenue, sad offcer may seze the
horse or mue, wagon, and contents, or pack, bunde, or basket, of any
person so refusng ; and the coector of the dstrct n whch the sezure
occurs may, on ten days notce, pubshed n any newspaper n the
dstrct or served personay on the pedder, or at hs dweng house.
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Regs. , rts. 20, etc.
3
requre such pedder to show cause, f any he has, why the horses or
mues, wagons, and contents, pack, bunde, or basket so sezed sha not
be forfeted. In case no suffcent cause s shown, proceedngs for the
forfeture of the property sezed sha be taken under the genera pro-
vsons of the nterna revenue aws reatng to forfetures.
bt. 17 . Regstry. (a) very person, before commencng busness as a
pedder of tobacco, sha regster wth the dstrct supervsor hs name or stye,
pace of resdence, and the area n whch he w operate as ndcated n the
statement requred by artce 179.
(6) In order to regster, the pedder of tobacco sha fe wth the dstrct
supervsor a propery competed return for regstry, Form 277, showng a
the nformaton caed for on the form and the nstructons prnted thereon.
(c) very pedder of tobacco sha aso fe a return for regstry, Form 277,
whenever he furnshes a new bond.
( ) When a propery competed return for regstry, Form 277, supported by
pedder of tobacco, he w ssue to the pedder a certfcate of regstry. Form
2S , whch certfcate sha be carred by the pedder and produced and e hbted
upon demand of any nterna revenue offcer. If the pedder operates a num-
ber of trucks or other vehces n hs busness, the supervsor sha ssue a
certfcate to be carred n connecton wth each such vehce.
(e) New certfcates sha be ssued by the dstrct supervsor whenever a
pe der of tobacco fes an amended statement coverng any change n hs
resdence address wthn the same coecton dstrct.
(f) The oss or destructon of a certfcate shoud be reported to the dstrct
supervsor at once for the purpose of obtanng from hm a dupcate certfcate.
Par. 10. Secton 33 3, Revsed Statutes, set forth mmedatey pre-
cedng artce 1 1 26 CFR 1 0.1 1 and such artce 1 1 are strcken
out.
ecause the soe purpose of ths Treasury Decson s to reeve dea-
ers n eaf tobacco, manufacturers of tobacco, snuff, cgars, and cga-
rettes, and pedders of tobacco from requrements pertanng to an-
nua regstraton, t s hereby found that t s unnecessary to ssue ths
secton (a) of the dmnstratve Procedure ct, approved une 11,
19 6, or sub|ect to the effectve date mtaton under secton (c) of
sad ct.
(Ths Treasury Decson sha be effectve upon ts pubcaton n
the Federa Regster.)
secton 3791 of the Interna Revenue Code ( 3 Stat. 67; 26 T . S. C.
3791).)
ohn . Dunaf,
Thomas . Lynch,
(Pubshed n the Federa Regster une 27.19 2)
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3 9
Msc.
TO CCO ND SNUFF
19 2-1 -13 67
Tob. 337
Tobacco and snuff manufactured n and removed from domestc factores durng
the month of May 19 2, compared wth the same month of 19 1
Manufactured
Ta -pad
Removed
Ta -free
19 2
1961
19 2
19 1
19 2
1S I
Pounds
3.3 6, 1
13, 602
2 7, 022
3,319, 171
, 6.0 9
3. 10 . 01
Pounds
3. 1.91
09.96
2 6, 2 2
3.333.006
9, 102, 61
3, 01, 1 7
Pounds
3, 26, 797
33 ,71
2 ,17
3,36 , 62
.320,7 2
3,112,271
Pounds
3, NS.311
371, 33
2 0,29
3,337,639
, 703. 176
3, 31. 602
Pounds
9 ,919
39, 1
Pounds
Pug
3.6 1)
33,609
Twst
Fne-cut chewng .
Scrap chewng
3,6 0
. 36,969
2, 11
3,0
91, 93
2, 0
Snuff
Tota
1 .S92. 36
20,1 . 9
1 , 1 ,36
19,7 2,361
377.0 3
,73
19 2-16-13 90
Tob. 3 1
the month of une 19 2, compared wth the same month of 19 1
Manufactured
Ta -pad
Removed
Ta -free
19 2
19 1
19 2
19 1
19 2
19 1
Pug-
Pounds
3,292,112
00,697
2 2. 19
3,3 . 3
7,99 ,6 2
3. 12 ,67
Pounds
3.3 0,666
372,6
2 6, 126
3, 6 . 1
, 96, 1
3, 20 , 773
Pounds
3,03 ,670
310,2 6
23 , 90
3,39 , 679
7, 7 9, 7 3
3,13 ,022
Pounds
3,267,
3 6,71
2 , 02
3, 0 , 2
,32 . 92
3,160,019
Pounds
1 ,330
116,2 1
Pounds
70, 7
7 , 73
Twst
Scrap chewng
2,662
209,339
1,0 9
1 , 6
373, 1
,1
Tota
1 . . 7
19. 0. 6 2
17, 69, 900
1 , 763, 197
73,671
39,2 9
19 2-19-1392
Tob. 3
the month of uy 19 2, compared wth the same month of 19 1
Manufactured
Ta -potd
Removed
Ta -:ree
19 2
19 1
19 2
19 1
19 2
19 1
Pounds
Pou nds
Pon nds
Pounds
Pounds
3,101
22.90
Pound
0,2
3,102
Pug---
3.30 .3 2
37 ,993
231.3 6
3. 19 . 67
327. 0(
21 (. 1111
3.3 . 2
332. 701
22S. 911
3.091.203
317.07
223. 22
3. 229.6 1
6, 66S. 301
2. 270. 73
Fne-cut chewng
2, 907. 9S 2,99 . 162
6. SIS. 0 ft. 961. 01
1 , 32
2 1.691
2,137
Scrap chewng
2, 907. M
, 11
232. 7 9
1.19
Snuff
2,263.11
2. 2 9. M0
2, 33 . 2
16,319.393
1 . 776. 622
16, 23 .
1 .S02. S6
31 ,37
07,720
T fgures are sub|ect to revson unt Incorporated n the tota for the caendar year
to be pubshed In the Commssoner s annua report.
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3 0
19 2-21-139 1
Tob. 3 7
the month of ugust 19 2, compared wth the same month of 19 1
Manufactured
Ta -pad
Removed
Ta -free
10 2
19 1
19 2
19 1
1962
19 1
Pound
Pounds
3, 762, 7 1
12,2
26S, 6
3, 02.0 1
9, 7 1.0 3
3,6 .333
Pounds
3,330, 971
313,37
23 ,799
3,3 7,027
,016,26
3,202, 76
Poutds
3, 7 7, 9 6
363. 9
2 ,723
3,719,966
9. 62 , 332
3, 610. 601
Pounds
Pounds
11 , 36
Pug
3,366,3 6
396. 0
231,2
3,017,122
,373,13D
3,170,0
0. 27
1 , 901
Twfat
2 . S
Rcrap chewng
1.072
2 0,6 9
3,712
1 .60
312. 11
1.7 0
Smokng
Snuf
Tota
1 , 6 , 6
21, 666.160
1 . , 311
21, 232, G
31, 61
7 ,706
19 2-23-13902
Tob. 3 0
the month of September 19 2, compared wth the same month of 19 1
Manufactured
Ta -pad
Removed
Ta -free
19 2
19 1
19 2
1961
1 62
10 1
Pounds
3, 12,677
19,0 6
227, 3
3,306,7 7
9, 0 ,763
3,279, 2
Pounds
3,21 ,079
30 ,7
233,006
3,2 2, 1
9,669,03
3,069,707
Pounds
3,2 3,0 3
3 ,60
2 1, 0
3,316,271
, 90,730
3.266,906
Pounds
3, 1 ,0 2
27 ,016
229, 1
3,1 , 2
9,291,2
2,913.3 1
Pounds
Pug
3 .2 7
76, 7
11 , 70
63,0
Twst..
Fne-cut chewng
17.W
3G6.273
3.61
6, 7
267.71
2.373
Tota
20,061, 0
19,777, 02
19,313,369
19.060,730
602,3 0
9 ,172
19 2-2 -139 6
Tob. 3 3
the month of October 19 2, compared wth the same month of 19 1
Manufactured
Ta -pad
Removed
Ta -free
19 2
19 1
19 2
19 1
19 2
1061
Pounds
,661, 71
.66
261.217
3, 67,010
9, 7 1,060
Pounds
3,2 2, 60
32 .
227,27
3,27 ,309
.017 0
Pounds
3, 60, 13
3 , 3
2 2, 03
3, s, 1
, (1, 230
,(3 ,0 0
Pounds
2, 22,21
277, 20
2 3, 39
3, 0 ,927
7, 717, 2
3, 237, 39
Pounds
103.613
7. 17
Pounds
,
3 ,10
Pug
Twst
Pne-cut chewng
Scran chewng
1,610
316,6 6
, 11
,00
2S6. 79
3.700
Smokng
Sm; 397
21, 3 1, 9 6
1 , 291, 12
20,790, 7
17, 0 , 772
613, 06
3 ,326
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CIG R TT S ND SM LL CIG RS-
19 2-1 -13 69
Tob. 33
Cgarette and sma cgars manufactured n and removed from domestc factores
durng the month of May 19 2, compared wth the same month of 19 1
Sma cgarettes
Large cgarettes
Sma cgars
1 62
1 1
19 2
UU
19 2
1 1
36, 13 , 1)7. 9
32. 1 , 7 , 060
3.3 ,377. 19
30, 66 . 6 , 9
32,776, 66.009
3. 99 , 736. 266
23 ,3 0
237. 0
1,200
,700
9,000
300
6,0 9,9 0
, 96 , 7 0
.000
6, 6 , 2 0
0.9 1. 620
197.000
Removed ta -pad..
19 2-16-13 91
Tob. 3 2
Cgarettes and sma cgars manufactured n and removed from domestc factores
durng the month of une 1 ). 2, compared wth the same month of 19 1
Sma cgarettes
Large cgarettes
Sma cgars
19 2
1 1
19 2
19 1
19 2
19 1
Manufactured
36. 72,7 1, 3
3 , 10,62 ,110
2.36 . 3, 96
3 ,96 . 3 ,37
32. 7 ,209,070
3. 62,793.922
11 ,6 0
116,3 0
300
9, 90
0,390
300
.717.970
,9 .2 0
33,000
, 0, 30
.613.060
Removed ta -pad
Removed ta -free.
19 2-1 -1391
Tob. 3
durng the month of uy 19 2, compared wth the same month of 19 1
Sma cgarettes
Large cgarettes
Sma cgars
19 2
19 1
19 2
19 1
19 2
19 1
Manufactured
36, 666, 922. 220
33. 36, , 0
2, 32, 13, 13
32.077. 69.36
29, 73 . 32. 70
2, 3, 76 , 3 2
73.600
72,390
300
7, 0
1,0 0
600
,16 , 0
, 26,9 0
,000
, 3 , 60
, 0. 00
Removed ta -pad ...
Removed ta -free
19 2-21-139 2
Tob. 3
durng the month of ugust 19 2, compared wth the same month of 19 1
Sma cgarettes
Large cgarettes
Sma cgars
19 2
19 1
19 2
19 1
19 2
19 1
Manufactured
0, 213, 2. 336
3 . 972,266. 70
,36 , ,399
0.003.779.113
36,601, 00,6 0
3, 99,136. 70
3.9 0
, 0
6 , 700
6 ,700
.000
, 7 2, 1 0
6,10 ,6 0
21,000
6, 37,900
6. 972. 620
12.000
Removed to -pad
fgures are sub|ect to revson unt ncorporated n the tota for the caendar year
to be pubshed n the Commssoner s annua report.
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Msc.
3 2
19 2-23-13963
Tob. 3 1
durng the month of September 19 2, compared wth the same month of 19 1
Sma cgarettes
Large cgarettes
Sma cgars
10 2
1961
19 2
19 1
19 2
19 1
39,693, 79,1 1
3 ,9 0, 37,06
,32 .020,216
33,6 1, 0,003
30,799. 32. 92
2.773. 07,931
116, 00
10 ,700
300
1, 00
6,900
6,000
6,0 2,2 0
,6 2, 700
6,000
,727,190
,9 9, W
2 ,000
19 2-2 -139S7
Tob. 3
durng the month of October 19 2, compared wth the same month of 19 1
Sma cgarettes
Large cgarettes
Sma cgars
1961
1961
19 2
19 1
19 2
19 1
Manufactured
1, 7 , 3, 9
37,372,1 .67
, 29 ,300, 1
0. 9 7. 73,66
37, 77, 119.3 6
3, 1 , 79 , 0
1 7,020
103.320
1 .300
11 ,000
11 ,600
300
6. 63. 30
6,3 7, 20
3.00C
7,031.990
6, 03.231
,000
emoved ta -free.
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3 3
Msc.
L RG CIG RS
19 2-1 -13 77
Tob. 339
Large cgars manufactured n and removed from domestc factores durng the
month of pr 19 2, compared wth the same month of 19 1
19 2 19 1
anufactured .
a 33, 3
6.06 . 660
Removed:
Ta -pad
Cass
2. 112.
16. 9, 326
17 . 91. 02
0. 32. 1
:oo. 219. M
10, 9 , 9
.969,7
1, 19 . 939
13. 6 9. 322
1 0. 7 6. 92
3, 7 1. 626
19 . 2 . 300
9, 166.
, 21 , 6 6
Cass
Cass C
Cass D
Cass
Cass F
Cass
Tota ta -pad
61, 71, 3 9
6, 7 1
1 .061,2 1
10,3 1.6 6
Ta -free
19 2-16-13 7
Tob. 3 0
Large cgars manufactured n and r moved from domestc factores durng the month of
Say 19 -2, compart d wth the same month of 19 1
19 2
19 1
Removed:
Ta -pad-
97.917.0 7
6. 913. 209
Cass
2. 192, 3
17.702, 7
1 6.331. 2
0, 2 ,0
20 , 9 0.11 1
11. 1. 21
6,339. 10
1,30 . 3 1
1 .700. 72
17 ,766.210
0.396. 19
219. 3 . 6
10,9 3,099
6. s 6. 61
Cass
Cass C
Cass r
Cass
Cass F
Cass O
Tota ta-pad
3, 7 ,632
,6 9. 107
3. 2,9 0
6,210.322
Ta -free
19 2-17-13007
Tob. 3 3
month of une 19 2, compared tcth the same month of 19 1
19 2
19 1
Removed:
Ta -pad
70. 9 9, 67
6, 919,291
Cass
2,073, 62
22. 92, 101
179. 12,9 7
9, 1. 37
220. 11 ,36
11,71 ,71
6. 703. 19
L 10, 9 3
17.211, 02
176, 692, 961
1. 297. 663
220. 10, 020
10, 316, 213
, 6,03
Cass D
Cass
Cass F
Cass f
Tota a -pad
9Z 197. 7
3.933,2 0
3, 02 , 27S
6, 36ft 777
Ta -free
fcures are sub|ect to revson unt ncorporated In the tota for the caendar year
to be pubshed In the Commssoner s annua report.
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19 2-19-13926
Tob. 3 6
month of uy 19 2, compared wth the same month of 19 1
10 2
19 1
Removed:
1 a -pad
29, 7 2 3
3 0, 2 , 2
Cass
2,2 1.9 0
16, 21 , 2SS
IM.trW, TM1
1,7 2,6 7
107. 3,1 3
10, 07. 39
. 2 . 206
1,33 ,779
16. 73 , 92
161,33 , 763
, 07.39
1 2.0 .1. S
,119. 7 3
.1 9. 11
Cass
Cass r ___
Cass
Cass F -
Cass O
6S, 037, 29
3,6 7,Gb9
23, 26 . 919
S. 31 , 2
19 2-21-139 3
Tob. 3 9
month of ugust 19 2, compared wth the same month of 19 1
19 2
19 1
Removed:
Ta -pa d-
Cass
7 .921.72
02. 99 .970
Cass
2, 6 ,9 0
16. 119,3 3
1 ,971, 73
1, 622.173
220, 6.939
10,107. 29
6, 39.090
2,02 ,396
21.0 2.3 7
1 .7 6, 77
6 . 27. M
222, . OI
10.396. 7
. 1.132
Cass C-.-
Cass D
Cass ...
Cass F
Cass O
Tota ta -pad
92.613.237
11,720.16
01. 73.363
6, 21 , 6
Ta -free
19 2-2 -13973
Tob. 3 2
month of September 19 2, compared wth the same month of 19 1
19 2
1961
Removed:
Ta -uad
13. 7. 7
6.2 .123
Cass
1,721.296
1 . 70, 3
19 .030, 767
3, 73,
212. 1 .09
11.3 3.6S
6. 32.720
1, .61
1 , 6 . 3
16 . 1 2.1 1
61.97 ,6 9
201. 20. 327
9.667.9W
. 70 .962
Cass
Cass C
Cass D
Cass
CLSf F...
Cass O
Tota ta -pad
9 . 17.9 6
11,6 6,110
,7 6.19
Ta -free
S. 37 .320
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L GISL TION
19 2-1 -13 6
. R. 1 6. PU LIC L W 3 6, IG TY-S COND CONGR SS
C PT R 390, S COND S SSION
n ct To repea the aska raroads ta
Unted States of merca n Congress assembed, That, effectve wth
respect to ta abe years endng after the date of the enactment of ths
ct, chapter of the Interna Revenue Code (mposng the aska
raroads ta ) s hereby repeaed.
19 2-1 -13 66
. R. 71 . PU LIC L W 391, IG TY-S COND CONGR SS
n ct To provde that the addtona ta mposed by secton
2 70(a) (2) of the Interna Revenue Code sha not appy n respect
of coconut o produced In, or produced from materas grown n, the
Terrtory of the Pacfc Isands.
e t enacted by the Senate and ouse of Representatves of
the Unted States of merca n Congress assembed, That secton
2 70(a) (2) of the Interna Revenue Code (reatng to the addtona
ta on domestc processng of coconut o) s hereby amended to read
as foows:
(2) ddtona rate on coconut on.. There sha be mposed (n addton
to the ta mposed by the precedng paragraph) a ta of 2 cents per pound,
to be pad by the processor, upon the frst domestc processng of coconut o
or of any combnaton or m ture contanng a substanta quantty of
coconut o wth respect to whch o there has been no prevous frst domestc
processng. The addtona ta mposed by ths paragraph sha not appy
when t s estabshed, n accordance wth reguatons prescrbed by the
Secretary, that the coconut o (whether or not contaned n a combnaton or
m ture) ( ) s whoy the producton of the Phppne Isands, any posses-
son of the Unted States, or the Terrtory of the Pacfc Isands (herenafter
n ths paragraph referred to as the Trust Terrtory ), or ( ) was produced
whoy from materas the growth or producton of the Phppne Isands,
any possessons of the Unted States, or the Trust Terrtory: Provded, how-
ever. That such addtona ta sha appy n respect of coconut o (whether
or not contaned n a combnaton or m ture) so derved from the Trust
Terrtory, to such e tent, and at such tme after the date of the appcabe
procamaton, as the Presdent, after takng nto account the responsbtes
of the Unted States wth respect to the economy of the Trust Terrtory,
sha hereafter determne and procam to be |ustfed to prevent substanta
n|ury or the threat thereof to the compettve trade of any country of the
free word. The ta mposed by ths paragraph sha not appy to any
domestc processng after uy 3, 197 .
(3 )
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Skc. 2. The amendment made by ths ct sha be effectve ony after
the day on whch ths ct s enacted.
19 2-1 -13 7
. R. 73 . PU LIC L W 6 , IG TY-S COND CONGR SS
C PT R , S COND S SSION
n ct To e cude from gross ncome the proceeds of certan
sports programs conducted for the beneft of the mercan Natona
Red Cross, and for other purposes.
e t enacted by the Senate and ome of Representatves of th#
Unted States of merca n Congress assembed, That secton 22(b)
of the Interna Revenue Code (reat.g to e cusons from gross
ncome) s amended by addng at the end thereof the foowng new
paragraph :
(1C) Sports programs conducted for thk mercan natona red ckubo.
In the case of a ta payer whch s a corporaton prmary engaged n the
furnshng of sports programs, amounts receved as proceeds from a sports
program conducted by the ta payer If
( ) the ta payer agrees n wrtng wth the mercan Natona Red
Cross to ccnduct such sports program e cusvey for the beneft of the
mercan Natona Red Cross;
( ) the ta payer turns over to the mercan Natona Red Cross
the proceeds from such sports program, mnus the e penses pad or
ncurred by the ta payer () whch woud not have been so pad or
Incurred but for such sports program, and () whch woud be aowabe
as deductons under secton 123(a)(1)( ) but for the ast sentence
thereof; and
(C) the factes used for such program are not reguary used
durng the ta abe year for the conduct of sports programs to whch
ths paragraph appes.
s used n ths paragraph, the term proceeds from such sports program
ncudes a amounts pad for admsson to the sports program, pus a
proceeds receved by the ta payer from such program or actvtes carred
on n connecton therewth.
Sec. 2. Secton 23(a) (1) ( ) of the Interna Revenue Code (reat-
ng to the deducton of trade or busness e penses from gross ncome)
s amended by addng at the end thereof the foowng new sentence:
Iu the case of any sports program conducted for the beneft of the mercan
Natona Red Cross, e penses descrbed n secton 22(b) (16) ( ) sha be
aowabe under ths subparagraph ony to the e tent that such e penses e ceed
the amount e cuded from gross ncome by secton 22(b) (1C).
Skc. 3. The amendments made by the frst secton and secton 2 of
ths ct sha appy ony wth respect to sports programs conducted
after the date of the enactment of ths ct under agreements entered
nto after such date.
Sec. . (a) Secton 23 (o) of the Interna Revenue Code (reatng
to deductons by ndvduas for chartabe contrbutons) s hereby
amended by strkng out 1 per centum and nsertng n eu thereof
20 per centum .
(b) Secton 120 of the Interna Revenue Code (reatng to unmted
deducton for chartabe and other contrbutons) s hereby amended
by strkng out 1 per centum and nsertng n eu thereof 20
per centum .
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(c) The amendments made by ths secton sha appy ony wth
pproved uy ,19 2.
19 2-16-13
L It. 7 76. PU LIC L W C , IG TY-S COND CONGR SS
n ct Reatng to the ta aton of fe Insurance companes
e t enacted by the Senate and Iouse of Representatves of the
Unted States of mer-ca n Congress assembed, That secton 201
(a) (1) (reatng to mposton of ta on fe-nsurance companes) of
the Interna Revenue Code s hereby amended by addng after 19 11
wherever t appears, and 19 2 .
(b) Secton 203 (reatng to ad|usted norma-ta net ncome of
fe-nsurance companes) of the Interna Revenue Code s hereby
amended by addng after 19 1 , wherever t appears, and 19 2 .
(c) Secton 33(a)(1)( ) (reatng to e cess profts net ncome
of fe-nsurance companes) of the Interna Revenue Code s hereby
amended by addng after 19 1 , wherever t appears, and 19 2 .
Sec. 2. The provsons of secton 201(f) of the Interna Revenue
Code and sectons 201(a)(1), 203 , and 33(a)(1)( ) of the In-
terna Revenue Code as amended by ths ct sha be appcabe to
ta abe years begnnng n 19 2.
pproved uy , 19 2.
19 2-16-13
. R. 7313. PU LIC L W 71, IG TY-S COND CONGR SS
C PT R 9 , S COND S SSION
n ct Makng appropratons for the Legsatve ranch for the
fsca year endng une .30, 19 3, and for other purposes.
e t enacted by the Senate and Iouse of Representatves of the
Unted States of merca n Congress assembed, That the foowng
sums are approprated, out of any money n the Treasury not other-
wse approprated, for the Legsatve ranch for the fsca year
endng une 30, 19 3, namey:

OUS OF R PR S NT TI S
Saares, Meage, and penses of Members

For meage and e pense aowance of Members of the ouse of Representatves,
Deegates from Terrtores, and the Resdent Commssoner from Puerto Rco, as
authorzed by aw, 1,273, 00: Provded, That for the two ta abe years begn-
nng after December 31, 19 2, the pace of resdence of a Member of Congress
(ncudng any Deegate and Resdent Commssoner) wthn the State, congres-
sona dstrct, Terrtory, or possesson whch he represents n Congress sha be
consdered to be hs home for the purposes of secton 23(a) (1) ( ) of the Interna
Revenue Code, but amounts e pended by such Member wthn each such ta abe
year for vng e penses sha not be deductbe for ncome ta purposes n e cess
of 3,000.
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3
mendment to Interna Revenue Code
Secton 23(k) of the Interna Revenue Code (reatng to deductons
for bad debts) s amended by addng at the end thereof a new para-
graph as foows:
(6) cepton. Ths subsecton sha not appy n the case of a ta payer,
other than a bank, as defned n secton 10 , wth respect to debts owed by
( ) any potca party, ( ) any natona, state, or oca commttee of any
potca party, or (C) any commttee, assocaton, or organzaton whch
accepts contrbutons or makes e pendtures for the purpose of nfuencng
or attemptng to nfuence the eecton of Presdenta or ce Presdenta
eectors or of any ndvdua whose name s presented for eecton to any
Federa. State, or oca eectve pubc offce, whether or not such ndvdua
s eected. For the purpose of ths paragraph, the terms contrbutons
and e pendture sha have the meanngs prescrbed for such terms n
secton 91 of tte 1 of the Unted States Code.
The amendment made by ths paragraph sha be appcabe wth

Ths ct may be cted as the Legsatve ranch ppropraton
ct, 19 3 .
pproved uy 9, 19 2.
19 2-16-13 6
S. 3276. PU LIC L W 73, IGIITY-S COND CONGR SS
C PT R tOO, S COND S SSION
n ct To amend the ct entted n ct to assst Federa
prsoners n ther rehabtaton.
Unted States of merca n Congress assembed, That secton 2 of
the ct of May 1 , 19 2 (Pubc aw 3 2. ghty-second Congress
C. . 19 2-1,2 9 ), reatng to the rehabtaton of Federa prsoners
s hereby amended by strkng out the words Federa ncome, State,
and gft ta es and nsertng n eu thereof Federa ncome, estate,
and gft ta es .
pproved uy 9, 19 2.
19 2-16-13 9
. R. 310 . PU LIC L W 39, IG TY S COND CONGR SS
C PT R 7 1, S COND S SSION
n ct To amend secton 113(b) (1) ( ) of the Interna Revenue
Code wth respect to the ad|ustment of the bass of property for
deprecaton, obsoescence, amortzaton, and depeton.
Unted States of merca n Congress assembed, That so much of
secton 113(b)(1)( ) of the Interna Revenue Code (reatng to
ad|ustments to bass of property for deprecaton, etc.) as precedes the
word Where s hereby amended to read as foows:
( ) n respect of any perod snce February 2 , 1913, for e hauston,
wear and tear, obsoescence, amortzaton, and depeton, to the e tent
of the amount
() aowed as deductons n computng net ncome under ths
chapter or pror Income ta aws, and
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3 9
(U) resutng (by reason of the deductons so aowed) In a
reducton for any ta abe year of the ta payer s ta es under ths
chapter (other than subchapter ) subchapter of chapter 2, or
pror ncome, war-profts, or e cess-profts ta aws,
but not ess than the amount aowabe under ths chapter or pror
Income ta aws. Cause () of ths subparagraph sha not appy n
respect of any perod snce February 2 , 1913, and before anuary 1,
19 2, uness an eecton has been made under subsecton (d).
Sec. 2. Secton 113 of the Interna Revenue Code (reatng to bass
of property) s hereby amended by addng at the end thereof the fo-
owng new subsecton:
(d) ecton n Respect of Deprecaton, tc., owed efore 19 2.
ny person may eect to have cause () of subsecton (b, (1) ( appy n
respect of perods snce February 2 , 1913, and before anuary 1, 19 2. Such an
eecton sha be made n such manner as the Secretary may by reguatons pre-
scrbe, sha be rrevocabe, and sha appy n respect of a property hed by the
person makng the eecton at any tme on or before the date on whch the eecton
was made and n respect of a perods snce February 2 , 1913, and before an-
uary 1, 19. 2, durng whch such person hed such property or for whch ad|ust-
ments must be made under subsecton (b) (2). n eecton by a transferor, donor,
or grantor made after the date of the transfer, gft, or grant of property sha not
affect the bass of such property n the hands of the transferee, donee, or grantee.
No such eecton may be made after December 31. 19 2.
Skc. 3. The amendments made by ths ct sha appy n respect of
ta abe years begnnng after Decefber 31, 193 . Provsons havng
the effect of such amendments sha be deemed to have been ncuded n
the revenue aws respectvey appcabe to ta abe years endng after
December 31, 1931, and begnnng before anuary 1, 1939.
pproved uy 1 , 19 2.
19 2-17-13 9
. R. 76 6. PU LIC L W 0, IG TY-S COND CONGR SS
C PT R 7 . S COND S SSION
n ct To provde vocatona read|ustment and to restore ost
educatona opportuntes to certan persons who served n the
rmed Forces on or after une 27, 19 0, and pror to such date as
sha be f ed by the Presdent or the Congress, and for other
purposes.
Unted States of merca n Congress assembed,
TITL I S ORT TITL ND ST T M NT OF POLICY
S ORT TITL
Sec. 101. Ths ct may be cted as the eterans Read|ustment
ssstance ct of 19 2 .

DMINISTR TION OF TITL
Sec. 0 . (a) Musterng-out payments due or to become due under
ths tte sha not be assgnabe and any payments made to or on
account of a veteran hereunder sha be e empt from ta aton, sha
be e empt from the cams of credtors, ncudng any cam of the
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Unted States, and sha not be sub|ect to attachment, evy, or sezure
by or under any ega or equtabe process whatever ether before or
after recept by the payee.
(b) The Secretares of the rmy, Navy, r Force, and Treasury
sha make such reguatons not nconsstent wth ths tte as may be
necessary effectvey to carry out the provsons thereof, and ther
decsons sha be fna and not sub|ect to revew by any court or other
Government offca.

pproved uy 16,19 2.
19 2-17-13 99
. R. 270. PU LIC L W 67, IG TY-S COND CONGR SS
n ct To amend secton 112(n) of the Interna Revenue Code
(reatng to nonrecognton of gan from sae or e change of res-
dence) wth respect to persons servng on actve duty wth the
rmed Forces of the Unted States.
Unted States of merca n Conaress assembed. That secton 112(n)
of the Interna Revenue Code (reatng to nonrecognton of gan
from sae or e change of resdence) s hereby amended by addng
at the end thereof the foowng new paragraph:
( ) Mkmbf.ks of rmed Forces. The runnng of any perod
of tme specfed n paragraph (1) or (2) (other than the one
year referred to n paragraph (2)(F)) of ths subsecton sha
be suspended durng any tme that the ta payer (or hs spouse
f the od resdence and the new resdence are each used by the
ta payer and hs spouse as ther prncpa resdence) serves on
e tended actve duty wth the rmed Forces of the Unted States
after the date of the sae of the od resdence and before anuary
1, 19 . e cept that any such perod as so suspended sha not
e tend beyond the date four years after the date of the sae of the
od resdence. For the purpose of ths paragraph, the term
e tended actve duty means any perod of actve duty pursuant
to a ca or order to such duty for a perod n e cess of nnety
days or for an ndefnte perod.
Sec. 2. The amendment made by the frst secton of ths ct sha
be appcabe to ta abe years endng after December 31, 19 0, wth
respect to resdences sod (wthn the meanng of secton 112(n) of
the Interna Revenue Code) after such date.
Carfcaton of stng Law as to uby Tra n ctons fob Recovery
of Interna Revenue Ta es
Sec. 3. (a) Nothng n Reorganzaton Pan Numbered 26 of 19 0
or Reorganzaton Pan Numbered 1 of 19 2 sha be construed to
mpar any rght or remedy, ncudng tra by |ury, to recover any
nterna-revenue ta aeged to have been erroneousy or egay
assessed or coected, or any penaty camed to have been coected
wthout authorty, or any sum aeged to have been e cessve or n any
manner wrongfuy coected under the nterna-revenue aws.
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(b) For the purpose of any acton to recover any such ta , penaty,
or sums, a statutes, rues, and reguatons referrng to the coector
of nterna revenue sha be deemed to refer to the offcer whose act
or acts referred to n subsecton (a) gave rse to such acton. The
venue of any such acton sha be the same as under e stng aw.
pproved uy 16,19 2.
19 2-17-13900
. . R S. 0. PTTRLIC L W 71, IG TY S COND CONGR SS
ont Resouton tendng the tme for use of constructon
reserve funds estabshed under secton 11 of the Merchant Murne
ct, 1930, as amended.
Resoved by the Senate and ouse of Representatves of the Unted
States of merca n Congress assembed. That secton of an ct
approved ugust ,19 7 (Pubc Law 3 , ghteth Congress) C. .
19 7-2, 3 , reatng to merchant-marne constructon reserve
funds estabshed under secton 11 of the Merchant Marne ct,
1936, as amended, s hereby amended by strkng out March 31,19 2
and nsertng n eu thereof March 31,19 3 .
pproved uy 16,19 2.
19 2-17-13901
. R. 73 . PURLIC L W 76, IG TY-S COND CONGR SS
C PT R 92 , S COND S SSION
n ct To amend secton 326 of the Interna Revenue Code so as
to e empt certan recreatona factes from the ta prescrbed
theren, and for other purposes.
Unted States of merca n Congress assembed, That secton 326 (a)
of the Interna Revenue Code (reatng to ta on bowng aeys and
bard and poo tabes) s hereby amended by addng at the end
thereof the foowng new sentence: The ta mposed under ths
secton sha not appy for any perod begnnng after une 30, 19 2,
wth respect to any bowng aey, bard tabe, or poo tabe man-
taned e cusvey for the use of members of the rmed Forces on any
property owned, reserved, or used by, or otherwse acqured for the
use of, the Unted States f no charge s made for ther use.
Sec. 2. Subsecton (a) ( ) (D) of the Renegotaton ct, as amended
by secton 201(c) of the Renegotaton ct of 19 1 C. . 19 1-1,1 1
and by secton 617 of the Revenue ct of 19 1, s hereby amended by
strkng out October 31,19 1 and nsertng n eu thereof December
31,19 2 .

pproved uy 17,19 2.
2 2100 3 2
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19 2-17-13902
S. 2 1. PU LIC L W 6, IG TY-S COND CONGR SS
n ct To amend the Merchant Marne ct, 1936, as amended,
to further promote the deveopment and mantenance of the
mercan merchant marne, and for other purposes.
Unted States of merca n Congress assembed, That secton 01(a)
of the Merchant Marne ct, 1936, as amended, s amended to read as
foows:

Sec. 9. Secton 11(b) of such ct s amended to read as foows:
(b) For t|e purposes of promotng the constructon, reconstructon, recon-
dtonng, or acquston of vesses, or for other purposes authorzed n ths sec-
ton, necessary to carryng out the pocy set forth In tte I of ths ct, any
ctzen of the Unted States who s operatng a vesse or vesses n the foregn or
domestc commerce of the Unted States or n the fsheres or owns n whoe or
n part a vesse or vesses beng so operated, or who, at the tme of purchase or
requston of the vesse by the Government, was operatng a vesse or vesses so
enggcd or owned n whoe or n part a vesse or vesses beng so operated or had
acqured or was havng constructed a vesse or vesses for the purpose of opera-
ton n such commerce or n the fsheres, may estabsh a constructon reserve
fund, for the constructon, reconstructon, recondtonng, or acquston of new
vesses, or for other purposes authorzed n ths secton, to be composed of deposts
of proceeds from snes of vesses, ndemntes on account of osses of vesses,
earnngs from the operaton of vesses documented under the aws of the Unted
States and from servces Incdent thereto, and recepts, n the form of nterest
or otherwse, wth res ect to amounts prevousy deposted. Such constructon
reserve fund sha be estabshed, mantaned, e pended, and used n accordance
wth the provsons of ths secton and rues or reguatons to be prescrbed
|onty by the Commsson and the Secretary of the Treasury.
Sec. 10. Secton 11(c) of such ct s amended to read as foows
(c) In the case of the sae or actua or constructve tota oss of a vesse, f the
ta payer deposts an amount equa to the net proceeds of the sae or to the net
ndemnty wth respect to the oss In a constructon reserve fund estabshed under
subsecton (b), then
(1) f the ta payer so eects n hs ncome-ta return for the ta abe year
n whch the gan was reazed, or
(2) n case a vesse s purchased or requstoned by the Unted States, or
s ost, n any ta abe year begnnng after December 31, ISM ), and the ta -
payer receves payment for the vesse so purchased or requstoned, or
receves from the Unted States ndemnty on account of such oss, subsequent
to the end of such ta abe year, f the ta payer so eects pror to the e pra-
ton of s ty days after the recept of the payment or ndemnty, and n
accordance wth a form of eecton to be prescrbed by the Commssoner of
Interna Revenue wth the approva of the Secretary of the Treasury,
no gan sha be recognzed to the ta payer n respect of such sae or ndemnfca-
ton n the computaton of net ncome for the purposes of Federa ncome or
e cess-profts ta es. If an eecton s made under subdvson (2) and f compu-
taton or recompututon n accordance wth ths subsecton s otherwse aowabe
but s prevented, on the date of makng such eecton or wthn s months there-
after, by any statute of mtaton, such computaton or recomputaton neverthe-
ess sha be made notwthstandng such statute f a cam therefor s red wthn
s months after the date of mkng such eecton.
For the purposes of ths subsecton no amount sha be consdered as deposted
n a constructon reserve fund uness t s deposted wthn s ty days after t
receved by the ta payer.
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363
s used n ths subsecton the term net proceeds and the terra net Indem-
nty mean the sum of (1) the ad|usted bass of the vesse and (2) the amount of
gan whch woud be recognzed to the ta payer wthout regard to ths subsecton.
Sec. 11. Secton 11(d) of such ct s amended to read as foows:
(d) The bass for determnng gan or oss and for deprecaton, for the purposes
of Federa ncome or e cess profts ta es, of any new vesse constructed, recon-
structed, recondtoned, or acqured by the ta payer, or wth respect to whch
purchase-money ndebtedness s qudated as provded n subsecton (g), n whoe
or n part out of the constructon reserve fund sha be reduced by that porton
of the deposts n the fund e pended n the constructon, reconstructon, recon-
dtonng, acquston, or qudaton of purchase-money ndebtedness of the new
vesse whch represents gan not recognzed for ta purposes under subsecton (c).
Sec. 12. Secton 11(g) of such ct s amended to read as foows:
(g) The provsons of subsectons (c) and (f) sha appy to any depost n
the constructon reserve fund ony to the e tent that such depost s e pended
or obgated for e pendture, n accordance wth rues and reguatons to be
prescrbed onty by the Commsson and the Secretary of the Treasury
(1) under a contract for the constructon or acquston of a new vesse
or vesses (or n the dscreton of the Commsson, for a part nterest theren),
or, wth the approva of the Commsson, for the reconstructon or recond-
tonng of a new vesse or vesses, entered nto wthn () two years from
the date of depost or the date of any e tenson thereof whch may be
granted by the Commsson pursuant to the provsons of secton 11 ), n
the case of deposts made pror to the date on whch these amendatory
provsons become effectve, or () three years from the date of such depost
n the case of a depost made after such eft Ctve date, ony f under such
rues and reguatons
( ) wthn such perod not ess than 12 /. per centum of the con-
structon or contract prce of the vesse or vesses s pad or rrevocaby
commtted on account thereof and the pans and specfcatons theref|r
are approved by the Commsson to the e tent by t deemed necessary;
and
( ) n case of a vesse or vesses not constructed under the provsons
of ths tte or not purchased from the Commsson, () sad constructon
s competed, wthn s months from the date of the constructon
contract, to the e tent of not ess than per centum thereof (or n
case the contract covers more than one vesse, the constructon of the
frst vesse so contracted for s so competed to the e tent of not ess
than per centum) as estmated by the Commsson and certfed by t
to the Secretary of the Treasury, and () a constructon under such
contract s competed wth reasonabe dspatch thereafter;
(2) for the qudaton of e stng or subsequenty ncurred purchase-
money ndebtedness to persons other than a parent company of, or a company
affated or assocated wth, the mortgagor on a new vesse or vesses wthn
() two years from the date of depost or the date of any e tenson thereof
whch may be granted by the Commsson pursuant to the provsons of
secton 11(h), n the case of deposts made pror to the date on whch
these amendatory provsons become effectve, or () three years from the
date of such depost n the case of a depost made after such effectve
date.

Sec. 19. Secton 607 (g) of such ct s amended by addng at the end
thereof the foowng new sentence: If a vountary depost of earn-
ngs approved by the Commsson under ths subsecton after Decem-
ber 31, 19 0, resuts n an overpayment of Federa ta es for any year,
nterest sha not be aowed on such overpayment for any perod pror
to the date of approva of the depost by the Commsson.

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19 2-17-13903
S. 1999. PU LIC L W 7, IG TY-S COND CONGR SS
n ct Reatng to wthhodng, for State ncome ta purposes,
on the compensaton of Federa empoyees.
e t enacted by the Senate and ome of Representatves of the
Unted States of merca n Congress assembed, That where
(1) the aw of any State or Terrtory provdes for the coec-
ton of a ta by mposng upon empoyers generay the duty of
wthhodng sums from the compensaton of empoyees and mak-
ng returns of such sums to the authortes of such State or
Terrtory, and
(2) such duty to wthhod s mposed generay wth respect to
the compensaton of empoyees who are resdents of such State
or Terrtory,
then the Secretary of the Treasury, pursuant to reguatons promu-
gated by the Presdent, s authorzed and drected to enter nto an
agreement wth such State or Terrtory wthn one hundred and
twenty days of the request for agreement from the proper offca of
such State or Terrtory. Such agreement sha provde that the head
of each department or agency of the Unted States sha compy wth
the requrements of such aw n the case of empoyees of such agency
or department who are sub|ect to such ta and whose reguar pace of
Federa empoyment s wthn the State or Terrtory wth whch such
agreement s entered nto. No such agreement sha appy wth respect
to compensaton for servce as a member of the rmed Forces of the
Unted States.
Sec. 2. Nothng n ths ct sha be deemed to consent to the app-
caton of any provson of aw whch has the effect of mposng more
burdensome requrements upon the Unted States than t mposes upon
other empoyers, or whch has the effect of sub|ectng the Unted States
or any of ts offcers or empoyees to any penaty or abty by reason
of the provsons of ths ct.
pproved uy 17,19 2.
19 2-17-1390
. R. 72 . PU LIC L W 9. IG TY-S COND CONGR SS
C PT R 9 2. S COND S SSION
n ct To amend secton 16 (b) of the Interna Revenue Code
(reatng to empoyee stock purchase pans).
Unted States of merca n Congress assembed, That secton 16 (b)
of the Interna Revenue Code (reatng to empoyee stock purchase
pans) s hereby amended by addng at the end thereof the foowng:
In no event sha the amount actuay dstrbuted or made avaabe to any
dstrbutee Incude net unreazed apprecaton n securtes of the empoyer
corporaton attrbutabe to the amount contrbuted by the empoyee. Such net
unreazed apprecaton and the resutng ad|ustments to bass of such securtes
sha aso be determned n accordance wth reguatons whch sha be pre-
scrbed by the Secretary.
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Sec. 2. The amendment made by ths ct sha be appcabe wth
pproved uy 17,19 2.
19 2-17-1390
. R. 271. PU LIC L W 9 , IG TY-S COND CONGR SS
n ct To amend sectons 33(b), 7, and 9 of the Interna
Revenue Code, and for other purposes.
Unted States of merca n Congress assembed. That, effectve wth
respect to ta abe years endng after une 30, 19 0, secton 7 of the
Interna Revenue Code, as added by secton 101 of the cess Profts
Ta ct of 19 0, s hereby amended by changng ts headng to read
corporatons competng contracts or makng deposts under
merchant marne act and by addng to sad secton 7 the foow-
ng new subsecton:
(c) ase I erod arnngs Credt fob Deposts Under Merchant Marne
ct. 1936. The e cess profts net ncome computed under secton 33(b) for
any base perod year sha be ncreased by the amount. If any, by whch (1) the
ta payer s ta -deferred deposts of earnngs, made n or accrued to reserve funds
under secton 607 of the Merchant Marne ct, 1936, n respect of such base
perod year, e ceeds (2) the amount of such deposts of earnngs for the ta abe
year. The Secretary sha provde, by reguaton, for proper ad|ustment of the
deposts made n or accrued to the reserve funds for any ta abe year so as to
e cude therefrom any amount payabe for such year as rembursement of oper-
atng-dfferenta subsdy.
Sec. 2. Secton 9 of the Interna Revenue Code (msceaneous
provsons reatng to the computaton of average base perod net
ncome) s hereby amended by addng at the end thereof the foowng
new subsecton:
(f) Companes Preservng Defense Capacty and Increasng Capacty for
Manufacturng Pe cetme Products From Certan Strategc and Cbtca
Metas.
(1) gbty requrement. In the case of a ta payer whch com-
menced busness on or pror to anuary 1, 1936, and snce such date as
been prmary engaged n manufacturng, f
( ) The percentage of the ta payer s purchases of raw materas
whch were strategc and crtca metas (as defned n paragraph (3))
was 0 per centum , r more for each of the ta abe years begnnng wth
or wthn the ta payer s base perod;
( ) The ta payer s average monthy e cess profts net ncome (com-
puted n the manner provded n secton 3(e)) for the perod com-
prsng a ta abe years endng wth or wthn the frst twenty-four
months of ts base perod was 2 0 per centum or more of the average
monthy e cess profts net ncome (so computed) of the ta payer for
the perod comprsng a ta abe years endng wth or wthn the ast
twenty-four month.- of ts base perod;
(C) The ad|usted bass of the ta payer s tota factes (as defned n
secton (d)) as of the begnnng of ts base perod (when added to
the tota actee at such tme of a corporatons wth whch the
ta payer has the prvege under secton 1 1 of fng a consodated
return for ts frst ta abe year under ths subchapter) dd not e ceed
10,000,000; and
(D) The ad|usted bass of the ta payer s tota factes (as defned
n secton (d)) on the ast day of ts base perod was 1 0 per centum
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366
or more 3f the ad|usted bass of ts tota factes on the frst day
of ts base perod.
the ta payer s average base perod net ncome determned under ths sub-
secton sha be the amount computed under paragraph (2).
(2) Computaton. The average base perod net ncome determned under
ths subsecton for a ta payer entted to the benefts of ths subsecton sha
be the amount computed under secton 3 (e) (2) ( ) and (F) e cept that
there sha be substtuted for the aggregate of the e cess profts net ncome
for each of the s months n the perod begnnng uy 1, 19 9, and endng
December 31, 19 9, an amount computed by mutpyng the aggregate )f
the e cess profts net ncome for each of the s months n the perod
begnnng uy 1, 19 6, and endng December 31, 19 6, by the per centum
determned by dvdng the ad|usted bass of ta payer s tota factes (as
defned n secton (d)) on December 31, 19 , by the ad|usted bass of ts
tota factes on the frst day of ts base perod. The average base perod
net ncome computed under the precedng sentence sha not e ceed 0 per
centum of the e cess profts ta net ncome for the ta payer s frst ta abe
year under ths subchapter.
(3) Defnton of stbateoc and crtca metas. s used n ths sub-
secton, the term strategc and crtca metas means copper and znc whch
on anuary 1, 19 , had been determned by proper authorty to be strategc
and crtca under the provsons of the Strategc and Crtca Stock Fng
ct and sha ncude scrap contanng such metas.
Sec. 3. The amendment made by secton 2 sha be appcabe wth
respect to a ta abe years endng after une 30, 19 0.
Sec. . ffectve wth respect to ta abe years endng after une 30,
19 0, secton 33(b) of the Interna Revenue Code (reatng to the
computaton of average base perod net ncome) s hereby amended by
nsertng at the end thereof two new paragraphs readng as foows:
(1 ) d|ustment for base perod osses fhom branch operatons. In
the case of a ta payer whch durng two or more such ta abe years
operated a branch at a oss, the e cess profts net ncome for each such
ta abe year (determned wthout regard to ths paragraph) sha be n-
creased by the amount of the e cess of such oss above the oss, f any,
ncurred by such branch durng the ta abe year for whch the ta under
ths subchapter s beng computed. s used n ths paragraph, the term
branch means a unt or subdvson of the ta payer s busness whch was
operated n a separate pace from ts other busness and dffered substantay
from ts other busness wth respect to character of products or servces.
unt or subdvson of the ta payer s busness sha not be consdered to dffer
substantay from the ta payer s other busness uness t s of a type cass-
fabe by the Standard Industra Cassfcaton Manua n a dfferent ma|or
ndustry group or n a dfferent subgroup of the ta payer s ma|or ndustry
group than that n whch ts other busness s so cassfabe: Provded,
however. That ths paragraph sha not appy uness the sum of the net
osses of such branch ( unug the base perod e ceeded 1 per centum of the
aggregate e cess profts net ncome of the ta payer durng the base perod.
For the purposes of ths paragraph, the aggregate e cess profts net ncome
of the ta payer durng the base perod sha be the sum of ts e cess profts
net ncome for a years n the base perod, ncreased by the sum of the net
osses of such branch durng the base perod
(19) Rues fob appcaton ok paragraph (1 ). For the purposes of
paragraph (IS)
( ) branch sha be deemed to have been operated at a oss durng
a ta abe year f the porton of the deductons under secton 23 for
such year whch s determned, under reguatons prescrbed by the
Secretary, to be the porton thereof propery aocabe to the operaton
of such branch e ceeds the porton of the gross ncome durng the ta -
abe year whch s determned under such reguatons to be the porton
thereof propery aocabe to the operaton of such branch; and the
amount of the oss sha be an amount equa to such e cess.
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367
( ) If the porton of the gross ncome determned to be propery
aocabe to the operaton of the branch s a mnus quantty, the amount
of such e cess sha be the sum of the deductons under secton 23
determned to be propery aocabe to the operaton of the branch pus
an amount equa to such mnus quantty.
Sec. . Secton 310(c) of the Revenue ct of 19 1 s amended to
read as foows:
(c) ffectve Date. The amendments made by ths secton sha be effectve
on and after anuary 1, 19 1.
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COMMITT R PORTS
19 -1399
M NDING S CTION 113(h)(1)( ) OF T INT RN L R NU
COD
( ouse of Representatves Report No. 312, ghty-second Congress, Frst Sesson
pr 11, 10 1
Mr. Camp, from the Commttee on Ways and Means, submtted the foowng
report to accompany II. R. 31C :
The Commttee on Ways and Means to whom was referred the b ( . R.
31 ) to amend secton 113(b) (1) (It) of the Interna evenue Code wth respect
to the ad|ustment of the bass of property for deprecaton, obsoescence, amor-
tzaton, and depeton, havng consdered the same, report favoraby thereon
wth amendments and recommend that the b as amended do pass.
The amendments are as foows:
On pa|re 1, ne 6. strke out ta abe .
On pa :e 2, ne 2. strke out ta abe .
On pnge 2, ne , strke out ct and nsert n eu thereof chapter .
On page 2, ne 6, strke out amendments and nsert n eu thereof
amendment.
On page 2, ne , strke out 193 and nsert n eu thereof 19 7 .
On page 2, nes 9 through 13, strke out subsecton (c).
G N R L ST T M NT
. R. 31( amends secton 113(b)(1)( ) of the Interna Revenue Code
(reatng to the ad|ustment of the bass of property for deprecaton, obsoescence,
amortzaton, and depeton) to provde that the bass of property sha be
ad|usted by the amount of deprecaton aowabe but not ess than the amount
of deprecaton aowed n computng net ncome and whch has resuted n a
reducton of the ta payer s ta es.
Ths amendment s ntended to correct the stuaton created by the decson
of the Supreme Court n rgnan ote Corp. v. everng (319 U. S. 23
(19 3)), whch has been foowed by three recent court-of-appeas decsons n
whch certorar was dened by the Supreme Court. The rue n the rgnan
ote case construes the 1932 amendment to what s now secton 113(b) (1) (It)
In the aw pror to the Revenue ct of 1 )32, t was provded that bass
shoud be reduced by the deprecaton aowabe over the prevous fe of the
property; that s, the deprecaton propery deductbe each year n computng
ta abe ncome. The aw was amended n 1932 to add another provson requr-
ng that, where deprecaton In e cess of that aowabe had been actuay
aowed, the e cess aowed over that propery aowabe shoud aso reduce the
bass of the property. The purpose of that amendment was to provde that,
where ta es had been reduced by e cessve deprecaton erroneousy camed
and the statute of mtatons had barred the coecton of the correct ta , the
ta payer coud not then cam that he coud restore to bass the amount of the
e cess deprecaton. If ths atter resut had been permtted, the ta payer n
effect woud have been aowed a doube deducton.
1 Commerce Company v. Unted State (171 Fed. (2(11 1 9. cert. den. 330 U. S. I72) :
Pedmont Cotton Ms v. Commssoner (177 Fed. (2d) 1 , cert. den. 33 U. S. 01 )) ; and
afkhavk Perry Corp. v. Commmtoner (1S2 Fed. (2d) 319, cert. den. 3 0 U. S. 7 ).
Sec. 111(b) (2) of the Revenue ct of 11)2 .
(369)
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370
In the rgnan ote case the Supreme Court construed the 1932 amendment
to mean that, where a ta payer had camed e cessve amounts for deprecaton
n hs returns for earer years now cosed, such e cessve amounts were propery
deductbe from cost n read|ustng the deprecaton bass of the property n
queston, even though n those years the ta payer had receved no ta beneft
from the deprecaton deducton. In that case the ta payer underestmated the
usefu fe of the property under the facts known at the tme the deprecaton
was camed. Thus, the ta payer woud be penazed because of hs error n
camng e cessve deprecaton n an earer year durng whch he had a net oss
even wthout the deducton of the e cessve deprecaton. Under those cond-
tons the e cess deprecaton camed by the ta payer coud have resuted n no
ta advantage to hm and n no ta pre|udce to the Government. Mr. Chef
ustce Stone, n hs dssent to the rgnan ote decson n whch he was
|oned by three other members of the Court, termed the above rue an ncon-
gruous resut whch was contrary to the statute.
The effect of . R. 31 s to provde that the ad|usted bass of property s
to be reduced by e cessve deprecaton shown n a return ony to the e tent
that such e cessve deprecaton resuted n a reducton n the ta payer s ta es.
Te commttee has amended the b so as to provde that the amendment sha
be appcabe wth respect to ta abe years begnnng after December 31, 1 ) 7,
rather than December 31, 193 , as the b orgnay provded. The commttee
has aso made severa amendments to the b whch are cerca n nature.
C NG S IN ISTING L W
In compance wth paragraph 2a of rue III of the Rues of the ouse of
Representatves, changes n e stng aw made by the b, as ntroduced, are
shown as foows (e stng aw proposed to be omtted s encosed n back
brackets; new matter s prnted n tac; e stng aw n whch no change s
proposed s shown n ronan) :
Secton 113 (b)(1)( ) of the Interna Revenue Code
( ) n respect of any perod snce February 2 , 1913, for e hauston, wear
and tear, obsoescense, amortzaton, and depeton, to the e tent aowed
as deductons n computng ta abe net ncome and resutng n a reducton
of the ta payer s ta es (but not ess than the amount aowabe) under ths
chapter ct or pror ncome ta aws. Where for any ta abe year pror
to the ta abe year 1932 the depeton aowance was based on dscovery
vaue or a percentage of ncome, then the ad|ustment for depeton for such
year sha be based on the depeton whch woud have been aowabe for
such year f computed wthout reference to dscovery vaue or a percentage
of ncome;
19 2-1391)9
D USTM NTS TO SIS ON CCOUNT OF C SSI D PR CI TION
LSenate eport No. 1160. hty-sccond Congress, Second Sesson. Caendar No. 1091)
February 0 (egsatve day, anuary 10), 19 2
Mr. George, from the Commttee on Fnance, submtted the foowng report
to accompany . R. 310 :
The Commttee on Fnance, to whom was referred the b ( . R. StS) to
amend secton 113(b)(1)( ) of the Interna Revenue Code wth respect to
the ad|ustment of the bass of property for deprecaton, obsoescence, amortza-
ton, and depeton, havng consdered the same, report favoraby thereon wth
an amendment and recommend that the b, as amended, do pass.
Genera Statement
. It. 316 amends secton 113(b)(1)( ) of the Interna Revenue Code (re-
atng to the ad|ustment of the bass of property for deprecaton, obsoescence,
amortzaton, and depeton) to provde, n genera, that the bass of property
sha be ad|usted by the amount of deprecaton prevousy aowabe, or by
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371
deprecaton prevousy aowed, f that was more than the nmount aowabe,
but ony to the e tent that the deducton of the e cess amount reduced ncome
or e cess profts ta es for any year.
Ths amendment s ntended to correct the stuaton created by the decson
of the Supreme Court n rgnan ote Corp. v. everng (319 U. S. 23
(19 3)), whch has been foowed by three court of appeas decsons n whch
certorar was dened by the Supreme Court.1 The rue n the rgnan ote
case construed those provsons of the Revenue ct of 1932 whch are equvaent
to what s now secton 113(b) (1) ( ) of the Interna Revenue Code.
The aw pror to the Revenue ct of 1932 provded that the bass of property
shoud be reduced by the deprecaton aowabe over the prevous fe of the
property. The aw was amended n 1932 to add another provson requrng
that, where deprecaton n e cess of that aowabe had been actuay aowed,
the e cess aowed over that propery aowabe shoud aso reduce the bass
of the property. The purpose of that amendment was to provde that, where
ta es had been reduced by e cessve deprecaton erroneousy camed and the
statute of mtatons had barred the coecton of the correct ta , the ta payer
coud not then cam that he coud restore to bass the amount of the e cess de-
precaton. If ths atter resut had been permtted, the ta payer n effect woud
have been aowed a doube deducton.
In the rgnan ote case the Supreme Court construed the 1932 amend-
ment to mean that, where a ta payer had camed e cessve amounts for de-
precaton n hs returns for earer years now cosed, such e cessve amounts
were propery deductbe from cost n read|ustng the bass of the property n
queston, even though n those years the ta payer had receved no ta beneft
from the deprecaton deducton. Thus, the ta payer woud be penazed because
of hs error n camng e cessve deprecaton n an earer year, even though
for that year he had a net oss (not capabe of beng offset aganst ncome of a
precedng or succeedng year) even wthout the deducton of the e cessve de-
precaton. Under those condtons the e cess deprecaton camed by the ta -
payer coud have resuted n no ta advantage to hm and n no ta pre|udce to
the Government. Mr. Chef ustce Stone, n hs dssent to the rgnan ote
decson n whch he was |oned by three other members of the Court, termed
the above rue an ncongruous resut whch was contrary to the statute. Ths
egsaton s ntended to correct the nequtabe ta effects whch resuted, or
whch woud n the future resut, from the appcaton of the rue of the rgnan
ote decson.
The b as passed by the ouse woud have corrected the effects of the r-
gnan ote decson ony wth respect to the computaton of ta abtes for
ta abe years begnnng after December 31, 19 7.
Your commttee has amended the b so as to provde that the amendment
may be appcabe to ta abe years begnnng after December 31, 1931, rather
than December 31, 19 7, as the ouse verson provdes. Ths w renstate the
ntent of Congress wth respect to secton 113(h) (1) ( ) of the Revenue cts of
1932, 193 , 1936, and 193 and the Interna Revenue Code. Snce the prncpe
emboded n the b has been endorsed by the ouse and by ths commttee,
t seemed desrabe to e tend that prncpe to a open years to whch It s
appcabe. Retroactve appcaton to these years w remedy the n|ustce of
the rgnan ote decson as fuy as s possbe wthout ftng the bar of
the statute of mtatons. If the amendment were made appcabe n a cases
for a ta abe years endng after December 31, 1931, however, the effect mght
have been to reduce the e cess profts credts of certan ta payers wthout pro-
vdng for a proportonate reducton of ther e cess profts net ncome; and
n other cases the effect mght have been to prevent ta payers from takng
advantage of some of the reef provsons of the present e cess profts ta aw,
wthout affordng them correspondng advantages. For those reasons the app-
caton of the amendment to perods before anuary 1, 19 2, s made eectve, so
that no ta payer need be hurt by retroactve egsaton.
The Treasury Department has now concuded that the addtona revenue oss
resutng from makng the amendment appcabe to the ta abe years begnnng
pror to anuary 1, 19 , w be n the neghborhood of 7 mon. The staff
of the ont Commttee on Interna Revenue Ta aton agrees. The revenue oss
resutng from the appcaton of the b ony to ta abtes for 19 and sub-
Commerce Company v. Unted States (171 Fed. (2d) 1 0, certorar dened 336 U. .
072) ; Pedmont Cotton Ms v. Commssoner (177 Fed. (2d) 1 , certorar dened 330
TT. . 910) :and ackhact-Perry Corp. t. Commssoner (1 2 Fed. (2d) 319, certorar
dened 3 0 U.S. 70).
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372
sequent years, as n the ouse b, Is now estmated to be In the neghborhood
of 6 mon. Thus the tota revenue oss resutng from your commttee s b
(e cudng nterest of appro matey 7 mon) s estmated as about 03
mon.
Technca nayss
s passed by the ouse, . R. 316 amended secton 113(b) (1) ( ) of the
Code to provde that the unad|usted bass of property sha be reduced by
deprecaton, etc., to the e tent aowed as deductons n computng net ncome
and resutng n a reducton of the ta payer s ta es, but not ess than the
amount aowabe, under chapter 1 of the Interna Revenue Code or pror ncome
ta aws.
Your commttee has amended . R. 316 to provde n greater deta certan
rues for determnng the amount of the e cessve deducton for deprecaton, etc.,
whch may be gnored n the ad|ustment to the bass of property, and to provde
that the dsregard of deprecaton, etc., aowed by reason of ths b sha be
eectve for perods pror to anuary 1, 19 2. Under your commttee s amend-
ment, the rues for determnng ad|ustments to bass where deductons have been
aowed are set forth n two new causes, () and (), added to secton
113(b) (1) ( ) of the Code.
Under cause (I), the bass of property sha be reduced to the e tent of the
amount aowed as deductons n computng net ncome under chapter 1 of the
Interna Revenue Code or under pror ncome ta aws. Cause () provdes
that the bass sha be so reduced, however, ony to the e tent the deductons so
aowed resuted n a reducton for any ta abe year of the ta payer s ta es under
chapter 1 of the Code (other than subchapter thereof, reatng to sef-empoy-
ment ta es), subchapter of chapter 2 (the Word War II e cess-profts ta ),
or under pror ncome, war-profts, or e cess-profts ta aws. The determnaton
under cause () of whether a deducton resuted n a ta beneft for any ta abe
year sha be made by ascertanng whether the ta for such year woud have
been greater but for such deducton havng been aowed. In makng such
determnaton any reducton n ta for the ta abe year for whch the deducton
was aowed and aso any reducton n ta for a precedng or succeedng ta abe
year (for e ampe, by reason of any carry-over or carry-back of net operatng
oss or unused e cess-profts credt) must be taken nto account.
Your commttee contnues the provsons of e stng aw, aso ncuded n the
ouse b, whch requre that the bass of property sha he reduced n any case
by amounts aowabe whether or not any ta beneft s derved therefrom.
The ta -beneft rue set forth n cause () of secton 113(b)(1)( ) sha
appy n respect of deprecaton, etc., for a perods after December 31, 19 1.
owever, n respect of the deprecaton, etc., for any perod after February 2 ,
1913, and before anuary 1, 19 2, the requrement of cause () that the deduc-
ton sha operate to reduce ta es (as dstngushed from the requrement of
cause () that the deducton be aowed) sha be appcabe ony f an eecton
has been made under new subsecton (d) added to secton 113 of the Code by
your commttee. If the eecton s not made, the b does not change the rue
under e stng aw wth respect to the ad|ustment to bass for deprecaton, etc.,
for the perod before anuary 1, 19 2.
The new subsecton (d) provdes that any person may eect to have cause ()
of secton 113(b)(1)( ) appy and that such eecton sha appy wth respect
to a perods after February 2 , 1913, and before anuary 1, 19 2, wth the
perod durng whch such person hed the property and the perod, f any, for
whch ad|ustments must be made as provded n secton 113(b)(2) of the Code,
reatng to substtuted bass. The eecton must he made on or before December
31, 19 2, sha be rrevocabe, and sha e made n such manner as the Secretary
may prescrbe by reguatons. n eecton may not be made wth respect to a
partcuar property but sha appy to a propertes hed by the person makng the
eecton at any tme on or before the date of such eecton. In the case of a part-
nershp or trust, an eecton as to property hed by such partnershp or trust
sha be made by the partnershp or trust rather than by the ndvdua partners
or benefcares.
Subsecton (d) further provdes that an eecton by a transferor, donor, or
grantor after the date of the transfer, gft, or grant of the property sha not
affect the bass of such property n the hands of the transferee, donee, or grantee.
Where a transferor, donor, or grantor makes an eecton on or before the date of
the transfer of the property, proper ad|ustments under secton 113(b) (2) gvng
effect to the eecton sha be made to the bass of the property n the bands of
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373
the transferee, donee, or grantee In respect of the perod durng whch the prop-
erty was hed by the transferor, donor, or grantor. If the transferee, donee,
or grantee makes the eecton on or after the date of the transfer, gft, or grant,
the eecton s appcabe n makng the ad|ustment to the bass of property n
respect of the perod durng whch such property was hed by the transferor,
donor, or grantor, whether or not the transferor, donor, or grantor made an eec-
ton under secton 113(d). n eecton by a transferee, donee, or grantee w
not affect the ta abty of the transferor, donor, or grantor.
The determnaton of the amount of deprecaton, etc., whch s aowabe n
any ta abe year to whch secton 113(b) (1) ( ) () s appcabe sha e made
In a manner consstent wth such secton. If pror to the enactment of ths b
there was a fna decson of a court determnng the amount of deprecaton
aowabe for a partcuar ta abe year, the determnaton (but ony for the pur-
poses of ths amendment) of the amount aowabe for that year, or for subse-
quent ta abe years, by reason of the appcaton of secton 113(b) (1) (I ) ()
must be ad|usted to refect ths change In the aw.
ta payer seekng to mt bs ad|ustment of bass wth respect to e cessve
deductons for deprecaton, etc., must estabsh that snch e cessve deductons
dd not produce a ta beneft. Certan ta payers may not have avaabe ade-
quate records to estabsh such ack of ta eneft. For e ampe, a corporate
transferee may have avaabe adequate, records wth respect to the ta effect of
the deducton for the ta abe years 19 6 and 10 7 of e cessve deprecaton, but
may not have avaabe adequate records wth respect to the deducton of e -
cessve deprecaton for a pror perod durng whch the property was hed by ts
transferor. In such case, the corporate transferee sha not be dened the rght
to appy secton 113(b) (1) ( ) (I) wth respect to the e cessve deprecaton for
the perod for whch adequate proof s avaabe.
Your commttee contempates that the Secretary sha prescrbe reguatons
settng forth rues for the determnaton of ta beneft n cases nvovng depre-
caton, etc., wth respect to more than one property In the same ta abe year;
In cases nvovng prorty between the ta -beneft rue of secton 113(b) (1) ( )
and other sectons, such as secton 22(h) (12) or secton 127; In cases nvovng
partnershps or trusts (n whch cases the tn beneft of the partners and the
benefcares must be taken nto account) ; and n cases nvovng ad|ustments
requred under secton 113(h)(2) (n whch cases the ta beneft of the trans-
feror, donor, or grantor must be taken nfo account, as we as any ta beneft
attrbutabe to a carry-over from such persons, as under Pubc Law 1 9, 0th
Cong., approved uy 1 , 10 7).
The b as passed by the ou e provded that the amendment made to secton
113(b)(1)( ) of the Code sha be appcabe to ta abe years begnnng after
December 31, 19 7. Your commrtee has provded that the amendments to the
Code sha appy n res ect of ta abe years gnnng after December 31, 193
(that s, the ta abe years to whch the Code s appcabe), and that provsons
havng the effect of such amendments sha he deemed to have been ncuded n
the revenue aws respectvey appcabe to ta abe years endng after December
31,1031, and begnnng before anuary 1,1030. owever, ths retroactve amend-
ment does not open for refund or credt, or assessment of a defcency, any ta -
abe year for whch such refund or credt, or such assessment, s barred by any
aw or rue of aw.
Changes n stng Law
In compance wth subsecton ( ) of rue I of the Standng Rues of the
Senate, chantes In e stng aw made by the b, . R. 316 , as reported, are
shown as foows (e stng aw proposed to be omtted s encosed In back
brackets, new matter s prnted n tacs, e stng aw n whch no change s
proposed s shown n roman) :
Interna Revenue Code
S CTION 113. D UST D SIS FOR D T RMINING G IN OR LOSS
#
(b) d|usted ass. The ad|usted bass for determnng the gan or oss from
the sae or other dsposton of property, whenever acqured, sha he the bass
determned under subsecton (a), ad|usted as herenafter provded.
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37
(1) Genera rue. Proper ad|ustment n respect of the property sha n
a cases be made
( )
( ) n respect of any perod snce February 2 , 1913, for e hauston,
wear and tear, obsoescence, amortzaton, and depeton, to the e tent
aowed (but not ess than the amount aowabe) under ths chapter or
pror ncome ta aws of the amount
( ) aowed as deducton n computng net ncome under ths
chapter or pror ncome ta acs, and
() resutng (by reason of the deductons so aowed) n a reduc-
ton for any ta abe year of the ta payer s ta es under ths chapter
(other than subchapter ), subchapter of chapter 2, or pror n-
come, war-profts, or e cess-profts ta aws,
but not ess than the amount aowabe under ths chapter or pror ncome
ta aws. Cause () of ths subparagraph sha not appy n respect of
any perod snce February 2 , 91S, and before anuary 1, 19 2, unets
an eecton has been made under subsecton (d). Where for any ta abe
year pror to the ta abe year 1932 the depeton aowance was based on
dscovery vaue or a percentage of ncome, then the ad|ustment for
depeton for such year sha be based on the depeton whch woud
have been aowabe for such year f computed wthout reference to
dscovery vaue or a percentage of ncome;

(d) ecton n Respect of Deprecaton, tc., owed efore 19 2. ny
person may eect to have cause () of subsecton (6) ( )( ) appy n respect
of perods snce February 2 , 1913, and before anuary 1, 19 2. Such an
eecton sha be made n such manner as the Secretary may by reguatons
prescrbe, sha be rrevocabe, and sha appy n respect of a property hed by
the person makng the eecton at any tme on or befove the date on whch the
eecton was made and n respect of a perods snce February 2 , 1913, and
before anuary 1, 19 2, durng whch such person hed such property or for
whch ad|ustments must be made under subsecton (6) (2). n eecton by a
transferor, donor, or grantor, made after the date of the transfer, gft, or grant
of property sha not affect the bass of such property n the hands of the trans-
feree, donee, or grantee. No such eecton may be made after December 31, 19 2.
19 2-1 000
L GISL TI R NC PPROPRI TION ILL. 19 3
Senate Report No. 1 2 . ghty second Congress, Second Sesson. Caendar No. 17 7
une 26 (egsatve day, une 21), 19 2
Mr. ender, from the Commttee on ppropratons, submtted the foowng
report to accompany . R. 7313 :

Ta Deducton fob Lvng penses
The b as p.ssed the ouse contaned the foowng provson wth reference
to the pace of resdence of Members of Congress for ta purposes:
: Provded, however. That In the case of ta abe years begnnng after Decem-
ber 31, 19 2, the pace of resdence of a Member of Congress (ncudng any
Deegate and Resdent Commssoner) wthn the State, congressona dstrct,
Terrtory, or possesson whch he represents n Congress sha be consdered
to be hs home for the purposes of secton 23(a) (1) ( ) of the Interna Revenue
Code.
Tte 26, secton 23(a) (1) ( ) of the Interna Revenue Code provdes:
the ordnary and necessary e penses pad or ncurred durng the ta abe
year In carryng on any trade or busness, ncudng a reasonabe aowance for
saares or other compensaton for persona servces actuay rendered; traveng
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37
e penses (ncudng the entre amount e pended for meas and odgng) whe
away from home n the pursut of a trade or busness; and rentas or other pay-
ments requred to be made as a condton to the contnued use or possesson, for
purposes of the trade or busness, of property to whch the ta payer has not taken
or s not takng tte or n whch he has no equty.
The commttee approves the anguage as passed the ouse wth the foowng
amendment:
, but amounts e pended by such member wthn such ta abe year for vng
e penses sha not be deductbe for ncome ta purposes f n e cess of 2, 00
The effect of the ouse amendment woud be to permt the Members of Con-
gress to cam deductons for ta purposes to the same e tent as other persons
whose busness or professon requres absence from home for varyng perods
of tme. The Senate amendment paces a mt of 2, 00 on the amount that may
be deductbe for vng e penses n any one ta abe year after December 31,
10 2.

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IND
I Rung No.
d|usted gross ncome, deductons for capta gans and osses,
Reguatons 111 amended
dvertsng, e pendtures, captazed n base perod, Regua-
tons 111 amended
ffated corporatons:
Consodated ncome and e cess profts ta returns
ecton to fe separate returns for frst ta abe year end-
ng after March 31, 19 1
aska raroads ta , repeaed (P. L. 3 0)
mony:
Deductbty of payments made to a dvorced wfe after
her remarrage
Incuson n gross ncome of payments receved by dvorced
wfe after her remarrage
Retroactve modfcaton of dvorce decree
ternatve computaton of e empt e cess output from mnera
propertes, Reguatons 130 amended
ternatve ta :
Computaton of, Reguatons 111 amended
Lmtaton on combned norma ta and surta n comput-
ng parta ta
mendments:
IR-Mu. 3 (page 2 0, ths uetn)
Reguatons 132
Secton 32.3. 0
Reguatons 130
Secton 0. 30-2
Secton 0. 37-
Secton 0. 0-1
Sectons 0. 3-2, 0. 3-3, 0. 3-
Reguatons 129
Sectons 2 .12, 2 .30, 2 .31, 2 . (added)
Reguatons 1 16
Sectons 0 . 01, 0 .601.
Reguatons 113
Sectons 1 3.31, etc
Reguatons 111
Sectons 29.11-1, 29.12-1, 29.12-2, 29.12-3, 29.12- ,
29. 00-1, and 29. 01-1
Secton 29.13-1, etc
Secton 29.22(d)-7
Sectons 29.22(n)-, 29.117-1, 29.117-2, 29.117-3,
29.117-6, 29.117-7, 29.122-3, 29.162 1, 29.162 2,
29 1 9-1
Secton 29.23(a)- ---
Secton 29.23(c)-
Sectons 29.23(o)-, 29.23(tu-, 29.101-3 (added),
29.101(6)-1, 29.27 -1, 29.3 13-1 (added , 29.3 13-2
(added), 29.3 13-3 (added), 29.3 1 -1 (added)
Sectons 29. 1-1, 29.27 -1, 29.27 -2, 29.322-7
2 2160 3 2 (377)
13991
13976
13912
13 73
13 2
13 6
13966
13966
13966
1399
13991
139 2
13971
13
139 9
1399
13913
1399
13 73
139 9
13921
1397
139S9
13936
13991
13976
139 6
13911
13967
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37
29.23 -2,
29. 21-
(added),
29. 23-1
mendments Contnued
Reguatons 111 Contnued
Sectons 29. 2-1, 29. -1, 29.101-2, 29.101(1)-1,
29.101(6)-1, 29.101(7|-, 29.101(1 )-1 (added),
29.117-3, 29.1 2-1, 29.1 3-1, 29.1 -1, 29.217-2,
29. 21-2 (added), 29. 21-3 (added),
(added), 29. 21- (added), 29. 22-1
29. 22-2 (added), 29. 22-3 (added),
(added), 29. 23-2 (added), 29. 23-3
(added;, 29. 23- (added)
Sectons 29.112(b)(7)-, 29.112(b)(7)-2, 29.112(b)(7)-
, 29.112(b)(7)- , 29.113(a)(1 )-, 29.1 -2, 29.-
1 -3 -
Sectons 29.131-3, 29.131-7
Secton 29.1 1-1.
Secton 29.1 -1..
Secton 29.291-1
Sectons 29.362-2, 29.362- , 29.362-6 (added)
Sectons 29. 01-1, 29. 02-1
Reguatons 10
Secton 1.2
Sectons 1.13, 1. 9
Sectons 1.17, 1.1 , 1.19
Sectons 1. , 1. ..
Secton 1. 0
Reguatons 103
Secton 19.22(d)-7
Reguatons 71
Sectons 113.1, etc
Reguatons 9
Sectons 323.30 and 323.31.
Reguatons 1
Sectons 320.0, etc
Reguatons 2 )
Secton 197.2 (6), (c)
Reguatons 1
Sectons 190.122, etc
Sectons 190.312, etc
Reguatons 11
Sectons 1 9.132, etc
Reguatons 10
Sectons 1 .311, etc
Reguatons
rtces 20, etc
Reguatons
Sectons 1 . 1, etc
Reguatons
Sectons 1 3.301, etc
Reguatons 3
ppend
Sectons 1 2.30 , etc
Reguatons No. 1
coho Ta ct
Treasury Decson 703, artce 1 (C. . -2, 2 (1936)).
Treasury Decson 9 (C. R. 19 6-1, 209)-
mercan Natona Red Cross, e cuson from gross ncome of
proceeds of certan sports programs conducted for the beneft
of (P. L. 6 )
nnutes, contrbutons by empoyers for the beneft of non-
resdent empoyees
rgentna, soca securty ta mposed upon empoyees of ar
nes
No.
13923
1 1
13 0
132
139 1
1
13912
161
13S6S
169
139 9
17
13993
176
13 96
209
13970
23
139
223
139 0
22
13996
226
13 7
232
13936
76
13932
2
13960
2 7
13 97
2 7
1 O
ooc
13
13 6
3 2
13 3
306
13 3
306
13 3
306
13 7
3
13 3
306
13 3
306
13 76
13 3
303
306
13933
301
139 0
217
13969
219
13 7
3 6
139 3
170
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379
rmed Forces of the Unted States:
empton of members from addtona estate ta upon
death, Reguatons 10 amended
Servceman s basc aowance for quarters used for support
of dependent
rmy offcer, dsabty retrement pay resumed after termna-
ton of cvan empoyment wth Federa Government
rtstc work, ong-term compensaton, prze receved for sym-
phonc composton _
ttorneys or agents, une roed, e tent of recognton n con-
necton wth Federa ta matters
utomobe seat covers. (See cse ta es.)
wards, prze receved for symphonc composton, ong-terra
compensaton
ass of property. (See Gan or oss.)

d|usted for deprecaton n computng renta ncome from
suppement U ease
onds, Lnted States, ssued after March 1, 19 1 owned by
nonresdent aen at tme of death, ta abe status, Reguatons
10 amended
usness e penses:
Costs ncurred by Congressman n connecton wth ssuance
of report etter to hs consttuents
Payments made by surgeons to other physcans for profes-
sona assstance and under fee-spttng arrangements-..
usness ncome, certan ta -e empt organzatons, Reguatons
111 amended
C
Canada, ta mposed upon corporatons under The Od ge
Securty ct, credt aganst Unted States ncome ta
Canceaton of ndebtedness, property transferred on quda-
ton of subsdary corporaton
Capta e pendtures, advertsng and promoton of good w
e penses, Reguatons 111 amended
Capta gan, ump-sum receved from cv-servce retrement
fund
Capta gans and osses:
Lmtaton on combned norma ta and surta n comput-
ng parta ta
Lump-sum payment for fee smpe tte to mneras n and,
royaty nterest retaned
Payment of |udgment by transferees of qudatng corpo-
raton
Percentage taken nto account, Reguatons 111 amended..
Treatment of, Reguatons 111 amended
Carry-backs, e tenson of tme for payment of ta es by corpo-
ratons e pectng, Treasury Decson 9 (C. . 19 6-1, 209)
amended
Carry-over, net capta oss, Reguatons 111 amended
Ceng prces:
mounts pad n e cess of, aowabe n computng gross
ncome
mounts pad n voaton of the Defense Producton ct
of 19 0
Chartabe contrbutons:
Deducton for e cess profts ta purposes where ta payer
reportng upon the nstament bass of accountng for
ncome ta purposes eected to report ncome from n-
stament saes on the accrua bass
Rung No.
13970
13 93
13 71
13 62
139
13 62
139 6
139
13909
13910
13923
13 1
1396
13976
139
139 2
13917
13992
13991
13991
13969
13991
139
139
13919
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3 0
C hartabe contrbutons Contnued
ecomputaton n connecton wth computatons under
secton 107, I. I. C
Cgarettes:
Manufactured n and removed from domestc factores
May, 19 2 and 19 1...
une, 19 2 and 19 1
uy, 19 2 and 19 1
ugust, 19 2 and 19 1...
September, 19 2 and 19 1
October, 19 2 and 19 1
Reguatons amended
Cgars:
Large
pr, 19 2 and 19 1.
Mav, 19 2 and 19 1
une, 19 2 and 19 1
uv, 19 2 and 19 1
ugust, 19 2 and 19 1. _
Sma
Mav, 19 2 and 19 1.
une, 19 2 and 19 1
uv, 19 2 and 19 1
ugust, 19 2 and 19 1
Cv Servce Retrement ct, ump-sum payments as capta
gan
Coconut o. (See cse ta es.)
Reatng to addtona ta on domestc processng of (P. L.
391) ---
Con-operated ganng devces used by members of the rmed
Forces, e empton from ta
Commttee on Practce:
tent of recognton to be accorded unenroed persons
empoyed by ta payers
Reguatons governng recognton of attorneys and agents
to practce before Treasury Department (revsed to
December 7, 19 1) - .
Commttee reports:
Secton 113(h)(1)( ), I. R. C, amended
ouse of Representatves Report No. 312
Senate Report No. 1160
Ta deducton for vng e penses
Senate Report No. 1 2
Compensaton:
mounts receved by former empoyees of Isthman Cana
Commsson or Panama Raroad Co. under P. L. 319
(7 1 h Cong.)
Dsabty benefts receved by empoyees under a sef-
nsured pan
Lvng quarters or meas furnshed empoyees, retroactve
effect of Mn. 6 72
Long-term, prze receved for symphonc composton
Retrement pay of fremen
Compromse, offers n, nspecton of returns and other reevant
papers
Computaton of ta , affated corporatons fng consodated
returns, Reguatons 129 amended
Congressman, e penses ncurred n connecton wth ssuance of
report etter to hs consttuents
Rung No
139 7
13 69
13 91
1391
139 2
13963
139 7
13 7
13 77
13 7
13907
13926
3
139 3
3
13973
3
13 69
3 1
13 91
3 1
1391
3 1
139 2
3 1
13963
3 2
139 7
3 2
139
173
13 66
3
13960
2 7
139
297
1 001
27
1399
369
13999
370
1 000
37
1392
7
13961
73
139
70
13 62
66
1396
6
13922
29
13 73
1
13909
90
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3 1
redeegaton of
Consodated returns:
ffated corporatons
Constructve average base perod net ncome,
settement authorty to technca advsors
Contrbutons:
Chartabe, etc., dsaowance where made to organzatons
engaged n prohbted transactons, Reguatons 111
amended
Chartabe, recomputaton n connecton wth computa-
tons under secton 107, I. R. C
Corporatons:
ffated
Consodated returns
ecton to fe separate returns for frst ta abe year
endng after March 31, 19 1
Dstrbutons where operatng defcts on February 2 , 1913,
of qudated subsdares contnued n former parent
corporaton
ecton as to recognton of gan n certan qudatons,
pectng carry-backs, e tenson of tme for payment of
ta es, Treasury Decson 9 (C. . 19 6-1, 209)
amended
Foregn
Subsdary of a domestc corporaton or a foregn sub-
sdary of the foregn subsdary, credt for foregn
ta es
Ta credt, Reguatons 111 amended
Informaton returns, payments of dvdends, Reguatons
111 amended
Mnng strategc mneras, bock steatte tac and rare
earths, Reguatons 130 amended
Nonta abe dstrbutons under Unted States-Swtzerand
ncome ta conventon, computaton of basc surta
credt
Rates of ta , Reguatons 111 and 130 amended
Ta mposed by Canada under The Od ge Securty ct,
credt aganst Unted States ncome ta
Ta -e empt, unreated busness ncome, Reguatons 111
amended
Treatment of capta gans and osses, Reguatons 111
amended
Court decsons:
auer, e ecutors of estate of Frederck R., et a., v. Com-
mssoner
Deacon rass Co., Inc., et a., Unted Sates v
Commssoner; e ecutors of estate of Frederck R. auer et
a., v
Commssoner; oseph . Smms v
Commssoner; Leo ahn Furnture Co. v
Commssoner v. Grace II. eham et a
Guf Coast Towng Co., Inc., v. Unted States of merca
ahn, Leo, Furnture Co. v. Commssoner
eham, Grace II. et a.; Commssoner v
Robertson, Leroy ., v. Unted States
Smms, oseph ., v. Commssoner
Unted States; Leroy . Robertson v
Unted States of merca; Guf Coast Towng Co., Inc., v
Unted States v. The eacon rass Co., Inc., et a
Rung No.
13912
13 73
1391
13911
139 7
13912
13 73
13 2
13929
13 0
13969
13 72
139 1
13 6
13913
1393
139 9
13 1
13923
13991
13992
139 2
13992
1396
13919
13929
13920
13919
13929
13 62
1396
13 62
13920
139 2
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3 2
Credts aganst net ncome, dependency credt, servceman s
basc aowance for quarters used for support
Credts aganst ta :
Canadan ta mposed upon corporatons under The Od
ge Securty ct
Soca securty ta mposed upon empoyees of rgentne
arnes.
Ta mposed by government of Trndad and Tobago under
Ordnance No. 3 of 193 as amended
Ta pad by foregn subsdary of a domestc parent or a
foregn subsdary of the foregn subsdary
Ta es of foregn corporatons, Reguatons 111 amended..
Deaers, persona property, nstament saes of compete factory-
but and she or semfnshed houses
Deductons.
Capta gans and osses, Reguatons 111 amended
Chartabe contrbutons, for e cess profts ta purposes
where ta payer reportng upon the nstament bass of
accountng for ncome ta purposes eected to report
ncome from nstament saes on the accrua bass
state ta , gfts and transfers to regous, chartabe,
scentfc and educatona corporatons, Reguatons 10
amended
Net operatng oss, Reguatons 111 amended
When to be taken
Rea property and tangbe persona property ta es
eved by Stae of Mssour
Rea property ta es eved by State of Washngton
Defcency, retroactve effect of Mn. 6 72
Dentsts, dstrbutve share of ncome of nonprofessona
member of partnershp, sef-empoyment ncome
Department stores empoyng the reta nventory and eectve
nventory methods, prce nde es for uy 19 2
Dependents, credt for, servceman s basc aowance for
quarters used for support
Deprecaton ad|ustments:
ass of property
Suppement U ease
Dsabty:
enefts, amounts receved by empoyees under sef-nsured
pan
Retrement pay, retred offcer of Reguar rmy, resumed
after termnaton of cvan empoyment wth Federa
Government
Dsted sprts:
Producton of vodka, Reguatons 1 amended
Reguatons , , 10, 11, 1 , and 29 amended
Reguatons No 1, coho Ta ct, amended
Dstrbutons n qudaton:
Canceaton of ndebtedness of subsdary corporaton
Capta gans and osses, payment of |udgment by trans-
ferees of qudatng corporaton
Dvdends:
Decared after cose of ta abe year, eecton by reguated
nvestment companes as to when pad, Reguatons 111
amended
Dstrbutons, by corporaton n whch operatng defcts on
February 2 , 1913, of qudated subsdares contnued
n former parent corporaton .
Rung No.
13 93
13 1
139 0
13930
13 72
139 1
13 63
13991
13919
13996
13991
13937
13977
139
1391
13990
13 93
1399
13999
139 6
13961
13 71
13 6
13 3
13933
1396
13992
13993
13929
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3 3
RuIIdk No.
Pa e
Dvdends Contnued
Informaton returns by corporatons, Reguatons 111
amended
Nonta abe under Unted States-Swtzerand ncome ta
conventon, computaton of basc surta credt
arnngs and profts, avaabe for dstrbuton as dvdends

where operatng defcts on February 2 , 1913, of qudated
subsdares contnued n parent corporaton
ecton:
Computaton of nonta abe ncome from e empt e cess
output of mnera propertes, Reguatons 130 amended.
ont return after fng separate return, Reguatons 111
amended
Reguated nvestment companes, as to when dvdends
decared after cose of ta abe year pad, Reguatons 111
amended
ectrc ar heaters. (See cse ta es.)
mpoyees trusts:
Cv-servce retrement system
Nonresdent empoyees, ta abty
quty capta of secton 20 nsurance companes, Reguatons
130 amended
state ta :
Deductons for gfts and transfers to regous, chartabe,
scentfc and educatona corporatons, Reguatons 10
amended
empton from addtona estate ta of members of
rmed Forces upon death, Reguatons 10 amended
Nonresdent aen Unted States obgatons, Reguatons
10 amended
Reguatons 10 amended to conform to sectons 60 , 609,
and 610 of the Revenue ct of 19 1
Works of art oaned by nonresdent aens for e hbton,
states and trusts, deductons for capta gans and osses,
stmated ta , substanta underestmate, penates. Regua-
tons 111 amended
cess profts ta :
Corporatons mnng strategc mneras, bock steatte
tac and rare earths. Reguatons 130 amended
Deducton for chartabe contrbutons where ta payer
reportng upon the nstament bass of accountng for
ncome ta purposes eected to report ncome from
nstament saes on the accrua bass
quty capta of nsurance companes, Reguatons 130
amended
Reef for producer or essor of mnera propertes, Regua-
tons 130 amended
Unused e cess profts credt carry-back. Treasury Decson
9 (C. . 19 6-1, 209) amended.
cess Profts Ta Counc:
Redeegaton of secton 722 settement authorty to
technca advsors
changes of property, producng o ease for fee nterest n
mproved ranch, recognton of gan or oss
cse ta es:
Manufacturers ta es
Sae of automobe seat covers
Sae of eectrc ar heaters
13 6
1393
13929
1399
13967
13993
139
139 3
1399
13996
13970
139
139 0
13 7
13991
139 9
13913
13919
1399
1399
13969
1391
13 9
13906
13972
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3S
cse ta es Contnued
Processng ta on coconut o
mnaton of addtona ta on o produced n the
terrtory of the Pacfc Isands
Retaers ta es
Reguatons 1, reatng to ta on saes of |ewery,
furs, etc. amended
Stamp ta es
owng aeys, bard tabes, or poo tabes, used
e cusvey by members of the rmed Forces,
e empton from ta
Documentary stamp ta es, Reguatons 71 amended...
Wagerng, Reguatons 132 amended
Transportaton of persons
Transportaton whch begns and ends n Unted
States
Transportaton of property
Contract for towng barges
port shpments, changes n procedure for estabsh-
ng e empton from ta
Waste matera, remova of
Wagerng ta es
Lottery actvtes of an organzaton e empt from
ncome ta under secton 101 of the Code
empt e cess output, nonta abe ncome from mnera prop-
ertes, Reguatons 130 amended
empt organzatons:
ngaged n prohbted transactons or accumuatng ncome,
dena of e empton, Reguatons 111 amended
Unreated busness ncome, Reguatons 111 amended
empton, dependents, servceman s basc aowance for
quarters used for support
penses, medca, recomputaton n connecton wth computa-
tons under secton 107, I. R. C
tenson of tme, payment of ta es bv corporatons e pectng
carry-backs, Treasury Decson 9 (C. . 19 6-1, 209)
amended
F
Feeder organzatons, e empton from ta , Reguatons 111
amended
Fnance companes, cassfcaton as persona hodng com-
panes, Reguatons 111 amended
Fnes, voaton of the Defense Producton ct of 19 0
Foregn corporatons, credt for ta es. Reguatons 111 amended.
Foregn ta es:
rgentna, soca securty ta mposed upon empoyees of
arnes
Canada, mposed upon corporatons under The Od
ge Securty ct, credt aganst Unted States ncome
ta
Foregn subsdary of a domestc parent or a foregn
subsdary of the foregn subsdary
Trndad and Tobago, government of, mposed under
Ordnance No. 3 of 193 as amended
Forms W-2:
Wthhodng Statements
Corrected statements requred n certan cases
Wthhodng Statements, 19 3
Rues for reproducton
Rung No.
13939
13 97
13960
13932
13
13931
13920
13921
13997
139
1399
13911
13923
13 93
139 7
13969
13911
13 96
139
139 1
139 0
13 1
13 72
13930
139 9
1393
13971
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3
G
Gan or oss:
d|usted bass, deprecaton, etc. (P. L. 39)
ass
d|ustment for deprecaton, certan ta -e empt
organzatons, Reguatons 111 amended
Cost of repantng persona resdence mmedatey
pror to sae
Canceaton of ndebtedness of qudatng subsdary
corporaton
ecton as to recognton of gan n certan corporate
qudatons, Reguatons 111 amended
Recognton, e change of producng o ease for fee
nterest n mproved ranch
Redempton of Unted States savngs bonds, Defense
Seres
Gasone ta es, deductbty by consumer, Reguatons 111
amended
Gfts, payments to former empoyees of Isthman Cana
Commsson or Panama Raroad Co. under P. L. 319
(7 th Cong.)
Good w, e pendtures for promoton of, captazed n base
perod, Reguatons 111 amended
Gross ncome:
mony payments receved by dvorced wfe after her
remarrage, retroactve modfcaton of dvorce decree
cusons
mounts receved by former empoyees of Isthman
Cana Commsson or Panama Raroad Co. under
Pubc Law 319 (7 th Cong.)
Dsabty retrement pay of retred Reguar rmy
offcer resumed after termnaton of cvan empoy-
ment wth Federa Government
Proceeds of certan sports programs conducted for
beneft of mercan Natona Red Cross (P. L. 6 ).
Incusons
Dsabty benefts receved by empoyees under sef-
nsured pan
Federa ncome ta es pad for ta payer per contract--
Lump-sum payment receved for fee smpe tte to
mneras n and, royaty nterest retaned
usband and wfe:

Payments made to a dvorced wfe after her remarrage
Retroactve modfcaton of dvorce decree
I
Industra acoho, Reguatons 3 amended
Informaton at source:
Dvdend payments by corporatons, Reguatons 111
amended
Returns respectng certan corporate qudatons, Regua-
tons 111 amended
Inspecton of accepted offers n compromse
Inspecton of returns and other reevant papers, offers n
compromse
Inspecton of returns, Senate Commttee on the udcary
Instament saes, compete factory-but and she or sem-
fnshed houses
Insurance:
ccdent or heath, dsabty benefts receved by empoyees
under New York and New ersey sef-nsured pan
Rung No.
13 9
13923
13 9
1396
13 0
13 9
1397
139 6
1392
13976
13966
1392
13 71
13 7
13961
139 3
13917
13966
13966
13 76
13 3
13 6
13 0
1392
13922
13979
13 63
13961
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3 6
Insurance Contnued
Companes, secton 20 , equty capta of, Reguatons 130
amended
Interest:
Unted States savngs bonds. Defense Seres , when
ncuded n gross ncome
Unreated busness ncome of certan ta -e empt organ-
zatons, Reguatons 111 amended
Inventores:
ectve method, prce nde es for uy 19 2 for use by
department stores
Last-n frst-out, nvountary qudaton and repacement,
Reguatons 103 and 111 amended
Investment companes, reguated, Reguatons 111 amended.-.
ont return, fng of, after separate return has been fed,
udgment, payment by transferees of qudatng corporaton...
Lease, suppement U:
ppcabe to ta abe years after December 31, 19 0
Deprecaton ad|ustment requred n computng amount
of renta noome.
Leases, unreated busness ncome of certan ta -e empt organ-
Legsaton:
ghtv-second Congress
Pubc Law No. 3S6.
Pubc Law No. 391 _
Pubc Law No. 6 .
Pubc Law No. 6 .
Pubc Law No. 71.
Pubc Law No. 73.
Pubc Law No. 39.
Pubc Law No. 0.
Pubc Law No. 67.
Pubc Law No. 71.
Pubc Law No. 76.
Pubc Law No. 6.
Pubc Law No. 7.
Pubc Law No. 9.
Pubc Law No. 9
Lfe nsurance companes, ta aton (P. L. 6 ).
Lqudatng corporaton, payment of |udgment by transferees
Lqudatons, corporate, eecton as to recognton of gan n
certan cases, eguatons 111 amended
Long-term capta gans, deducton for, Reguatons 111
amended
Long-term compensaton, prze receved for symphonc com-
poston
Losses, nterest refunded upon redempton pror to maturty
of Unted States savngs bonds, Defense Seres
M
Medca e penses, recomputaton n
putatons under secton 107, I. R C
Mne e poraton e pendtures, consodated
atons 129 amended
Mnera propertes, reef from e cess profts ta for producer or
essor, Reguatons 130 amended
connecton eth corn-
returns, Regu-
Rung No.
1399
1397
13923
13990
13936
13993
13967
13992
139 7
139 6
13923
13 6
13 66
13 7
13
13
13 6
13 9
13 9
13 99
13900
13901
13902
13903
1390
1390
13
13992
13 0
13991
13 62
1397
139 7
13 73
1399
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3 7
Mnng of strategc mneras, bock steatte tac and rare earths,
Mssour, rea property and tangbe persona property ta es
eved by, accrua date
N
Net operatng osses, unreated busness ncome of certan ta -
e empt organzatons, Reguatons 111 amended
New ersey:
Dsabty benefts receved by empoyees under sef-nsured
pan
New York:
Dsabty benefts receved by empoyees under sef-nsured
pan
Nonresdent aens:
Unted States obgatons, ta abe status, Reguatons 10
amended
Works of art on oan for e hbton, Reguatons 10
amended
Nonresdent benefcares, ta abty of dstrbutons under a
penson trust
Nonta abe ncome, e empt e cess output of mnera propertes,
O
Offers n compromse:
Inspecton of returns and other reevant papers
Inspecton n accordance wth . O. 103 0 and T. D. 927.
P
Parta ta , mtaton on combned norma ta and surta n
computng
Partnershps, engaged n practce of dentstry, ncome of non-
professona member, sef-empoyment ncome
Payment of ta , Treasury bs, certfcates of ndebtedness, and
notes, accepted n
Penates:
Substanta underestmate of estmated ta , Regua-
tons 111 amended
Wfu attempt to evade ta es
Penson trusts, nonresdent empoyees, ta abty
Persona hodng companes, Reguatons 111 amended
Persona property, nstament saes of compete factory-but
and she or semfnshed houses
Persona resdence. ( See Resdence.)
Physcans, payments made by surgeons for professona assst-
ance and under fee-spttng arrangements
Prsoners, Federa, rehabtaton, Pubc Law 3 2 amended
(P. L. 73)
Prohbted transactons, dena of e empton under secton
101(6), I. R. C., n case of certan organzatons, Regua-
tons 111 amended
Property wthout the Unted States, works of art oaned by non-
resdent aens for e hbton, Reguatons 10 amended
Pubc aws:
ghty-second Congress
No. 3 6, repeang the aska raroads ta
No. 391, reatng to addtona ta on domestc
processng of coconut o
No. 6 , e cudng from gross ncome proceeds of cer-
tan sports programs conducted for the beneft of the
mercan Natona Red Cross, and for other purposes.
ng No.
13913
13937
13923
13961
13961
139
13 7
139 3
1399
13922
1392
139 2
1391
139 0
139 9
139 2
139 3
13 96
13 63
13910
13 6
13911
13 7
13 6
13 66
13 7
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3
Rung No.
Pubc aws Contnued
ghty-second Congress Contnued
No. 6 , reatng to ta aton of fe nsurance com-
panes
No. 71, makng appropratons for fsca year endng
une 30, 19 3
No. 73, amendng the ct entted n ct to assst
Federa prsoners n ther rehabtaton
No. 39, amendng secton 113(b)(1)( ), I. R. C, re-
atng to ad|ustments to bass of property for depre-
caton, etc
No. 0, provdng vocatona read|ustment and restor-
ng ost educatona opportuntes to certan persons
who served n the rmed Forces, etc
No. 67, amendng secton 112(n), I. R. C, wth re-
spect to persons servng on actve duty wth the
rmed Forces
No. 71, e tendng tme for use of constructon reserve
funds under secton 11, Merchant Marne ct, 1936.
No 76, amendng secton 326 , I. R. C, e emptng
certan recreatona factes from ta
No. 6, amendng Merchant Marne ct, 1936, to
further promote deveopment and mantenance of
the mercan merchant marne
No. 7, reatng to wthhodng, for State ncome ta
purposes, on compensaton of Federa empoyees
No. 9, amendng secton 16 (b), I. R. C, reatng to
empoyee stock purchase pans
No. 9 amendng sectons 33(b), 7, and 9,
I. R. C., and for other purposes
R
111 and 130 amended.
Rates of ta :
Corporatons, Reguaton.
Suppement ncome of reguated nvestment companes,
Recognton of gan or oss (.See Gan or oss.)
Refunds and credts, retroactve effect of Mm. 6 72
Reguated nvestment companes, Reguatons 111 amended
Reguatons. (See mendments: Reguatons.)
Rents, unreated busness ncome of certan ta -e empt organ-
Repars, repantng persona resdence mmedatey pror to
sae, cost of, ad|ustment to bass
Reproducton of Forms -2:
Wthhodng Statements, 19 3..
Resdence, persona, cost of repantng mmedatey pror to
sae, ad|ustment to bass
Retrement pay:
Dsabty, retred offcer of Reguar rmy, resumed after
termnaton of cvan empoyment wth Federa Gov-
ernment
Fremen
Returns:
ffated corporatons, eecton to fe separate returns for
frst ta abe year endng after March 31, 19 1
Consodated
ffated corporatons
Fng of |ont return after separate return has been fed,
13
13
13 6
13 9
13 9
13 99
13900
13901
13902
13903
1390
1390
139 9
1397
13993
139
13993
13923
13 9
1393
13971
13 9
13 71
1390
13 2
13912
13 73
13967
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3 9
Returns Contnued
Informaton
Dstrbutons n qudaton. Reguatons 111 amended.
Payments of dvdends by corporatons, Reguatons
111 amended
Inspecton by Senate Commttee on the udcary
Inspecton, offers n compromse cases
Ta -e empt organzatons, Reguatons 111 amended
Royates:
Lump-sum payment for foe smpe tte to mneras n and..
Unreated busness ncome of certan
tous, Reguatons 111 amended...
S
Saares and wages, amounts pad n voaton of the Defense
Producton ct of 19 0 1
Saes, nstament bass, compete factory-but and she or
semfnshed houses
Sef-empoyment ncome, dstrbutve share of ncome of non-
professona member of partnershp engaged n practce of
dentstry
Senate Commttee on the udcarv, nserton of returns
Snuff:
May, 19 2 and 19 1.
une, 19 2 and 19 1
uv, 19 2 and 19 1..
Strategc mneras, mnng corporatons, bock steatte tac and
rare earths Reguatons 130 amended
Suppement U ease:
ppcabe to ta abe years after December 31, 19 0
Deprecaton ad|ustment requred n computng amount
of renta ncome
Surgeons, payments made to other physcans for professona
assstance and under fee-spttng arrangements
Rung No.
13 0
13 6
13979
13922
13923
13917
13923
139
13 63
1391
13979
13 67
13 90
1392
139 1
13962
139 6
Ta Court of the Unted States, The:
Decsons of, st of acquescences and nonacquescences. .
Ta deducton, vng e penses
Ta es:
Federa ncome, pad for ta payer per contract
Foregn
Canada, mposed upon corporatons under The Od
ge Securty ct, credt aganst Unted States
ncome ta
Foregn subsdary of a domestc parent or a foregn
subsdary of the foregn subsdary
Soca securty ta es mposed upon empoyees of
rgentne arnes
Trndad and Tobago, government of, mposed under
Ordnance No. 3 of 193 a amended
Gasone, deductbty by consumer, Reguatons 111 amended.
Penates for wfu attempt to evade
Rea property and tangbe persona property, eved by
State of Mssour, accrua date
Rea property ta es, eved by State of Washngton, de-
ductbty as between a grantor and grantee of the
property
139 7
139 6
13910
1 000
139 3
13 1
13 72
139 0
13030
139 6
139 2
13937
13977
G
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2
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390
Tobacco:
Mav, 19 2 and 19 1,
une, 19 2 and 19 1
uy, 19 2 and 19 1
Reguatons amended
Trade or busness, dstrbutve share of ncome of nonprofes-
sona member of partnershp engaged n practce of dentstry,
sef-empoyment ncome
Transfers, Reguatons 10 amended to conform to sectons 60 ,
609, and 610 of the Revenue ct of 19 1
Transpotaton of persons. (See cse ta es.)
Transportaton of property. (See cse ta es.)
Treasury bs, certfcates of ndebtedness, and notes, accept-
ance n payment of ta es
Treasury Department, Commttee on Practce, e tent of recog-
nton of unenroed persons empoyed by ta payer
Trndad and Tobago, government of, ta mposed under
Ordnance No. 3 of 193 as amended -
Trusts and estates, deductons for capta gans and osses,
Trusts, empoyees :
Cv-servce retrement system
Nonresdent empoyees, ta abty
U
Unted States obgatons:
Unted States savngs bonds, Defense Seres , redemp-
ton of
Unted States-Swtzerand ncome ta conventon, nonta abe
corporate dstrbutons, computaton of basc surta credt..
Unreated busness ncome, certan ta -e empt organzatons,
odka, producton of, Reguatons 1 amended

W
Wagerng ta es. (See cse ta es.)
Wages and saares, amounts pad n voaton of the Defense
Producton ct of 19 0
Washngton, rea property ta es eved by, deductbty as
between a grantor and a grantee of the property
Wthhodng of ta at source:
Corrected Forms W-2 requred n certan cases, Regua-
tons 116 amended
Dsabty benefts receved by empoyees under New
ersey and New York sef-nsured pan
Wthhodng Statements 19 3, Form W-2:
Rues for reproducton
Rues for reproducton, par. 1(h) amended
Works of art, oaned by nonresdent aens for e hbton,
Rung No.
13 67
13 90
1392
139 1
13962
139 6
13 7
1391
139 0
139 0
139
13930
13991
139
139 3
1397
1393
13923
13 6
139
13977
139 9
13961
1393
13971
13 7
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Bureau of Internal Revenue Cumulative Bulletin 1952-2

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Copyright:

Bureau of Internal Revenue Cumulative Bulletin 1952-2

Uploaded by

Copyright:

Treasury Department : ureau of Interna Revenue

Interna Revenue uetn

Offce decsons (Tob.):

er, arry Fraser, e ecutor of estate of Lesey Dana

ctory ousng No. 2, Inc

radey, ane aston

ambv et a., arbara Chapn, e ecutors of estate of

ng, r., Ws L., estate of 1

S C. 11. NORM L T ON INDI IDU LS.

ass of property. (See Gan or oss.)

arnngs and profts, avaabe for dstrbuton as dvdends

usband and wfe:

odka, producton of, Reguatons 1 amended

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