Bureau of Internal Revenue Cumulative Bulletin 1946-2

SP CI L TT NTION s drected to the cautonary notce on ths page that pub-
shed rungs of the ureau do not have the force and effect
of Treasury Decsons and that they are appcabe ony to facts presented n the pubshed case
Treasury Department : : : : ureau of Interna Revenue
Interna Revenue uetn
Cumuatve uetn 1946-2
ULY-D C M R 1946
IN T IS ISSU
P e
Introductory Notes I
Contents - I
Rungs Nos. 12333-12465
Ta Court of the Unted States, The, formery Unted
States oard of Ta ppeas 1-7
Income Ta
Part I ( . Interna Revenue Code and . 193
ct) -134
Part II (1937 and 1936 cts) 135-137
Part III (1935 and 1934 or Pror cts) .... 13
mpoyment Ta es 139-162
Msceaneous Ta es
state and Cft Ta es 163-169
Saes Ta es, Stamp Ta es, etc 170-1 5
Msceaneous Rungs 1 6-265
Legsaton 266-299
Inde 301-310
The rungs reported n the Interna Re venae uetn are for the nformaton of ta payers and ther counse aa
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 heen 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 facts upon whch a partcuar case rests. It s especay to be noted that the same resut w not neces-
sary be reached n another case uness a the 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 caso s dentca wth the reported esse. s bearng oot ths dstncton, t may be observed that the
rungs pubshed from tme to tme may appear to re erne runfa 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
st ads n studyng the aw and ts forma constructon as made n the reguatons and Treasury Decsons pre-
vousy ssued.
In 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 t no prevousy pubshed rung or decson, or for other reasons, are of such mportance aa
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 arc not of genera nterest because they announce no
n.ow r.uUt ( 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. No unpubshed rung or decson w be cted or reed upon by any offcer or
empoyee of the ureau of Interna Revenue as a precedent n the dsposton of other cases. Uness otherwse
specfcay ndcated, a pubshed rungs and decsons hare receved the consderaton and approva of the
Chef Counse for the ureau of Interna Revenue.
UNIT D ST T S GO RNM NT PRINTING O IC : W S INGTON 1947
or sae by Superntendent of Documents, U. S. Government Prntng Offce. Washngton 25, D. C
See back of tte for prces
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The Interna Revenue uetn servce for 1947 w consst of b-
weeky buetns and semannua cumuatve buetns.
The bweeky buetns w contan the rungs and decsons to be
made pubc and a Treasury Department Decsons (known as Treas-
ury Decsons) pertanng to Interna Revenue matters. The sem-
annua cumuatve buetns w contan a rungs and decsons
(ncudng Treasury Decsons) pubshed durng the prevous G months.
The compete uetn servce may be obtaned, on a subscrpton
bass, from the Superntendent of Documents, Government Prntng
Offce, Washngton 25, D. C, for 2.50 per year foregn, 3.75. Snge
copes of the bweeky uetn, 10 cents each.
New subscrbers and others desrng to obtan the 1919, 1920, and
1921 Income Ta Servce may do so from the Superntendent of Docu-
ments at prces as foows: Dgest of Income Ta Rungs No. 19
(contanng dgests of a rungs appearng n Cumuatve uetns
1 to 5, ncusve), 50 cents per copy Cumuatve uetns Nos. 1 to 5,
contanng n fu a rungs pubshed snce pr. 1919, to and ncud-
ng December, 1921, as foows: No. 1, 30 cents No. 2, 25 cents No. 3,
30 cents No. 4, 30 cents No. 5, 25 cents.
Persons desrng to obtan Saes Ta Cumuatve uetns for
uy-December, 1921, may procure them from the Superntendent of
Documents at 5 cents per copy.
Persons desrng to obtan the Interna Revenue uetn servce for
the years 1922 to 1946, ncusve, may do so at prces as foows:
Year.
Cumuatve uetn.
Prce (cents).
rst 6 months.
Second 6 months.
1922
1-1
1-2
40, 30
1923
II-
II-2
30, 40
1924
III-
111-2
50, 50
1925
I -1
I -2
40, 35
1926
-
-2
40, 30
1927
I-1
I-2
40, 40
192
II-1
II-2
35, 50
1929
III-1
III-2
50, 55
1930
I -1
I -2
50, 50
1931
-
-2
65, 30
1932.
I-1
I-2
30, 55
1933
II-1
II-2
30, 50
1934
III-1
III-2
50,60
1935...
I -1
I -2
50, 50
1936
-1
-2
55, 45
1937
1937-1
1937-2
60,50
193
193 -1
193 -2
60,50
1939
1939-1
1939-2
60
Part 1
50
1 Part 2
1
1940.
1940-1
1940-2
30, 60
1941
1941-1
1941-2
45, 60
1942
1942-1
1942-2
40, 60
1943.
SI. 25
1944
1. 50
1. 00
50,75
1945..
1946.
1946-1
1946-2
ouse, Senate, and conference reports on revenue bs from October 3, 1913, to Revenue
ct of 193 , ncusve: and on amendments thereto.
Persons desrng to obtan the servce n dgest form may do so at
prces as foows: Dgest No. 13 (1922-1924), 60 cents Dgest No. 17
(1925), 25 cents Dgest No. 21 (1926), 15 cents Dgest No. 22 (1925-
1927), 35 cents and Dgest (ncome ta rungs ony, pr, 1919, to
December, 1930, ncusve), 1.50.
nqures n regard to these pubcatons and subscrptons shoud
be sent to the Superntendent of Documents, Government Prntng
Offce, Washngton 25, D. C.
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INTRODUCTORY NOT S.
The Interna Revenue Cumuatve uetn 1946-2, n addton to
a decsons of the Treasury Department (caed Treasury Decsons)
pertanng to Interna Revenue matters, contans opnons of the
Chef Counse, and rungs and decsons pertanng to ncome, estate,
gft, saes, capta stock, e cess profts, empoyment, soca securty, and
msceaneous ta es, and egsaton affectng the revenue statutes, as
ndcated on the tte page of ths uetn, pubshed n the bweeky
uetns (1946, Nos. 13 to 26, ncusve) for the perod uy 1 to
December 31, 1946. It aso contans a cumuatve st of announce-
ments reatng to decsons of The Ta Court of the Unted States,
formery Unted States oard of Ta ppeas, pubshed n the Interna
Revenue uetn Servce from uy 1 to December 31, 1946.
Income Ta rungs are prnted n three parts. The rungs n
Part I are prnted as Part I, (Interna Revenue Code) and
(Revenue ct of 193 ), the aw headngs correspondng wth the
sectons of the Code, as amended, and the 193 ct, respectvey, and
the reguatons headngs correspondng wth the secton headngs of
Reguatons 111 or 103 and the artce headngs of Reguatons 101.
Rungs under the Revenue cts of 1937 and 1936 are prnted as Part
II, the aw headngs correspondng wth the secton headngs of those
cts and the reguatons headngs correspondng wth the artce head-
ngs of Reguatons 94. Rungs under the Revenue cts of 1935 and
1934 or pror cts are prnted as Part III, the aw headngs corre-
spondng wth the secton headngs of the Revenue ct of 1934 and the
reguatons headngs correspondng wth the artce headngs of
Reguatons 6.
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, 1940, are pubshed under artce
headngs of Reguatons 91 and 90, respectvey rungs under Sub-
chapters and C, Chapter 9, of the Code n force on or after anuary
1, 1940, 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, are pubshed under
the artce headngs of Reguatons 100 and rdngs under Tte III
of the Revenue ct of 1936 Ta on un|ust enrchment are coded
under the sectons of that ct and the artce headngs of Reguatons
95.
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 Ta Unt.
(n)
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. T. . oard of Ta ppeas.
C. . Cumuatve uetn.
Ct. D. Court decson.
C. S. T Capta Stock Ta Dvson.
C. T. Ta es on mpoyment by Carrers.
D. C- Treasury Department crcuar.
m. T. Ta es mposed by the Soca Securty ct, the Carrers Ta ng ct
of 1937, and Subchapters , , and C of the Interna Revenue Code.
. P. C. cess Profts Ta Counc rung or memorandum.
. T. state Ta Dvson.
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 Unt.
M, N, , Y, Z, etc. The names of corporatons, paces, or busnesses, accord-
ng to conte t.
Mm. Mmeographed etter.
MS. or M. T. Msceaneous Dvson.
O. or L. 0/ Soctor s aw opnon.
O. D.- Offce decson.
Op. . G. Opnon of the ttorney Genera.
P. T. Processng Ta Dvson.
S. T. Saes Ta Dvson.
S. Sver Ta Dvson.
S. M. Soctor s memorandum.
So. Op. Soctor s opnon.
S. R. Soctor s recommendaton.
S. S. T. Ta es on mpoyment by others than carrers.
T. Tobacco Dvson.
T. . M. dvsory Ta oard memorandum.
T. . R. dvsory Ta oard recommendaton.
T. C 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 O T T COURT O TII UNIT D
ST T S, ORM RLY NOWN, S T UNIT D ST T S O RD O T PP LS.
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, formery known as the Unted States
oard of Ta ppeas, dsaowng a defcency n ta determned by
the Commssoner to be due, announcement w be made n the b-
weeky Interna Revenue uetn at the earest practcabe date.
Notce that the Commssoner has acquesced or nonaequesced 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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CONT NTS O CUMUL TI ULL TINS (I. T.) 1 to 5 S. T. 1 O 1920 ND 1921 INT RN L
R NU 1-1, 1-2, -, II-2, III-, I-2, I -1. I -2, -, -2. I-1, I-2. II-1, II-2, III-1.
1-2. I -.I -2. -, -2, I-1, I-2, II-1. II-2, III-1, III-2, I -. I -2. -1, -2, 1 37-1.
1937-2, 193 -1, 193 -2, 1939-1 (P RT 1 ND P RT 2). 1939-2, 1946-1, 1940-2, 1941-1. 1941-2, 1942-1.
1942-2 NNU L ULL TINS OR 1943, 1944. ND 945 S MI NNU L ULL TINS 1946-1 ND
1946-2.
Cumuatve uetn.
Rung Nos.
Income Ta :
December, 1919 (No. 1)
anuarv- une, 1920 (No. 2)
uv-December, 1920 (No. 3)
anuary- une, 1921 (No. 4)
uy-December, 1921 (No. 5)
Saes Ta :
1920 (S. T. 1-20)
anuarv- une, 1921
uy-December, 1921
Interna Revenue uetn:
anuary- une, 1922 (No. 1-1)
uy-December, 1922 (No. 1-2)
anuary- une, 1923 (No. II-)
uv-December, 1923 (No. II-2)
anuary- une, 1924 (No. III-)
uy-December, 1924 (No. III-2)
anuary- une, 1925 (No. I -1)
uv-December, 1925 (No. I -2)
anuary- une, 1926 (No. -)
uy-December, 1926 (No. -2)
anuarv- une, 1927 (No. I-1)
uy-December, 1927 (No. I-2)
anuary- une, 192 (No. II-1)
uy-December, 192 (No. TI-2)
anuary- une, 1929 (No. III-1)
anuary- une, 1930 (No. I -1) --
uy-December, 1930 (No. I -2)
anuary- une, 1931 (No. -)
anuary- une, 1932 (No. I-1)
uv-December, 1932 (No. I-2)
cn uary- une, 1933 (No. II-1)
uy-December, 1933 (No. II-2)
anuary- une, 1934 (No. III-1)
anuary- une, 1935 (No. I -1)
uy-December, 1935 (No. I -2)
anuary- une, 1936 (No. -1)
anuarv- 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, 1940 (1940-1)
uy-December, 1940 (1940-2)
anuarv- une, 1941 (1941-1)
uy-December, 1941 (1941-2)
anuarv- une, 1942 (1942-1) ---
uy-December, 1942 (1942-2)
anuary-December, 1943 (12 months)
anuary- une, 1946 (1946-1)
uy-December, 1946(1946-2)
1-655
656-1033
1034-136
1369-1710
1711-1996
1-112
113-265
266-356
1-3 3
3 4-665
666-956
957-1276
1277-1641
1642-1949
1950-2251
2252-2523
2524-2 13
2 14-3026
3027-3291
3292-3557
355 -37 4
37 5-4052
4053-424
4249-44 7
44 -46 3
46 4-4 7
4 -5124
5125-533
5339-5531
5532-5961
5962-6262
6263-65 1
65 2-6 71
6 72-7224
7225-7563
7564-7 4
7 5- 149
150- 459
460- 792
793-911
9119-9424
9425-9654
9655-9 96
9 97-10126
10127-10304
10305-1054
10549-10761
10762-10943
10944-1113
11139-11302
11303-11590
11591-11916
11917-12200
12201-12332
12333-12465
(vn)
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T T COURT O T UNIT D ST T S.
CUMUL TI LIST O NNOUNC M NTS R L TING TO
D CISIONS O T T COURT O T UNIT D ST T S,
ORM RLY T UNIT D ST T S O RD O T PP LS,
PU LIS D IN T INT RN L R NU ULL TIN S R -
IC ROM ULY 1 TO D C M R 31, 1946, INCLUSI .
nnouncements reatng to the acquescence or nonacquesccnce of the Commssoner n
decsons of The Ta Court of the Unted States, formery the Unted States oard of Ta
ppeas, as prnted n the weeky Interna Revenue uetns from December 22, 1924, to
December 31, 1931, ncusve, are pubshed n Cumuatve uetn -2 (1931), pr.ges 1-106.
Those prnted n weeky uetns from anuary 1, 1932, to December 31, 1939, ncusve, are
yubshed n Cumuatve uetn 1939-2, pages 1-73. Those prnted n weeky uetns from
ftnuary 1, 1940, to December 31, 1942, ncusve, and n semmonthy uetns from anuary
1, 1943, to December 31, 1944. ncusve, are pubshed n Cumuatve uetn 1944, pages 1-51.
Those prnted n semmonthy uetns durng the caendar year 1945 are pubshed n Cumu-
atve uetn 1945, pages 1-9. Those prnted n bweeky uetns from anuary 1 to une
30, 194 , ncusve, are pubshed n Cumuatve uetn 1946-1, pages 1-5. The st beow,
therefore, contans ony such announcements prnted n the bweeky uetns from uy 1
to December 31,1946, ncusve.
1946-26-12457
The Commssoner acquesces n the foowng decsons:
Ta payer.
Docket No. oume. Page.
e ander, S. enneth
mercan Lght Tracton Co.1.
nderson, W s
ustn, Ida
vaton Cub of Utah, The
.
ackus, Lotta
ackus et a., Lotta ., e ecutors of estate of Standsh
ackus.,
ackus, Standsh, estate of
ar Company
akey, Wam
ramer, Samue ugene
rown, George W
rown. Wam Maynard
uard, Loa G -
Carro et a., ohn ., e ecutors of estate of orence
L. Tsdae
Carke, enneth
Cay Drng Co. of Te as, The
Ceveand doph Mayer Reaty Corporaton
2359
112415
4423
5751
903
52 1
52 0
52 0
5000
5624
6715
5992
97 36
6546
97 42
59 9
6927
6104
6
6
6
7
6
s
6
44
5
44
6
6
6
oard of Ta ppeas.
1 Parta nonacquescence pubshed n Cumuatve uetn 1944, page 32. wthdrawn.
Nonacquescence pubshed n Cumuatve uetn 1941-2, page 16, wthdrawn.
cquescence reates ony to the Issue whether ta payer s entted to deduct amounts pad as Interest
on ts debenture.
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cquescence. Contnued.
I
Ta payer.
No.
Coates, Chares
Conant, Raph W...
Conney, ames
Consodated Motor Lnes, Inc
Cooper oundaton
Cra, Gadys S., e ecutr of estate of oe Cra
Cra, oe, estate of
Dana, R bert. W__
Deone, een S...
D on, r., bert.
Draper, Pau
Duntz, arry
Duntz, Ma
Dyke, bert ___
.
mer, Lucus ., estate of
.
age Too De Corporaton
as, Wam
arey, mer
arev, reda .
fth Street Store..
emng, Wam
emng, Wam, trustee
ord et u ., yn
ord et u ., Robert . _ -
orest Lawn Memora Park ssocaton, Inc. .
our Tweve West S th Co..
reeman, r., Lews . (formery Lous . redman,
r.), transferee
Gcrease O Co
Gette et a., esse W., e ecutors of estate of Leon
N. Gette
Gette, Leon N., estate of
Gmor, Dane S., transferee
Gmare, nna .
Goodman, Samue
Grant, oseph W.
Grasse, Mabe .
Green, Lese
Green, Macom
Greene, Pau G
Gross, Wam .
Gwnn ros. Co.7
601
5617
5153
6006
2043
64 1
105509
105509
5996
6423
602
59
5752
5755
57 6
020
161
69 1
962
961
3661
703
704
394
3947
1029S9
1692
3946
7699
4610
6745
6745
7741
97 35
524
4767
7391
17 0
5993
4370
5949
5 2
7
7
7
. 44
6
7
7
7
6
5
oard of Ta ppeas.
1 cquescence reates ony to the Issue nvo
rendered In contestng a proposed ncome ta de-
Nonacquesccnce pubshed n Cumuatve uetn 1942-2. page 23, wthdrawn.
state ta decson.
Nonacquescence pubshed In Cumuatve uetn 1942-1, page 23, wthdrawn.
ctbty of fees pad to attorneys for servws
Nonacquescenccs pubshed In Cumuatve uetn 1941-2, paces 16,1 , 24, and 25, wthdrawn.
cquescence reates to resut ony.
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cqt|escences Contnued.
Ta payer.
.
a, George W., estate of 1
a et a., . rower, e ecutors of estate of George
W. a
amton et U ., arry
azard, Leand
eer Trust No. 7610, Cara eman.
emngray, Dane C, estate of
enry, ertha .
erndon Drng Co.
ess, Car
evman et u ., Wam
ckey et u ., ames W
ochschd, arod
omes, Mnot
owe, C. L.
owe, D.
owe, . .
I.
Igoe, ndrew ., estate of
Igoe et a., Peter, e ecutors of estate of ndrew .
Igoe.
Independent O Co., Inc.
Ingerso, rank
ackson et a., Gustrne Mner, e ecutrces of estate
of Mary Care Mner 1
ohnson, Therese C
eer, dran C
ern Co., The rnst4.
Landau, Morrs Marks ...
Lawton, oward
Lawton, Leonard
Lawton et u ., Norman .
Lederman, ues D
Lehn nk Products Corporaton
Lews, enry S
Loew, Davd L
Lousana Land poraton Co., The.
Ludwg, ua S.
Lynch, Mary Shed
Docket No.
3469
3469
5994
690
6932
3773
7674
4193
6024
6964
616
10 4
3731
925
927
92
65 0
65 0
59 1
6000
3255
66
5991
104946
231
5592
5621
5620
6347
3742
5420
7592
3672
49
6204
7593
oume.
2 7
4
363
507
510
4
1 state ta decson,
| cquescence reates to resut ony.
cquescence reates ony to the Issue whether ntangbe drng and deveopment costs of certan o
na|eas wes are deductbe as e penses or must bo captazed as the cost of a capta asset.
, ZS nonacqucseence pubshed n Cumuatve uetn 1944, pace 42, wthdrawn.
Oft ta decson.
, cquescence reates ony to the ssue whether the pro rata dstrbuton of money and other property to
stockhoders of the Post Pubshng Co. mmedatey pror to ts merger wth the ourna Pubshng Co. s
uuaoe as a dvdend under secton 116(a) of the Interna Revenue Code.
G
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2
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1
3
-
0
1
-
2
2

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4

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cqcescences Contnued.
Ta payer.
M.
Maggo ros. Co., Inc
Mares, Mar|ore D., e ecutr of estate of Pompeo M.
Mares 11
Mares, Pompeo M., estate of 1 -
Marks, Leo
Martn, oward G
Martn, r., et u ., ames G
Mayo, rankn, admnstrator wth w anne ed of
estate of ohn . Toeer 1
Mc bee, Mnte Carro
Mc bee, Php W
McCausand, Geneveve
Me ean et u ., uncy . Shaw
Mburn, Devereu , estate of 1
Mner, Marv Care, estate of 1
Mtche, Carence . 7
Montgomery udng Reaty Co
Morgan Co., Inc., . P., e ecutor of estate of
Devereu Mburn 1
N.
Neson, bert..
Nobe, Caude Patterson
Norman, Irma, admnstratr of estate of ar Wess
Nutter et u ., Chares L
Paatne Insurance Co., Ltd.4
Parker, rancs
Peabody ote Co
Peeress Theater Corporaton, The
Phoen State ank Trust Co., e ecutor of estate of
Lucus . mer 1
Phoen State ank fe Trust Co. of artford, Conn.,
et a., e ecutors of estate of Percy Rothwe
Phoen State ank Trust Co. et a., coe ecutors of
estate of rank . Soue
Perce, atharne C
Producers Crop Improvement ssocaton.
Raner rewng Co.
Rhode Isand ospta Trust Co
Rce et a., ae ., e ecutors of estate of George Rce .
Rce, George, estate of 1
Rggs Tractor Co., .
Rssman, Samue
Robertson, uan
Rothwe, Percy, estate of
Rothrock, Woughby .7
1 state ta decson.
Nonacqucsccnce pubshed n Cumuatve uetn 1946-1, pare 6, wthdrawn.
1 cquescence reates to a ssues e cept the ssue whether the oss on sae of a budng was an ordnary
oss or a ong-term capta oss. . ,
Nonaequrecence pubshed n Cumuatve uetn 1945, page 9, wthdrawn, and acquescence mted
to ta abe years ended pror to anuary 1, 1941, substtuted therefor n Interna Revenue uetn 1WC-M.
page 1. Lmted acquescence wthdrawn In Interna Revenue uetn 1946-25. page 1. cquescent
reates to a ta abe years.
Nonacquescence pubshed In Cumuatve uetn 1944, page 46, wthdrawn.
cquescence reates ony to the ssue nvovng the March 1,1913, vaue of good w.
Gft ta decson.
Docket No.
5125
67 3
67 3
4774
7594
7595
6 90
3772
3774
5990
063
7570
3255
3 9
6364
7570
676
7 2
6144
660
2446
63 7
230
64 2
020
617
631
632
1
6404
9544
4 95
7 76
6570
6570
4430
635
6365
41 7
617
77 1
oume.
Page.
6
999
6
5 3
6
5 3
6
659
6
4
6
4
6
32
5
1130
5
1130
6
209
6
757
6
1119
6
74
6
159
7
417
6
1119
6
764
7
960
6
227
7
4 0
4
239
6
974
7
600
7
3 9
6
944
7
125

125
3
2
32

662
7
162
7
211
7
223
7
223
6
9
6
1105
6
1060
7
125
7
4
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cquescences Contnued.
Ta payer.
Docket No. oume
Yo
Pago.
S.
Scott, ce M
Scruggs- andervoort- arney, Inc
Shedon, Isabea M.1
Shedon, r., Raph C
Sherover, Mes M., transferee
Shnke, r., et a., . Cfford, survvng trustees of
estate of Dane C. emngray
Sover, ay
Sovcr, Samue L
Soabar Co
Soue, rank ., estate of
Staforth, ederco
Standard Tube Co., The
Staney, van
Strong, rnest
T.
Thrasher, W. Water
Tmken, dth
Tsdac, orence L., estate of
Toeer, ohn ., estate of
Trmbe, sther --
Trmbe, arod Guyon
W.
Wabash O Gas ssocaton
Wash, Mary D. (Mrs. . oward Wash)
Webster, rthur
Webster, . esser
Webster, r., et a., Warren, e ecutors of estate of
Warren Webster, Sr.1 --
Webster, r., et a., Warren, trustees of anne S.
Webster Trust1 -----
Webster, r., et a., Warren, trustees of Warren Web-
ster Trust No. 1
Webster, r., et u , Warren
Webster, Sr., Warren, estate of
Webster Trust, anne S.
Webster Trust No. 1, Warren
Wess, ar, estate of4
Wes argo ank Unon Trust Co., trustee of Cara
eman eer Trust No. 7610
West nd urnture Co.
Wheeock, Ward
Whton, Dorothy
Weser, Norbert . .-.
Worth Steamshp Corporaton
Z.
Zmmerman, Ward P
5995
7223
6203
6205
7697
3773
7573
7557
1730
631
632
5926
5406
5623
4766
77 2
664
97 42
6 90
60 7
G0SG
7 05
701
7023
97 40
97 39
97 41
97 37
97 3
97 39
97 41
97 37
6144
6932
56
52 9
5622
10 911
112741
769
3145
6
7
6
6
7
5
G
G
7
7
G
6
G
7
7
6
, 44
6
G
G
G
7
6
44
44
44
a 44
a 44
a 44
44
44
6
7
G
7
6
6
7
oard of Ta ppeas.
1 cquescence rentes ony to the ssue whether the pro raU dstrbuton of money and other property
to stockhoders of the Pott Pubshng Co. mmedatey pror to Its merger wth the ourna Pubshng Co.
Is ta abe as a dvdend under secton 115(a) of the Interna Revenue Code.
1 OUt ta decson.
1 Nonacquescence pubshed In Cumuatve uetn 1941-2, page 24, wthdrawn.
1 state ta decson.
1 Nonacquescences pubshed In Cumuatve uetn 1941-2, pages 24 and 25. wthdrawn.
cquescence reates to opnon promugated March 22,19-16, as revsed by court order entered ugust
7, 1946.
cquescence reates to a Issues e cept the Issue whether ta payer Is entted, under secton 23(a)(1)
of the Interna Revenue Code, to deduct amounts, equvaent to dvdends, pad by hm on account of stock
borrowed to effectuate short saes of such stock.
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6
The Commssoner does NOT acquesce n the foowng decsons:
Ta payer.
Docket No.
oome.
Pag .
.
616
7105
7
7
120
573
ndrus, ohn ., trust under agreement dated Decem-
ber 30, 1921 (Trust No. 1)
. ,
ack Mountan Corporaton, The -
5
1117
C.
Centra anover ank Trust Co. et a., trustees of
trust under agreement dated December 30, 1921, by
ohn . ndrus (Trust o. 1)
7105
6104
7
6
573
730
Ceveand doph Mayer Reaty Corporaton 1
/ 5153
6006
6
744
Cuter, r., Nathan P., estate of
36 4
I
5
1301
D.
Denbgh, as ennedy, admnstrator wth the w
anne ed of estate of ohn aday Denbgh
317
317
7
7
3 7
3 7
Denbgh, ohn aday, estate of L
.
echt Co., The _
2699
4193
7
643
62
erndon Drng Co.
6
L.
Laht, Matthew
4 6
6204
6
6
7
M.
510
/ 7947
67
T
64
N.
063
6
757
7002
11263
6
605
473
Natona Reserve Insurance Co
6
Newton Trust Co., e ecutor of estate of Nathan P.
Cuter, r. ,
36 4
5
1304
P.
Phpps states, enry
5156
5
964
1 Nonacquescence reates ony to the Issue whether deprecaton aowabe for Y vears pror to I 3f
on a budng occuped by ta payer s essee shoud be computed at the revsed rate of 2 per ant or at toe od
rate of 3 per cent.
Nonaeqnescencc reates ony to the ssue whether contrbutons to the Mc ean County ar ssods-
tcn are deductbe from gross ncome under secton 23(o) of the Interna Revenue Code.
1 state ta decson.
Nouacqucsccnco reates ony to he ssue whether, for purposes of computng depeton aowances, t
nterests of the ta payer In each of two o and gas eases comprse two propertes or ony one property-
Gft U decson.
Nonacquescence reates ony to the Issue whether contrbutons made to the amestown re Depart-
ment ssocaton, Inc., are deductbe as chartabe contrbutons under secton 23(o) of the Interna Reve-
nue Code
Nonacquescence reates ony to the ssue whether the oss on sae of a budng was an ordnary essors
ong-term capta oss.
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Nonacquescences Contnued.
Ta payer.
Docket No.
oume.
R.
Raner rewng Co.1
S.
Schoonmaker, r., ames M., estate of
Shedon, Isabea M.3
Straus, Rose N., e ecutr of estate of Chares Na-
than
Sunnen, oseph
T.
Trust under agreement dated December 30, 1921, by
ohn . ndrus (Trust No. 1)
D.
Unon Trust Co. of Pttsburgh, The, e ecutor of
estate of ames M. Schoonmaker, r.
w.
WIeser, Norbert .4 -
4 95
5695
6203
7002
00 9
7105
5695
10 911
112741
6

Nonecquescence reates to a Issues e cept the Issue Invovng the March 1,1913, vaue of good w.
state ta decson.
Nonacquescence reates ony to the Issue whether contrbutons made to the amestown re Depart-
ment ssocaton, Inc., are deductbe as chartabe contrbutons under secton 23(o) of the Interna Reve-
nue Code.
Nonacquescence reates ony to the Issue whether ta payer s entted, under secton 23(a) (1) of the
Interna Revenue Code, to deduct amounts, equvaent to dvdends, pad by hm on account of stock
borrowed to effectuate short saes of such stock.
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-
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2

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5
5

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3
9
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7
6
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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 O T .
S CTION 11. NORM L T ON INDI IDU LS.
Secton 29.11-1: Income ta on ndvduas. 1946-13-12331
T. D. 5517
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 T R D C M R SI, 1941.
Reguatons 111 amended to conform to sectons 101, 102, 103,
121 (a), (c), and (d), 122 (g) and (h), 131(a), and 152 of the
Revenue ct of 1945.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C.
To Coectors of Interna Revenue and Others Concerned:
In order to conform Reguatons 111 Part 29, Tte 26, Code of
edera Reguatons, Cum. Sup. to sectons 101, 102, 103, 121 (a),
(c), and (d), 122 (g) and (h), 131(a), and 152 of the Revenue ct
of 1945 (Pubc Law 214, Seventy-nnth Congress), approved No-
vember , 1945, such reguatons are amended as foows:
Paragraph 1. There s nserted mmedatey precedng secton
29.11-1 the foowng:
S C. 101. R DUCTION IN NORM L T ND SURT ON
INDI IDU LS. (R NU CT O 1945.)
(a) Reducton n Norma Ta on Indvduas. Secton 11 (re-
atng to the norma ta on ndvduas) s amended to read as foows:
S C. 11. NORM L T ON INDI IDU LS.
There sha be eved, coected, and pad for each ta abe year
upon the net ncome of every ndvdua 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
In secton 25, and by reducng such tentatve norma ta by 5 per
centum thereof. or aternatve ta whch may be eected If ad|usted
gross Income s ess than 5,000, see Suppement T.

(d) Ta abe Years to Whch ppcabe. The amendments made
by ths secton sha be appcabe to ta abe years begnnng after
( )
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1
3
-
0
1
-
2
2

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5
5

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9
29.11-1.
December 31, 1945. or treatment of ta abe years begnnng In 1945
and endng In 1946, see secton 131.
Par. 2. Secton 29.11-1, as amended by Treasury Decson 645 ,
approved une 15, 1945 C. . 1945, 45 , s further amended by
strkng out the ast sentence and nsertng n eu thereof the
foowng:
or ta abe years begnnng after December 1, 1943, and before anuary 1,
1946, the norma ta on ndvduas s at the rate of 3 per cent and s
upon net ncome reduced by the amount of the norma ta e empton provded
n secton 25(a) for such years and by the credts under secton 25(a) for
nterest on certan obgatons of the Unted States and obgatons of nstru-
mentates of the Unted States. or ta abe years begnnng after December
31, 1945, the norma ta on ndvduas s determned by computng a tentatve
norma ta of 3 per cent of the amount of the net ncome n e cess of the
credts aganst net ncome provded n secton 25 and by reducng such tenta-
tve norma ta by 5 per cent thereof.
or treatment of ta abe years begnnng n 1945 and endng n 1946, see
secton 29.10 -2.
Par. 3. There s nserted mmedatey precedng secton 29.12-1
the foowng:
S C. 101. R DUCTION IN NORM L T ND SURT ON
INDI IDU LS. (R NU CT O 1945.)

(b) Reducton n Surta on Indvduas. Secton 12(b) (reatng
to the rate of surta on ndvduas) Is amended to read as foows:
(b) Rates of Surta . There sha be eved, coected, and pad
for each ta abe year upon the surta net Income of every ndvdua
a surta determned by computng a tentatve surta under the foow-
ng tabe, and by reducng such tentatve surta by 5 per centum
thereof:
If the surta net ncome s: The tentatve surta sha be:
Not over 2,000
17 of the surta net ncome.
340, pus 19 of e cess over 2
Over
2,000 but not over 4,000
:,000.
Over
4,000 but not over 6,000
720, pus 23 of e cess over 4,000.
Over
6,000 but not over ,000
1,1 0, pus
27
of
e cess
over
6,000.
Over
,000 but not over 10,000
1,720, pus
,000.
31
01
e cess
over
Over
10,000 but not over 12,000.
2,340. pus
10,000.
35
of
e cess
over
Over
12,000 but not over 14,000_
3,040, pus
12,000.
40
of
e cess
over
Over
14,000 but not over 16,000.
3, 40, pus
44
of
e cess
over
14,000.
Over
16,000 but not over 1 ,000.
4,720, pus
10,000.
47
of
e cess
over
Over
1 ,000 but not over 20,000.
5,660, pus
50
of
e cess
over
1 ,000.
Over
20,000 but not over 22,000.
6,660, pus
53
of
e cess
over
Over
22,000 but not over 26,000.
20,000.
7,721), pus
22,000.
56
of
e cess
over
Over
26,000 but not over 32,000.
9,960, pus
26,000.
59
of
e cess
over
Over
32,000 but not over 3 ,000.
13,500, pus
62
of
e cess
over
32,000.
Over
3 ,000 but not over 44,000.
17,220, pus
66
of
e cess
over
3 ,000.
Over
44,000 but not over 50,000.
21,1 0, pus
44,000.
69
of
e cess
over
Over
50,000 but not over 60,000.
25,320, pus
50,000.
72
of
e cess
over
72 29 47 2
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29.11-1.
10
the surta net ncome s Con. The tentatve surta sha be Con.
Over 60,000 but not over 70,000.
2,520, pus
75
of
e cess
over
60,000.
40,020, pus
70,000.
7
of
e cess
over
47, 20, pus
0,000.
1
of
e cess
over
55,920, pus
4
of
e cess
over
90,000.
64,320, pus
6
of
e cess
over
100,000.
107,320, pus
7
of
e cess
over
Over 200,000..
150,000.
150, 20, pus

of
e cess
over
200,000.
(c) Lmtaton on Ta . Secton 12(g) (reatng to the 90 per centum
mtaton) s amended by strkng out 90 per centum and nsert-
ng n eu thereof 5 per centum .
() Ta abe Yeabs to Whch ppcabe. The amendments made by
ths secton sha be appcabe to ta abe years begnnng after December
31,1945. or treatment of ta abe years begnnng In 1945 and endng n
1946, see secton 131.
Par. 4. Secton 29.12-1, as amended by Treasury Decson 5425,
approved December 29, 1944 C. . 1945, 10 , s further amended by
strkng out that porton thereof desgnated as (6) and nsertng
n eu thereof the foowng:
(b) Ta abe years begnnng after December 31, 1943, and before anuary 1,
1946. or ta abe years begnnng after December 1, 1943, and before anuary
1, 1946, there s mposed, n addton to the norma ta , a surta at the rates
specfed n secton 12 pror to ts amendment by the Revenue ct of 1945, upon
the surta net ncome of every ndvdua, resdent or nonresdent, e cept non-
resdent aen Indvduas sub|ect to the ta mposed by secton 211(a). The
surta net ncome for such years s the net ncome mnus the credts for surta
e emptons provded n secton 25(b) pror to ts amendment by the Revenue ct
of 1945.
(c) Ta abe years begnnng after December 31, 1945. or ta abe years be-
gnnng after December 31, 1945, there s mposed, n addton to the norma ta ,
a surta determned as specfed In secton 12, 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 Is the net ncome mnus the credts provded n secton 25(b). Secton 12
specfes that the surta s 5 per cent ess than the amount of the tentatve surta
computed n accordance wth the tentatve surta tabe contaned theren.
or treatment of ta abe years begnnng n 1945 and endng n 1946, see secton
29.10 -2.
Par. 5. Secton 29.12-2, as amended by Treasury Decson 5425, s
further amended as foows:
( ) y amendng the frst sentence to read as foows:
The foowng tabes show the surta (or, for ta abe years begnnng after
December 31, 1945, the tentatve surta ) due upon certan specfed amounts of
surta net ncome.
( ) y amendng the fourth sentence to read as foows:
The ast coumn gves the tota surta (or tota tentatve surta ) on a surta
net ncome equa to the second fgure n the surta net ncome coumn.
(C) y changng the headng of the surta tabe for ta abe years
begnnng after December 31, 1943, added by Treasury Decson 5425,
to read as foows:
Sttbta Tabe Ta abe Years egnnng fter December 31, 1943, and efore
anuary 1, 1946.
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11
29.11-1
(D) y nsertng at the end thereof the foowng:
Tentatve Surta Tabe).
Ta abe Years egnnng fter December 31, 1945.
Surta net ncome.
Tstat
tve surta .
0 to 2,000
2,000 to 4,000
4,000 to 6,000
6,000 to ,000
,000 to 10,000...
10,000 to 12,000.-
12,000 to 14,000..
14,000 to 16,000. _
16,000 to 1 ,000..
S 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 44,000..
44,000 to 50,000..
50,000 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 150,000
150,000 to 200,000
200,000 up
340
720
1, 1 0
1, 720
2, 340
3, 040
3, 40
4, 720
5, 660
6, 660
7, 720
9, 960
13, 500
17, 220
21, 1 0
25, 320
32, 520
40, 020
47, 20
55, 920
64, 320
107, 320
150, 20
The tentatve surta for any amount of surta net Income not stated n round
numbers In the tentatve surta tabe s computed by addng to the tentatve
surta for the argest amount stated whch s ess than the surta net ncome,
the tentatve surta upon the e cess over that amount at the rate ndcated n
the tabe. ccordngy, the tentatve surta upon a surta net ncome of 63,123
woud be 34, 66, computed as foows:
Tentatve surta on 60,000 from tabe 32, 520
Tentatve surta on 3,12 at 75 per cent 2, 340
Tota 34, 66
Snce secton 12 specfes that the surta s 5 per cent ess than the tentatve
surta , the surta upon a surta net ncome of 63,12 woud be 33,122.70,
computed as foows:
Tentatve surta on 63,12 .
Less: 5 per cent of 34, 66
Surta .
34, 66. 00
1,743. 30
33,122.70
Par. 6. Secton 29.12-3, added by Treasury Decson 5425, s amend-
ed as foows:
( ) y nsertng mmedatey after or ta abe years begnnng
after December 31, 1943, the words and before anuary 1, 1946, .
( ) y nsertng at the end thereof the foowng:
or ta abe years begnnng after December 31, 1945, the aggregate amount of
the surta and the norma ta , 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 143
or secton 144), and secton 35 (reatng to the credt for ta wthhed on wages),
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1
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-
0
1
-
2
2

0
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29.11-1.
12
can not e ceed an amount equa to 5 per cent of the ta payer s net Income for
the ta abe year. or treatment of ta abe years begnnng n 1945 and endng
n 1946, see secton 29.10 -2.
Par. 7. There s nserted mmedatey precedng secton 29.13-1 the
foowng:
S C. 122. R P L O C SS PRO ITS T IN 1946. (R NU
CT O 1945.) r

(g) Technca mendments. ffectve wth respect to ta abe years
begnnng after December 31, 1945

(2) Secton 13(a)(2) (defnng norma ta net ncome ) s
amended by strkng out mnus the credt for ncome sub|ect to
the ta Imposed by Subchapter of Chapter 2 provded n secton 26
(e) and

(h) sca Year Ta payers. or ta abe years begnnng n 1945
and endng n 1946, see secton 131.
Par. . Secton 29.13-1 s amended by strkng out the second sen-
tence of the second paragraph and nsertng n eu thereof the foow-
ng:
The ta mposed by secton 13 s computed upon the norma-ta net ncome.
that s, for ta abe years begnnng before anuary 1, 1946, the ad|usted net
ncome mnus the credt provded n secton 26(e) for ncome sub|ect to the
e cess profts ta mposed for such years by Subchapter of Chapter 2 and
mnus the credt for dvdends receved provded n secton 26(b) pror to ts
amendment by the Revenue ct of 1945. or ta abe years begnnng after
December 31, 1945, the norma-ta net ncome s the ad|usted net ncome mnus
the credt for dvdends receved provded n secton 26(b). Secton 26(b) reates
to dvdends receved from a domestc corporaton whch s sub|ect to ta aton
under Chapter 1 ( 5 per cent of dvdends receved). or ta abe years begnnng
n 1945 and endng n 1946, see secton 29.10 -2.
Par. 9. There s nserted mmedatey precedng secton 29.15-1 the
foowng:
CT O 1945.)


(3) Secton 15(a) (defnng corporaton surta net ncome )
s amended ( ) by strkng out mnus the credt for Income sub-
|ect to the ta Imposed by Subchapter of Chapter 2 provded
n secton 26(e) nnd and ( ) by strkng out (computed by
mtng such credt to 5 per centum of the net ncome reduced by
the credt for ncome sub|ect to the ta Imposed by Subchapter
of Chapter 2 In eu of 5 per centum of the ad|usted net Income so
reduced), .

(h) sca Yeab Ta payers. or ta abe years begnnng n 1945
S C. 121. D CR S IN CORPOR TION SURT . (R NU
CT O 1945.)
(a) In Genera. Secton 15(b) (reatng to the corporaton surta )
Is amended to read as foows:
(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 Western emsphere 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:
G
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1
3
-
0
1
-
2
2

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5
5

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7
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13
29.11-1.
(1) Subta net ncomes not ovek 2s,ooo. Upon corporaton
surta net Incomes not over 25,000, 6 per centum of the amount
thereof.
(2) Subta net ncomes over 25,000 but not over 50,000.
Upon corporaton surta net Incomes over 25,000, but not over
50,000, 1,500 pus 22 per centum of the amount of the corpora-
ton surta net ncome over 25,000.
(3) Surta net ncomes over r,o,ooo. Upon corporaton sur-
ta net ncomes over 50,000, 14 per centum of the corporaton
surta net Income.

(d) Ta abe Years to Whch ppcabe. The amendments made
by ths secton sha be appcabe wth respect to ta abe years begnnng
after December 31, 19-15. or treatment of ta abe years begnnng
In 1045 and endng n 1940, see secton 131.
Pak. 10. Secton 29.15-1 s amended as foows:
( ) y strkng out so much as foows the frst paragraph and
precedes the e ampe and nsertng n eu thereof the foowng:
or ta abe years begnnng before anuary 1, 1946, the corporaton surta
net ncome of a corporaton Is ts net ncome mnus (1) the credt provded
n secton 26(e) for ncome sub|ect to e cess profts ta mposed by Subchapter
of Chapter 2, (2) the credt provded In secton 26(b) for dvdends receved,
and (3) n the case of a pubc utty, the credt provded n secton 26(h) for
dvdends pad on ts preferred stock. or the purposes of determnng the cor-
poraton surta net ncome, dvdends receved on the preferred stock of a pubc
utty must be dsregarded n computng the credt provded n secton 26(b)
for dvdends receved. or the purposes of determnng the corporaton surta
net ncome for ta abe years begnnng before anuary 1, 1946, such credt s
mted to 5 per cent of the corporaton s net ncome reduced by the credt
provded n secton 20(e) for ncome sub|ect to the e cess profts ta mposed
by Subchapter of Chapter 2, rather than to 5 per cent of the ad|usted net
ncome so reduced.
or ta abe years begnnng before anuary 1, 1946, the rates of corporaton
surta are as foows:
(1) Upon corporaton surta net ncomes of 25,000 or ess, 10 per cent
of the amount thereof.
(2) Upon corporaton surta net ncomes over 25,000 but not over
50,000, 2,500, pus 22 per cent of the amount of such Income In e cess of
25,000.
(3) Upon corporaton surta net ncomes of more than 50,000, 16 per
cent of the entre amount thereof.
or ta abe years begnnng after December 1, 1945, the corporaton surta
net ncome of a corporaton s ts net ncome mnus (1) the credt provded n
secton 26(b) for dvdends receved and (2) n the case of a pubc utty, the
credt provded n secton 26(h) for dvdends pad on ts preferred stock. or
the purposes of determnng the corporaton surta net ncome, dvdends
receved on the preferred stock of a pubc utty must be dsregarded n com-
putng the credt provded n secton 26(b) for dvdends receved.
or ta abe years begnnng after December 31, 1945, the rates of corporaton
surta are as foows:
(1) Upon corporaton surta net ncomes of 25,000 or ess, 6 per cent of
the amount thereof.
(2) Upou corporaton surta net Incomes over 25,000 but not over
50,000, 1,500 pus 22 per cent of the amount of such ncome In e cess of
25,000.
(3) Upon corporaton surta net ncome of more than 50,000, 14 per cent
of the entre amount thereof.
The credt provded n secton 26(a) for nterest receved on obgatons of
the Unted States or ts nstrumentates Is not aowabe n computng corpo-
raton surta net ncome for any ta abe year.
or treatment of ta abe years begnnng In 1945 and endng In 1946, see
secton 29.10 -2.
The computaton of the surta on corporatons may be Iustrated by the
foowng e ampes:
G
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3
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0
1
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2
2

0
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5

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29.11-1.
14
( ) y redesgnatng the e ampe as ampe (1) and nsertng
at the end thereof the foowng:
ampe (2). The Corporaton, a domestc corporaton whch s not a
pubc utty, has for the caendar year 1946 a net ncome of 75,000. The net
Income ncudes dvdends receved from a corporaton whch s not a pubc
utty, n the amount of 5,000, and dvdends receved on the preferred stock
of a pubc utty n the amount of 2,000. The Corporaton s surta for the
caendar year 1946 s 9,905, computed as foows:
Net ncome 75.000
Less credt for dvdends receved ( 5 per cent of 5,000) 4.250
Corporaton surta net ncome 70,750
Ta (14 per cent of 70,750) 9,900
Par. 11. There s nserted mmedatey precedng secton
29.22(b) (9)- the foowng:
S C. 152. T NSION O TR TM NT O INCOM R SULTING
ROM DISC RG O IND T DN SS. (R NU CT O
1945, PPRO D NO M R , 1945.)
Secton 22(b) (9) and (10) (reatng to the e cuson of ncome from
the dscharge of ndebtedness) are amended by strkng out 1945 n
each of such paragraphs and nsertng n eu thereof 1946 .
Pah. 12. Secton 29.22(b) (9)- s amended by strkng from the
frst paragraph and from the thrd paragraph anuary 1, 1946
and nsertng n eu thereof n each nstance anuary 1, 1947.
Par. 13. There s nserted mmedatey precedng secton 29.22(b)
(10)-1 the foowng:
S C. 152. T NSION O TR TM NT O INCOM R SULTING
ROM DISC RG O IND T DN SS. (R NU CT O
1945, PPRO D NO M R , 1945.)
Secton 22(b) (9) and (10) (reatng to the e cuson of noome from
the dscharge of ndebtedness) are amended by strkng out 1945 n
each of such paragraphs and nsertng In eu thereof 1946 .
Par. 14. Secton 29.22(b) (10)-1 s amended by strkng from the
frst sentence and from the ast sentence anuary 1, 1946 and
nsertng n eu thereof n each nstance anuary 1, 1947.
Par. 15. There s nserted mmedatey precedng secton 29.23 ( )-
the foowng:
S C. 102. LLOW NC O S M MPTIONS OR NORM L
T S OR SURT . (R NU CT O 1945.)

(b) Technca mendments.
(1) Secton 23( ) (reatng to the deducton for medca e -
penses) s amended by strkng out surta wherever appearng
theren.

(c) Ta abe Tears to Whch ppcabe. The amendments and re-
peas made by ths secton sha be appcabe wth respect to ta abe
years begnnng after December 31, 1915. or treatment of ta abe years
begnnng n 1945 and endng n 1946, see secton 131.

Par. 16. Secton 29.23( ) -, as amended by Treasury Decson 542, ),
s further amended by strkng from the thrd sentence of the ffth
paragraph the e presson surta e empton whch occurs twce
theren and nsertng n eu of such e presson n each nstance
e empton under secton 25 (b)
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15
29.11-1.
the foowng:
(a) In Genera. So much of secton 25(b) (reatng to credts for
surta ) as precedes paragraph (2) thereof s amended to read as
foows:
(b) Credts fob oth Norma Ta and Surta .
(1) Credts. There sha be aowed for the purposes of both
the norma ta and the surta , the foowng credts aganst net
Income:
( ) n e empton of 500 for the ta payer
( ) n e empton of 500 for the spouse of the ta payer
f
(1) a |ont return s made by the ta payer and hs
spouse under secton 51, n whch case the aggregate e -
empton of the spouses under subparagraph ( ) and ths
subparagraph sha be 1,000, or
() a separate return s made by the ta payer, and
hs spouse has no gross ncome for the caendar year n
whch the ta abe year of the ta payer begns and s not
the dependent of another ta payer
(C) n e empton of 500 for each dependent whose gross
Income for the caendar year n whch the ta abe year of the
ta payer begns s ess than 500, e cept that the e empton
sha not be aowed n respect of a dependent who has made
a ont return wth hs spouse under secton 51 for the ta abe
year begnnng n such caendar year.

(2) Secton 25(a)(3) (reatng to the norma ta e empton)
Is repeaed.

(c) Ta abe Tears to Whch ppcabe. The amendments and re-
years begnnng after December 31, 1945. or treatment of ta abe
years begnnng n 1945 and endng n 1946, see secton 131.
Par. 1 . Secton 29.25-1, as amended by Treasury Decson 5425,
s further amended as foows:
( ) y nsertng mmedatey precedng the perod n the headng
of (b) , and before anuary 1,1046.
( ) y nsertng mmedatey precedng the ta payer s n the
frst sentence of (b) and before anuary 1,1946, .
(C) y amendng the ast sentence of (6) to read as foows:
or such ta abe years no e empton for dependents s aowed for norma ta
purposes.
(c) Ta abe years begnnng after December SI, 19k5. or ta abe years be-
gnnng after December 31, 1945, the ta payer s net ncome as determned
pursuant to sectons 21 to 24, ncusve, s reduced, for the purpose of computng
the norma ta , by (1) the ncome e empt from norma ta ony receved upon
certan obgatons of the Unted States and upon certan obgatons of cor-
poratons organzed under ct of Congress whch are nstrumentates of the
Unted States, and (2) the credts for both norma ta and surta under secton
25(b). See secton 29.25-3.
( ) y strkng out Persona e empton and surta e emptons.
and nsertng n eu thereof Persona e empton, surta e emptons,
and e emptons for both norma ta and surta .
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29.11-1.
16
( ) y nsertng mmedatey precedng the perod n the headng
of (b) , and before anuary 1,1946.
(C) y nsertng mmedatey precedng there are aowed n
the frst sentence of (b) and before anuary 1,1946, .
(o) Ta abe years begnnng after December SI, 19)5. or the purpose of
the norma ta and surta on ndvduas for ta abe years begnnng after
December 31, 194. , there are aowed as credts aganst net ncome the e emp-
tons specfed n secton 25(b). cept that such e emptons are not desg-
nated surta e emptons for such years and that they are aowabe for the
purpose of the norma ta as we as the surta for such years, the provsons
of ( 6) above are appcabe thereto.
s further amended by strkng out the ast two sentences and nsert-
ng n eu thereof the foowng:
or ta abe years begnnng after December 31, 1043, the persona e empton, as
such, of marred persons s not appcabe. There are substtuted therefor, n
the case of ta abe years begnnng after December 31, 1043, and before an-
uary 1, 1946, the norma-ta e empton and the surta e emptons. In the ease
of ta abe years begnnng after December 31, 1945, the e emptons under
secton 25(b) for both norma ta and surta are appcabe. See secton
20.25-3.
Par. 21. Secton 29.25-C, as amended by Treasury Decson 5425,
s further amended by strkng surta from the ast sentence
thereof.
the foowng:
CT O 1945.)

(g) Technca mendments.- ffectve wth respect to ta abe years
(1) Secton 26(e) (reatng to the credt for ncome sub|ect to
the e cess profts ta ) s repeaed.
.
(4) Secton 26(b) (reatng to the credt for dvdends receved)
s amended by strkng out reduced by the credt for ncome
sub|ect to the ta mposed by Subchapter of Chapter 2 provded
n subsecton (e) .

(h) sca Yeab Ta paykbs. or ta abe years begnnng n 1945
approved ugust 26, 1944 C. . 1944, 204 , s further amended by
strkng out at the begnnng of the frst sentence and nsertng n
eu thereof or ta abe years begnnng before anuary 1, 1946, a.
the foowng:
S C. 102. LLOW NC O S M MPTIONS OR NORM L T
S OR SURT . (R NU CT O 1945.)

(b) Technca mknoments.

(3) Secton 47(e) (reatng to the reducton of certan credts
aganst net ncome) s amended to read as foows:
(e) Reducton of Credts ganst Net Income. In the case of a
return made for a fractona part of a year under secton 146(a)(1).
the e emptons provded n secton 25(b) sha be reduced to amounts
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17
29.11-1.
whch bear the same rato to the fu e emptons so provded as the
number of months n the perod for whch return s made bears to tweve
months.

(c) Ta abe Years to Whch ppcabe. The amendments and re-
years begnnng after December 31, 1945. or treatment of ta abe years
s further amended by strkng out the s th sentence to the nnth
sentence, ncusve, and nsertng n eu thereof the foowng:
If, for ta abe years begnnng after December 31, 1943, and before anuary 1,
194, a return s made for a fractona part of a year resutng from the term-
naton by the Commssoner under secton 146 of the ta abe perod, the norma-
ta e empton and the surta e emptons sha be reduced to that proporton
of the fu norma-ta e empton (n the case of the norma ta ) and the fu
surta e emptons (n the case of the surta ) whch the number of months n
the perod for whch the return s made bears to 12 months, but such e emptons
sha not be reduced for a fractona part of a year otherwse resutng. If, for
ta abe years begnnng after December 31, 1945, such a return s made, the
e emptons for norma ta and surta sha be smary reduced. return s
requred n the case of every ta abe year begnnng before anuary 1, 1946,
whch s a perod of ess than 12 months, f the gross Income for such ta abe
year s greater than the persona e empton or the norma-ta e empton, as the
case may be, for such ta abe year as so reduced. return s requred n the
ease of every ta abe year begnnng after December 1, 1945, whch s a perod
of ess than 12 months, f the gross ncome for such ta abe year Is greater than
one e empton for norma ta and surta as so reduced. In the case of a return
by a corporaton for a fractona part of a year the credt provded by secton
26(e) for the ncome of the corporaton sub|ect to e cess profts ta , for ta abe
years begnnng before anuary 1, 1944, s consdered the amount of whch the
e cess profts ta of the corporaton Imposed for the ta abe year computed
wthout regard to the ta deferment under secton 710(a)(5) s 90 per cent,
and for ta abe years begnnng after December 31, 1943, and before anuary 1,
1946, the amount of whch such e cess profts ta so computed s 95 per cent.
s to the defnton of ta mposed for ta abe years begnnng before anuary
1,1946, see secton 26(e). or treatment of ta abe years begnnng In 1945 and
endng n 1946, see secton 29.10 -2.
Par. 26. Secton 29.47-2, as amended by Treasury Decson 5401, s
further amended by nsertng mmedatey after the words for ta -
abe years begnnng after December 31,1943, n the ffth sentence of
the second paragraph of (a), the ffth sentence of the second paragraph
of (b), and the thrd sentence of the fourth paragraph of (6) the words
and before anuary 1, 1946, .
Par. 27. There s nserted mmedatey precedng secton 29.5 -1 the
foowng:
S C. 102. LLOW NC O S M MPTIONS O NORM L T
S OR SURT . (R NU CT O 1945.)


(4) Secton r (a) (1) (reatng to the requrement of a decara-
ton of estmated ta ) s amended by strkng out surta .

(c) Ta abe Years to Whch ppcabe. The amendments and re-
peas made by ths secton sha be appcabe wth respect to ta abe years
begnnng after December 31, 19-15. or treatment of ta abe years
begnnng n 1945 and endng n 194G, see secton 131.
Par. 2 . Secton 29.5 -2, added by Treasury Decson 5419, ap-
proved November 25,1944 C. . 1944,175 , s amended by strkng out
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29.11-1.
IS
the word surta wherever occurrng theren n the matter precedng
ampe (1).
the foowng:
CT O 1945.)


(5) Secton 102(d) (1) (defnng terms for the purposes of the ta
mposed by secton 102) s amended by strkng out subparagraph
(D) thereof.

(h) sca Teab Ta payers. or ta abe years begnnng n 1945 and
endng n 1946, see secton 131.
s further amended by nsertng mmedatey after the second sentence
the foowng:
or ta abe years begnnng after December 31, 1945, the e cess profts ta
mposed by Subchapter of Chapter 2 s not appcabe. or ta abe years
begnnng n 1945 and endng n 1946, see secton 29.10 -2.
Par. 31. There s nserted mmedatey precedng secton 29.10 -1 the
foowng:
S C. 131. ISC L Y R T P Y RS. (R NU CT O 1945,
PPRO D NO M R , 1945.)
(a) Income Ta es. Secton 10 of the Interna Revenue Code Is
amended by strkng out (c) at the begnnng of subsecton (c) and n-
sertng n eu thereof (d) , and by Insertng after subsecton (b) the
foowng:
(c) Ta abe Years egnnng n 1945 and ndng n 1946. In the
case of a ta abe year begnnng n 1945 and endng In 1946, the ta m-
posed by sectons 11, 12, 13, 14, 15, and 400 sha be an amount equa to
the sum of
(1) that porton of a tentatve ta , computed as f the aw
appcabe to ta abe years begnnng on anuary 1,1945, were app-
cabe to such ta abe year, whch the number of days n such ta abe
year pror to anuary 1, 1946, bears to the tota number of days
In such ta abe year, pus
(2) that porton of a tentatve ta , computed as f the aw ap-
pcabe to years begnnng on anuary 1, 1946, were appcabe to
such ta abe year, whch the number of days n such ta abe year
after December 31, 1945, bears to the tota number of days n such
ta abe year.

Par. 32. There s nserted mmedatey foowng secton 29.10 -1 the
foowng:
Sec 29.10 -2. Computaton of Ta fob Ta abe Years egnnng n 1915 ao
ndno n 1946. or a ta abe year begnnng n 1945 and endng n 1946, the
norma ta , surta , and optona ta mposed by sectons 11, 12, and 4O0 upon
ta payers other than corporatons, and the norma ta and surta mposed by
sectons 13, 14, and 15 upon corporatons sha be computed as foows:
(a) That porton of a tentatve ta computed under the aw appcabe
to ta abe years begnnng on anuary 1, 1945, whch the number of days
pror to anuary 1, 1946, n the ta abe year of the ta payer bears to the
tota number of days n such ta abe year, and
(6) That porton of a tentatve ta computed under the aw appcabe
to ta abe years begnnng on anuary 1, 1946, whch the number of days
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19
29.11-1.
after December 31, 1945, n the ta abe year of the ta payer bears to the
tota number of days n such ta abe year.
The provsons of secton 10 appy to estates, trusts, and no resdert aen
ndvduas whose ta s computed under sectons 11 and 12. The method of
computaton prescrbed n secton 10 s not appcabe, however, to an nsurance
company sub|ect to Suppement G, an nvestment company sub|ect to Suppement
, or a Western emsphere trade corporaton as defned n secton 109.
The provsons of secton 10 appy to a ta abe year begnnng n 1945 and
endng n 1946, whether or not such ta abe year s one of ess than 12 months.
In Ue case of a ta payer, whether a corporaton or a ta payer other than a
corporaton, whch s sub|ect to the provsons of secton 10 (c) and whch
because of a cnnge n accountng perod has a ta abe year of ess than 12
months, the net Income sha be paced on an annua bass under the provsons
of secton 47(c)(1) for the purpose of both tentatve ta computatons under
secton 103(c), or sha be computed under the e cepton n secton 47(c) (2) for
the purpose of both such tentatve ta computatons. Regardess of the method
adopted, the amounts of the tentatve norma ta and surta so computed upon
the bass of 12 months Income sha be propery reduced under secton 47(c)
n order to determne the tentatve ta es under secton 10 (c). owever, n
the case of a ta payer, whether a corporaton or a ta payer other than a cor-
poraton, wcn s sub|ect to the provsons of secton 10 (c) and whch because
of any reason other than a change n accountng perod has a ta abe year of
ess than 12 months, the net ncome sha not be paced on an annua bass under
secton 47(c)(1) and sha not be computed under the e cepton n secton
47(c)(2).
In any case n whch the ta payer, whether a corporaton or a ta payer other
than a corporaton, whch s sub|ect to the provsons of secton 10 (c) has an
e cess of net ong-term capta gans over net short-term capta osses, the ater-
natve ta under secton 117(c) sha be an amount equa to the sum of the
proper portons of the tentatve ta es determned under secton 10 (c), by com-
putng each such tentatve ta pursuant to the aternatve ta computaton
provded n secton 117(c), regardess of whether ether tentatve ta so com-
puted on the aternatve bass s arger or smaer than the tentatve ta com-
puted wthout regard to secton 117(c).
cept as herenafter provded, In the case of a corporaton whose ta abe
year begns n 1945 and ends n 1946, the credt under secton 26(e) for ncome
sub|ect to the ta mposed by Subchapter of Chapter 2 (the e cess profts
ta ), for the purposes of the tentatve ta computaton provded n secton
10 (c) (1), sha be the ad|usted e cess profts net Income used n computng the
tentatve e cess profts ta provded In secton 710(a) (7), and for the purposes
of the tentatve ta computaton provded n secton 10 (c)(2), no credt for
ncome sub|ect to the ta mposed by such Subchapter s aowabe.
In the case of a ta abe year of a corporaton of ess than 12 months, the
credt under secton 26(e) for ncome sub|ect to e cess profts ta , for the pur-
pose of the tentatve ta under secton 10 (c) (1), sha be an amount computed
as provded n secton 29.47-1 or secton 29.47-2 (a) or (6), dependng upon
whether or not such ta abe year Is a year of ess than 12 months because of a
change n accountng perod and upon whether the net ncome has been paced
on an annua bass under secton 47(c)(1) or has been computed as the net
ncome for a 12-month perod under the e cepton contaned n secton 47(c) (2).
In the case of a corporaton computng ts e cess profts ta under secton
721 (reatng to abnormates In Income In the ta abe perod), secton 726
(reatng to corporatons competng contracts under the Merchant Marne ct
of 1936), secton 731 (reatng to corporatons engaged In mnng strategc mn-
eras), or secton 736(b) (reatng to corporatons wth ncome from ong-term
contracts), such credt for ncome sub|ect to e cess profts ta sha be, In the
case of the tentatve ta computed under secton 10 (c) (1), the amount of whch
the tentatve e cess profts ta computed under the provsons of secton
710(a)(7) wthout regard to the 0 per cent mtaton provded In secton
710(a) (1) ( ) Is 95 per cent.
Wth respect to the credt for ncome sub|ect to e cess profts ta mposed
by Chapter 2 for ta abe years begnnng before anuary 1, 1946, n case the
corporaton s entted to use the e cess profts credt based upon a constructve
average base perod net ncome, see secton 29.26-4.
In the case of a ta payer, whether a corporaton or a ta payer other than a
corporaton, sub|ect to te provsons of secton 10 (c), any credt aganst the
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29.11-1.
20
ta otherwse mposed by sectons 11, 12, 13, 14, 15, and 400, such as the credt
for ta es pad to a foregn country or possesson of the Unted States under
secton 131, sha be deducted from, and any mtaton n such credt sha be
based upon, the ta computed under secton 10 (c). owever, In those nstances
In whch an ndvdua ta payer computes a tentatve ta under secton 10 (c)
by takng nto account the optona standard deducton under secton 23(aa),
the foowng credts sha not be aowed: a credts under secton 131 wth
respect to ta es of foregn countres aud possessons, and a credts wth respect
to ta es wthhed at the source under secton 143(a), reatng to nterest on
ta -free covenant bonds.
ampe. Corporaton Is a domestc manufacturng corporaton whch
makes ts ncome ta returns on the bass of a fsca year endng March 31. or
the fsca year ended March 31, 1946, t had a gross ncome of 1,000,000, whch
dd not ncude any dvdends or nterest. Its aowabe deductons are 400,000,
ts e cess profts credt s 200,000, and there are no ad|ustments to be made
under secton 711 n computng e cess profts net ncome. Its ad|usted e cess
profts net ncome for the purposes of the tentatve e cess profts ta computed
under secton 710(a) (7) s 390,000. The norma ta and surta of Corporaton
for ts fsca year ended March 31, 1946, are 73,479.45 and 46,027.40, respec-
tvey, computed as foows:
(a) Computaton of tentatve ta es provded n secton 10 (c) (1).
NORM L T ND SURT .
1. Gross Income 1,000,000.00
2. Less deductons 400,000.00
3. Net Income 600,000.00
4. Less credt under secton 26(e) for ncome sub|ect to e cess
profts ta (ad|usted net ncome for tentatve e cess profts
ta under secton 710(a)(7)) 390,000.00
5. Norma ta net ncome and corporaton surta net Income 210, 000.00
6. Norma ta (24 per cent of tem 5) 50,400.00
7. Surta (16 per cent of tem 5) 33,600.00
(6) Computaton of tentatve ta es provded n secton 10 (c) (2).
NORM L T ND SURT .
. Net Income (Item 3) : Norma ta net Income and corporaton
surta net ncome , 600,000.00
9. Norma ta (24 per cent of tem ) 144, 000.00
10. Surta (14 per cent of tem ) 4,000.00
(c) Computaton of norma ta and surta for fsca year ended March SI, 19 6.
11. Number of days n ta abe year pror to anuary 1, 1946 275
12. Number of days n ta abe year after December 31, 1945 90
NORM L T .
13. Tentatve norva computed n (o) 50,400.00
14. 275/365ths of 50,400 37,972.60
15. Teatatve norma ta computed n (b) 144,000.00
16. 90/365ths of 144,000 35, 506. 5
17. Tota norma ta 73,479.45
SURT .
1 . Tentatve surta computed In (a) 33,600.00
19. 275/365ths of 33,600 25,315.07
20. Tentatve surta computed n (6) 4,000.00
21. 90/365ths of 4,000 20, 712.33
22. Tota surta .
46,027.40
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21
29.11-1.
the foowng:
S C. 122. R P L O C SS PRO ITS T IN 1946. (R -
NU CT O 1945.)


(6) Secton 131(b) (prescrbng certan mtatons on the foregn-
ta credt) Is amended by strkng out paragraph (3) thereof.

(h) sca Year Ta payebs. or ta abe years begnnng n 1945
Par. 34. Secton 29.131- , as amended by Treasury Decson 5452,
approved pr 19, 1945 C. . 1945, 206 , s further amended by
strkng out The at the begnnng of the paragraph whch begns
wth the words The norma-ta net ncome and nsertng n eu
thereof or ta abe years begnnng before anuary 1 1946, the,
Pah. 35. There s nserted mmedatey precedng secton 29.143-1
the foowng:

(b) Technca. mendments.

(5) Secton 143(a)(2) (reatng to credts aganst net ncome n
the case of Interest on ta -free covenant bonds) s amended by strk-
ng out norma ta e empton provded In secton 25(a)(3) and
the surta .

(c) Ta abe Yeaks to Whch ppcabe. The amendments and re-
years begnnng after December 1,1945. or treatment of ta abe years
Par. 36. Secton 29.143-3 as amended by Treasury Decson 5443,
approved March 2, 1945 C. . 1945, 231 , s further amended as
foows:
( ) y nsertng mmedatey after December 31, 1943, n the
second sentence and before anuary 1,1946, .
( ) y nsertng mmedatey precedng the sentence whch begns
wth the words To avod nconvenence the foowng:
or ta abe years begnnng after December 31, 1945, such wthhodng sha not
be requred f there s fed wth the wthhodng agent when presentng coupons
for payment, or not ater than ebruary 1 of the foowng year, an ownershp
certfcate on orm 1000 statng
(1) In the case of a ctzen or resdent of the Unted States, that hs net
Income does not e ceed hs e emptons under secton 25(b) and
(2) In the case of an estate or trust, that the net ncome does not e ceed
the credt aowed n secton 163(a) (1).
(C) y strkng out the ne t to the ast paragraph and nsertng
n eu thereof the foowng:
nonresdent aen ndvdua not engaged n trade or busness wthn the
Unted States at any tme wthn the ta abe year s sub|ect to the ta mposed
by secton 211(a) on gross ncome and s not entted to any persona e empton
or credt for dependents for ta abe years begnnng before anuary 1, 1944, to
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29.11-1.
22
the norma-ta e pmpton or the surta e emptons for ta abe years begnnng
after December 31, 1943, an before anuary 1, 1046, or to the e emptons under
secton 25(b) for ta abe years begnnng after December 31, 1945. nonres-
dent aen ndvdua who s engaged n trade or busness wthn the nted
States at any tme durng the ta abe year s entted to the persona e empton
for ta abe years begnnng before anuary 1, 1944, and to the norma-ta e emp-
ton and the surta e empton aowed by secton 25(b) (1) ( ) for ta abe years
begnnng after December 31, 1043, an before anuary 1, 1046, and to the e emp-
ton aowed by secton 25(b) (1) ( ) for ta abe years begnnng after December
1, 1915. If such nonresdent aen s a resdent of Canada or Me co, he s
aso entted to the credt for dependents for ta abe years begnnng before
anuary 1, 1944, and to the surta e emptons or e emptons for both norma
ta and surta aowed by secton 25(b)(1) ( ) and (C) for ta abe years
begnnng after December 31, 1943. The beneft of such e emptons or credt
for dependents may not be receved by fng a cam therefor wth the
wthhodng agent.
owever, n the determnaton of the ta to be wthhed at the source under
secton 143(b) wth respect to remuneraton pad on or after uy 1, 1943, for
abor or persona servces performed wthn the Unted States by a nonresdent
aen, the beneft of the persona e empton for ta abe years begnnng before
anuary 1, 1944, or the norma-ta and surta e emptons or e empton for
both norma ta and surta for ta abe years begnnng after December 31,1943,
sha be aowed, prorated upon the bass of 1.40 per day for the perod of
empoyment durng any porton of whch abor or persona servces are performed
wthn the Unted States by such aen. Thus f , a nonresdent aen seaman
empoyed by the Shppng Corporaton, s pad upon the termnaton of the
voyage and such voyage covers 100 days, and performed persona servces
wthn the Unted States durng, or ncdent to, such voyage, the amount of
140 w be aocated as the porton of the persona e empton, norma-ta and
surta e emptons, or e empton for norma ta and surta to be aowed as a
credt aganst the remuneraton of for persona servces performed wthn
the Unted States durng such voyage, and wthhodng sha be apped aganst
the baance, f any, of such remuneraton. If, for e ampe, the tota remunera-
ton pad to for such voyage s 00, of whch the amount of 120 s aocabe
to sources wthn the Unted States, there s no wthhodng. s to what con-
sttutes remuneraton for or persona servces performed wthn the Unted
States, see secton 119(a) (3) and secton 29.119-4. The amount of the compen-
saton aocabe to abor or persona servces performed wthn the Unted States
together wth the amount of the persona e empton, norma-ta and surta
e emptons, or e empton for both norma ta and surta , prorated as set forth n
ths paragraph, sha be shown on the annua wthhodng return, orm 1042.
the foowng:

(6) Secton 163(a)(1) (reatng to credts of estates and trusts
aganst net ncome) s amended to read as foows:
(1) or the purpose of the norma ta and the surta , an estate
sha be aowed, n eu of the e emptons under secton 25(b) (1),
a credt of 500 aganst net ncome, and a trust sha be aowed, n
eu of the e emptons under secton 25(b)(1), a credt of 100
aganst net ncome.

(c) Ta abe Yeabs to Whch ppcabe. The amendments and
repeas made by ths secton sha be appcabe wth respect to ta abe
years begnnng In 1945 and endng n 1946, see secton 131.
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23
29.11-1
Par. 3 . Secton 20.163-1, as amended by Treasury Decson 5425,
s further amended by strkng out the capton and the frst two sen-
tences of (b) and nsertng n eu thereof the foowng:
( ) empton ao ced estates and trusts for ta abe years begnnng after
December SI, 1943. or ta abe years begnnng after December 31, 1943, and
before anuary 1, 1943, an estate s aowed the same norma ta e empton,
namey, 00, as s aowed a snge person under secton 25(a) (3) and the same
surta e empton, namey, 500, as s aowed an ndvdua under secton
25(b) (1) ( ). or ta abe years begnnng after December 31, 1945, an estate
Is aowed a credt of 500 aganst net ncome for both norma ta and surta
purposes. or proraton of such e emptons n the case of a fractona part of
a year resutng from termnaton by the Commssoner undGr secton 146 of
the ta abe perod, see secton 29.47-1.
Par. . ). There s nserted mmedatey precedng secton 29.214-1
the foowng:

(b) Technca men mnts.

(7) Secton 214 (reatng to credts of nonresdent aens aganst
net ncome) s amended to read as foows:
S C. 214. CR DITS G INST N T INCOM .
In the case of a nonresdent aen ndvdua who s not a resdent
of a contguous country, ony one e empton under secton 25(b) sha
be aowed.

(c) Ta abe Yeabs to Whch ppcabe. The amendments and
years begnnng after December 31, 1S)45. or treatment of ta abe
years begnnng n 1945 and endng n 1946, see secton 131.
Par. 40. Secton 29.214 1, as amended by Treasury Decson 5425,
s further amended by strkng out the ast two sentences and nsert-
ng n eu thereof the foowng:
In the case of a nonresdent aen Indvdua (e cept a resdent of Canada or
Me co) who at any tme durng the ta abe year was engaged n trade or bus-
ness wthn the Unted States, the norma ta e empton aowed as a credt
aganst net ncome by secton 25(a) (3) and the surta e empton aowed as a
credt aganst net ncome by secton 25(b) sha, for ta abe years begnnng
after December 31, 1943, and before anuary 1, 194C, each be 00 and, for ta -
abe years begnnng after December 31, 1945, ony one e empton under secton
25(b) for both nerma ta and surta purposes sha be aowed. In the case of
a resdent of Canada or Me co, the same norma-ta e empton, surta e emp-
tons, and e emptons under secton 25(b) for both norma ta and surta , as n
the case of a ctzen of the Unted States, sha appy.
the foowng:


( ) Secton 215(b) (reatng to credts of nonresdent aens
aganst net Income In case of ta wthhed at source) s amended
by strkng out the words norma ta e empton and the surta
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29.11-1.1
24
e emptons and by Insertng fn eu thereof the e emptons under
secton 25(b) .

(c) Ta abe Years to Whch ppcabe. The amendments and
years begnnng after December 31.1945. or treatment of ta abe years
begnnng In 1945 and endng n 1946, see secton 131.
the foowng:
T _S OR SURT . (R NU CT O 1945.)


(9) Secton 251(f) (reatng to credts aganst net Income n the
case of ctzens entted to the benefts of secton 251) s amended to
read as foows:
(f) Credts ganst Net Income. ctzen of the Unted States
entted to the benefts of ths secton sha be aowed ony one e emp-
ten under secton 2T (b).

(c) Ta abe Years to Whch ppcabe. The amendments and
years begnnng In 1945 and endng n 1946, see secton 131.
the foowng:
S C. 121. D CR S IN CORPOR TION SURT . (R NU
CT O 1945.)

(c) Reguated Investment Companes. Secton 62(b) (4) (re-
atng to the surta on reguated nvestment companes) Is amended by
strkng out 16 per centum and Insertng In eu thereof 14 per
centum .
(d) Ta abe Years to Whch ppcabe. The amendments made by
ths secton sha be appcabe wth respect to ta abe years begnnng
after December 31, 1945. or treatment of ta abe years begnnng a
1945 and endng n 1946, see secton 131.
Par. 44. Secton 29.362-2 s amended by nsertng after 16 per cent
of the amount thereof n the frst sentence the foowng:
for ta abe years begnnng before anuary 1,1946, and at the rate of 14 per cent
of the amount thereof for ta abe years begnnng after December 31, 1945,
the foowng:
S C. 103. INDI IDU LS WIT D UST D GROSS INCOM S O
L SS T N 5,000. (R NU CT O 1945.)
(a) In Genera. The ta tabe (Incudng the note at the foot of snch
tabe) In secton 400 (reatng to optona ta on Indvduas wth ad|usted
gross Incomes of ess than 5,000) s amended to read as foows:
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25 29.11-1.
If the ad-
|usted gross
e s
nd the number of
e emntona s
If the ad-
usted Rross
Income s
nd the number of e emptons s
at
ess
I
2
1
4 or
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1
2
3
4
6
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The ta sha be

6
550
0
O
0
0
2,200
2,225
2 3
1
03
0
0
0
0
0
0
550
75
1
0
0
0
2,225
2.250
2 S
193
O
3
0
0
0
0
57
COO
5
0
0
0
2,250
2,275
202
197
102
7
0
0
0
0
0
eoo
625
10
0
0
0
2 275
2300
200
201
uO
11
0
0
0
0
0
626
650
14
0
0
0
2,300
2.325
SI )
205
110
15
0
0
0
0
0
650
67
IS
0
0
0
2,325
2,350
305
210
115
20
0
0
0
0
0
675
700
23
0
0
0
2,350
2 375
309
214
110
24
0
0
0
0
0
700
725
27
0
0
0
2,375
2,400
313
21
123
2
0
0
0
0
0
725
750
31
0
0
0
2,400
2 426
31
223
12S
33
0
0
0
0
0
750
775
35
0
0
0
2,425
2,450
322
227
132
37
0
0
0
0
0
775
00
40
0
0
0
2 450
2,475
32
231
136
41
0
0
0
0
0
00
25
44
0
0
0
2,475
2600
330
236
140
45
0
0
0
0
0
25
50
4
1)
0
0
2,500
2 525
335
240
145
50
0
0
0
0
0
50
76
52
11
0
0
2 525
2550
339
244
149
54
0
0
0
0
0
75
900
67
(1
0
0
2,5 0
2 575
343
24
153
6
0
0
0
0
0
eeo
925
CI
0
0
0
2.575
2600
347
2 2
157
62
0
0
0
0
0
925
950
65
0
0
0
2600
2,625
352
257
162
67
0
0
0
0

950
975
70
0
0
0
2,625
2,650
356
261
166
71
0
0
0
0
0
975
1,000
74
0
0
0
2650
2 675
360
2 5
170
75
0
0
0
0
0
1.000
1,025
7
()
0
0
2 676
2700
365
270
176
0
0
0
0
0
0
1.026
1,050
2
0
0
0
2700
2,726
369
274
179
4
0
0
0
0
0
1,050
1,075
7
0
0
0
2,725
2,750
373
27
1 3

0
0
0
0
0
1,07
1,100
91
0
0
0
2,750
2,776
377
2 2
1 7
92
0
0
0
0
0
1,100
1,125
95
n
0
0
2 775
2 00
3 2
2 7
192
97
2
0
0
0
a
1.125
1,150
on
6
0
0
2. 00
2. 26
3 7
291
196
101
6
0
0
0
0
1. 150
1,175
104
0
0
0
2, 25
2, 50
391
295
200
105
10
0
0
0
0
1.175
1.200
10
IS
0
0
2. 50
2 75
396
299
204
109
14
0
0
0
0
1.200
1,225
112
17
0
0
2. 75
2.900
401
304
209
114
19
0
0
0
0
1,225
1, 251)
117
22
0
0
2.900
2 925
405
30
213
11
23
0
0
0
0
1,250
1,275
121
20
0
0
2. 925
2950
410
312
217
122
27
0
0
0
0
1.275
1.300
125
30
0
0
2.950
2,97
415
317
222
127
32
0
0
0
0
1,300
1,325
129
34
0
0
2, 975
3.000
419
321
226
131
36
0
0
0
0
1. 2
1,350
134
39
0
0
3,000
3,050
427
327
232
137
42
0
0
0
0
1.350
1,375
13
43
0
0
3,050
3.100
436
336
241
146
61
0
0
0
0
1.37
1,400
142
47
0
0
3,100
3,150
445
344
249
154
59
0
0
0
0
1,400
1,425
147
52
0
0
3.150
3,200
455
353
25
163
6
0
0
0
0
1,42
1,450
151
56
0
0
3.200
,250
464
3 1
26
171
76
0
0
0
0
1.450
1.475
155
60
0
0
3.250
3,300
474
370
275
1 0
5
0
0
0
0
1.476
1,500
159
54
0
0
3,300
3,350
4 3
379
2 4
1 9
94
0
0
0
0
1.500
1,525
164
69
0
0
3,350
3.400
492
3
292
197
102
7
0
0
0
1,525
1,550
16
73
0
0
3,400
3.450
502
397
301
206
111
16
0
0
0
1, 50
1,575
172
77
0
0
3,450
3.500
511
407
309
214
119
24
0
0
0
1, 75
1,600
17
1
0
0
3.5O0
3.550
521
416
31
223
12
33
0
0
0
1.600
1,626
1 1
6
0
0
3,550
3,600
530
425
326
231
13
41
0
0
0
1.625
1.650
1 6
90
0
0
3,600
3.650
539
43
336
240
146
60
0
0
0
1,650
1.675
1 9
94
0
0
3.650
3.700
549
444
343
24
153

0
0
0
1,675
1,700
194
99
4
0
3.700
3.760
55
4 4
352
257
162
67
0
0
0
1.700
1,725
19
103
0
3.750
3. 00
56
463
361
266
171
7
0
0
0
1,725
1,750
202
107
12
0
3. 00
3. 0
577
472
369
274
179
4
0
0
0
1,7 0
1,775
206
111
16
0
3, 50
3,900
WO
4 2
37
2 3
1
93
0
0
0
1.776
1, 00
211
116
21
0
3,900
3,950
506
491
3 7
291
196
101
6
0
0
1. 00
1, 25
215
120
25
0
3,950
4,000
605
501
39
300
205
110
1
0
0
1, 2
1, 50
219
124
29
0
4,000
4,050
615
510
406
30S
213
11
23
0
0
1, 50
1, 75
22
12
33
0
4,050
4.100
624
620
-115
317
222
127
32
0
0
1. 7
1,900
22
133
3
0
4,100
4,160
633
629
121
325
230
135
40
0
0
1,900
1.925
232
137
42
0
4,150
4.200
643
53
131
331
239
144
49
0
0
1.925
1,950
23
141
46
0
4. 2O0
4,250
652
54
143
342
247
152
7
0
0
1.950
1,975
241
146
51
0
4,250
4,300
662
557
453
351
256
161
66
0
0
1,975
2,000
245
150
55
0
4,300
4.350
671
5 7
162
360
265
170
76
0
0
2,000
2,025
249
154
59
0
4. 350
4, 400
6S0
576
171
36
273
17
3
0
0
2.025
2.050
253
15
63
0
4,400
4,450
690
5 5
I 1
377
2 2
1 7
92
0
0
2.050
2,075
25
163
6
0
4.450
4,500
600
505
190
3m
290
195
100
5
0
2,075
2100
262
167
72
0
4.500
4,550
709
60-1
r. n
305
200
204
109
14
0
Z100
2.125
266
171
7f
0
4,550
4,600
71S
614
500
405
3117
212
117
22
0
2,125
2,150
271
176
1
0
4,600
4.650
727
623
51S
111
316
221
126
31
0
2.150
2. 175
275
1 0
5
0
4,650
4.700
737
632
52S
123
321
220
134
39
0
2,176
2.200
279
1 4
9
0
4,700
4.750
74
642
537
433
333
23
143
4
0
4,750
4, 00
756
661
547
442
342
247
152
7
0
4, 00
4, 50
765
661
556
452
3. I
255
160
65
0
4, 50
4,900
771
6711
565
161
350
264
160
74
0
4,900
4,950
7 4
670
575
170
367
272
177
2
0
4,950
6,000
793
( SO
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376
2S1
1 0
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0
72 29 47-
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29.11-1. 26
(b) Ta abe Years to Whch ppcabe. The amendment made
by ths secton sha be appcabe wth respect to ta abe years begn-
nng after December 31. 1915. or treatment of ta abe years begnnng
n 1945 and endng In 1946, see secton 131.
( ) y strkng out the frst sentence of the paragraph n (b) whch
begns wth the words or the purposes and nsertng n eu thereof
the foowng:
or the purposes of determnng whether a ta payer may eect to pay the ta
under Suppement T for ta abe years begnnng after December 31, 194S. the
amount of the ad|usted gross ncome s eon-trong, wthout reference to the
number of e emptons or surta e emptons, as the case may be, to whch the
ta payer may be entted.
( ) y strkng out the paragraph n (b) whch begns wth the
words To determne and nsertng n eu thereof the foowng:
To determne the amount of the ta for a ta abe year begnnng after Decem-
ber 31, 1943, the ndvdua ascertans the amount of hs ad|usted gross ncome,
refers to the schedue set forth n secton 400 whch s appcabe to the ta abe
year, ascertans the ncome bracket nto whch such ncome fas, and. usng
the number of e emptons (or surta e emptons) appcabe to hs ease, fnds the
ta n the vertca coumn havng at the top thereof a number correspondng to
te number of e emptons (or surta e emptons) to whch the ta payer s
entted. Thus, f fur 194(5 has ad|usted gross ncome of 4,415 and has three
e emptons, ncudng hs own e empton, hs ta s 4 1.
(C) v strkng out the paragraph n (b) whch begns wth the
words In any case and nsertng n eu thereof the foowng:
If, for a ta abe year begnnng after December 31, 1943, and before anuary 1.
194(1. the ta payer and hs spouse eect to pay the ta mposed by Suppement T
on the bass of a |ont return and the return ncudes ncome of both husband
and wfe, the ta determned under the tabe sha be reduced by 3 per cent of
the smaer ad|usted gross ncome but n an amount not n e cess of 15.
the foowng:


(10) Secton 401 (defnng surta e empton for the purposes
of Suppement T) s amended to read as foows:
S C. 401. D INITIONS O MPTION .
s used In the tabe n secton 400, the term number of e emptons
means the number of the e emptons aowed under secton 25(b) as
credts aganst net ncome for the purpose of the norma ta and the
surta mposed by sectons 11 and 12.
(c) Ta abe Yeaks to Whch ppcabe. The amendments and re-
years begnnng after December 31,1945. or treatment of ta abe years
Par. 4 . Secton 29.401-1, as amended by Treasury Decson 5425.
s further amended by nsertng at the end of the frst paragraph of
(b) the foowng:
The term number of e emptons, whch, for ta abe years begnnng after
December 31, 1945, s used nstead of the term number of surta e emptons,
means the number of e emptons aowed under secton 25(b) .for such years
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27
29.22(a)- .
as credts aganst net ncome for the purpose of the norma ta and the surta
mposed by sectons 11 and 12. See secton 29.25-3.
(Ths Treasury decson s ssued under the authorty contaned
n secton 62 of the Interna Revenue Code (53 Stat., 32 26 U. S. C,
62) and sectons 101, 102, 103,121 (a), (c), and (d), 122 (g) and (h),
131 (a), and 152 of the Revenue ct of 1945 (Pubc Law 214,-Seventy-
nnth Congress).)
Wm. T. Sherwood,
ctng Commssoner of Interna Revenue.
pproved une 12,1946.
oseph . O Con e, r.,
ctng Secretary of the Treasury.
( ed wth the Dvson of the edera Regster une 13, 19-16, 10.55 a. m.)
P RT II. COMPUT TION O N T INCOM .
S CTION 22(a). GROSS INCOM : G N R L
D INITION.
Secton 29.22 (a)-1: What ncuded n gross 1946-13-12335
ncome. G. C. M. 24945
INT RN L R NU COD ND PRIOR R NU L WS.
The mere act of embezzement does not of tsef resut n ta abe
Income to the embezzer for edera ncome ta purposes. If the
owner condones the takng of the property and forgves the n-
debtedness, ta abe ncome may resut to the embezzer, dependng
on the facts n the partcuar case.
G. C. M. 16572 (C. . -1, 2 (1930)) modfed.
In G. C. M. 16572 (C. . T1, 2 (1936)) t was hed, on the
bass of court decsons then avaabe, that the proceeds of an em-
bezzement consttute ta abe ncome n the hands of the embezzer
for edera ncome ta purposes.
In the case of Commssoner v. Wco et a. (327 U. S., , Ct. D.
166 , C. . 1946-1, 6), decded by the Supreme Court ebruary 25,
1946, t was hed that moneys embezzed by a bookkeeper from an
empoyer are not ta abe ncome to the embezzer under secton
22(a) of the Interna Revenue Code, where the empoyer never con-
doned nor forgave the takng of the money and st hods the em-
poyee abe to restore t. The fact that the empoyee was convcted
and sentenced, but paroed after servng part of hs prson term, dd
not affect ths concuson. The Court stated that not every beneft
receved by a ta payer from hs abor or nvestment necessary ren-
ders hm ta abe, nor s mere domnon over money or property
decsve, but a reevant facts and crcumstances must be consdered.
The Court ponted out that a ta abe gan s condtoned upon (1)
the presence of a cam of rght to the aeged gan, and (2) the
absence of a defnte, uncondtona obgaton to repay or return
that whch woud otherwse consttute a gan. The Court aso stated
that wthout some bona fde ega or equtabe cam, the ta payer
can not be sad to have receved any gan or proft wthn the reach
of secton 22(a) of the Interna Revenue Code. The Court com-
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29.22(a)-2.
2S
mented that f the uncondtona ndebtedness s canceed or retred,
ta abe ncome may adhere, under certan crcumstances, to the
ta payer.
In vew of the decson of the Supreme Court n Commssoner v.
Wco et a., t s the opnon of ths offce that the prncpes stated
n G. C. M. 16572, supra, are too broad nasmuch as that memorandum
can be construed as hodng that embezzement resuts n ta abe
ncome n a cases. The correct rue appears to be that the mere act
of embezzement does not of tsef resut n ta abe ncome nasmuch
as the owner does not ose tte to the property embezzed. owever,
where the owner condones the takng of the property and forgves
the ndebtedness, ta abe ncome may resut to the embezzer, de-
pendng on the facts n the partcuar case.
G. C. M. 16572, supra, s modfed accordngy.
. P. Wenche,
Chef Counse, ureau of Interna Revenue.
Secton 29.22(a)-2: Compensaton for persona 1946-22-12434
servces. I. T. 3 23
INT RN L R NU COD .
The persona money aowance of 500 or 2,200 per year, as the
case may be, pad under secton 7 of the Pay Read|ustment ct of
1942 ( 56 Stat., 359, at 362) to offcers of the rmy, Navy, Marne
Corps, Coast Guard, Coast and Geodetc Survey, and Pubc eath
Servce servng n specfed grades, s e empt from edera ncome
ta .
dvce s requested whether the persona money aowance pad
under secton 7 of the Pay Read|ustment ct of 1942 (56 Stat., 359,
at 362) to certan offcers of the rmy, Navy, Marne Corps, Coast
Guard, Coast and Geodetc Survey, and Pubc eath Servce con-
sttutes ta abe ncome for edera ncome ta purposes.
The tte and the pertnent porton of secton 7 of the Pay Read-
|ustment ct of 1942, supra, read as foows:
n ct 1 0 read|ust the pay and aowances of personne of the rmy, Navy,
Marne Corps, Coast Guard, Coast and Geodetc Survey, and Pubc eath
Servce.

Sec. T.
Offcers of the Navy servng n the grade of vce admra, offcers of the rmy
servng n the grade of eutenant genera, and offcers of the other servces men-
toned n the tte of ths ct servng n correspondng grades, sha be entted,
whe so servng, to the pay and aowances of a rear admra (upper haf) and
to a persona money aowance of 500 per year. Offcers of the Navy servng n
the grade of admra or as Chef of Nava Operatons, offcers of the rmy serv-
ng n the grade of genera or as Chef of Staff of the rmy, and offcers of the
other servces mentoned n the tte of ths ct servng n correspondng grades,
sha be entted, whe so servng, to the pay and aowances of a rear admra
(upper haf), and to a persona money aowance of 2,200 per year.
It s hed that the persona money aowance of 500 or 2,200, as
the case may be, pad under secton 7 of the Pay Read|ustment ct of
1942, supra, to offcers of the rmy, Navy, Marne Corps, Coast Guard,
Coast and Geodetc Survey, and Pubc eath Servce servng n
specfed grades, s e empt from edera ncome ta . (See Cfford
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29
29.22(a)-3.
ones v. Unted States, 60 Ct. Cs., 552, T. D. 3724, C. . I -2, 136
(1925), and Mm. 3413, C. . -, 29 (1926).)
Secton 29.22(a)-3: Compensaton pad other 1946-17-12373
than n cash. I. T. 3 12
( so Secton 23(a). Secton 29.23(a)-6 Sec-
ton 24, Secton 29.24-1.)
INT RN L R NU COD .
The vaue of meas and odgng furnshed by a father to hs un-
emancpated mnor chd s not ncudbe, for edera Income ta pur-
poses, n the gross ncome of the chd and s not deductbe as wages
n computng the net ncome of the father, even though an empoyer-
empoyee reatonshp e sts between them. If the father takes the
chd s earnngs and utzes them for hs own purposes, or f the
father requres the chd to purchase hs own cothng or other neces-
stes whch the father s obgated to furnsh, the deducton of the
chd s earnngs as a busness e pense shoud be dsaowed to that
e tent.
dvce s requested whether, for edera ncome ta purposes, the
vaue of meas and odgng furnshed by a father to hs unemancpated
mnor chd s ncudbe n the gross ncome of the chd and deductbe
as wages by the father where the empoyer-empoyee reatonshp
e sts between them.
It s ponted out that n many nstances wages pad to mnor chdren
amount to ess than 500, but f the vaue of meas and odgng whch
s furnshed by the father to hs chd consttutes addtona wages, the
gross ncome of the chd woud frequenty e ceed 500. In such cases,
the chd woud be requred to fe an ncome ta return, and the father
woud ose the surta e empton of 500 on account of the chd.
In I. T. 3767 (C. . 1945, 101) t was hed that reasonabe wages
pad by a father to hs unemancpated mnor chd for persona serv-
ces actuay rendered as a bona fde empoyee n the conduct of a
trade or busness, or n the producton of ncome, are deductbe as
ordnary and necessary e penses, for edera ncome ta purposes, for
ta abe years begnnng after December 31, 1943. owever, n order
to obtan such a deducton, the father must estabsh that a bona fde
empoyer-empoyee reatonshp e sts between hm and the chd.
In determnng whether there s n fact such a reatonshp, consdera-
ton must be gven to whether the father s deang wth hs mnor
chd, for the purpose of empoyment, as he woud dea wth a stranger
under the same crcumstances. Thus, there shoud be a satsfactory
showng by the father that the usua condtons of empoyment, such
as dutes, hours of work, amount of wages, and tme of payment of
wages, had been agreed upon to the same e tent as they woud have
been had the father been engagng the servces of a stranger. If wages
are pad pursuant to an arrangement n the guse of an empoyer-em-
poyee reatonshp, entered nto ether before or after the servces are
performed, a camed deducton for wages pad w not be aowed.
Secton 24(a)(1) of the Interna Revenue Code provdes that n
computng net ncome no deducton sha n any case be aowed n
respect of persona, vng, or famy e penses, e cept e traordnary
medca e penses whch are deductbe under secton 23 ( ) of the Code.
father s egay abe for the support and mantenance of hs mnor
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29.22(a)-7.
30
chdren, and the cost of meas and odgng whch he furnshes them
consttutes a persona e pense.
It s hed that, for edera ncome ta purposes, the vaue of meas
and odgng furnshed by a father to hs unemancpated mnor chd
s not ncudbe n the gross ncome of the chd and s not deductbe
as wages n computng the net ncome of the father, even though an
empoyer-empoyee reatonshp e sts between them. If the father
takes the chd s earnngs and utzes them for hs own purposes, or
f the father requres the chd to purchase hs own cothng or other
necesstes whch the father s obgated to furnsh, the deducton of
the chd s earnngs as a busness e pense shoud be dsaowed to that
e tent.
Secton 29.22(a)-7: Gross ncome of farmers. 1946-1 -123S9
( so Secton 117, Secton 29.117-7.) I. T. 3 15
INT RN L R NU COD .
Where ctrus groves are sod wth frutt on the trees, a porton of
the seng prce must, for edera ncome ta purposes, be aocated
to the frut and the baance to the and and trees. Gan from the sae
of the frut w consttute ordnary Income. Gan from the sae of
the and and trws may be treated as capta gan under secton
117(|) of the Interna evenue Code, provded the recognzed gans
from a transactons comng wthn the purvew of that secton
e ceed the recognzed osses thereunder.
dvce s requested wth respect to the treatment for edera ncome
ta purposes of gan derved from the sae of ctrus groves wth frut
on the trees, wth partcuar reference to the necessty of aocatng a
porton of the seng prce to the frut on the trees.
The three man ctrus crops n Caforna, for e ampe, are oranges,
grapefrut, and emons. The nave type of orange reaches a state of
maturty, sutabe for harvestng, ate n December or the eary part
of anuary, and the harvestng season e tends nto the mdde of May.
The aenca type of orange and the grapefrut reach maturty n the
atter part of pr or eary n May. The harvestng season for these
fruts e tends from that tme unt November. Lemon trees, how-
ever, have frut n varous stages of maturty at a tmes, and the
frut s harvested when t reaches a certan sze or stage of maturty
on the trees. The sae of mmature frut s prohbted by State and
edera aws.
The frut on ctrus trees has a potenta vaue from the tme the
crop s set (adherng permanenty to the trees) unt t s harvested,
but ts actua vaue can not be determned unt t s harvested and sod.
It s contended that because ctrus frut s a pershabe crop, the vaue
of the marketabe portons of the crop s purey specuatve.
Wth respect to dsposton of growng crops b a purchaser, O. D.
714 (C. . 3,49 (1920)) provdes as foows:
purchased for a certan prce and together wth crops growng thereon.
The bass for determnng gan or oss upon a subsequent sae of the crops s the
dfference between the cost, or f no part of the purchase prce was assgned
to the crops, the far market vaue thereof at the tme of purchase, and the seDg
prce ess cost of harvestng and marketng.
Secton 7(|) of the Interna Revenue Code provdes n part as
foows:
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31
29.22(a)-21.
(1) Defnton of property used n the trade on busness. or the
purposes of ths subsecton, the term property used n the trade or busness
means property used n the trade or busness, of a character whch s sub|ect
to the aowance for deprecaton provded n secton 23(1), hed for more
than 6 months, and rea property used n the trade or busness, hed for more
than 6 months, whch s not ( ) property of a knd whch woud propery
be ncudbe n the nventory of the ta payer f on hand at the cose of the
ta abe year, or ( ) property hed by the ta payer prmary for sae to
customers n the ordnary course of hs trade or busness. Such term aso
Incudes tmber wth respect to whch subsecton (k) (1) or (2) s appcabe.
(2) Geneba rue. If, durng the ta abe year, the recognzed gans upon
saes or e changes of property used n the trade or busness, pus the recog-
nzed gans from the compusory or nvountary converson (as a resut of
destructon n whoe or n part, theft or sezure, or an e ercse of the power
of requston or condemnaton or the threat or mmnence thereof) of prop-
perty used n the trade or busness and capta assets hed for more than
6 months nto other property or money, e ceed the recognzed osses from
such saes, e changes, and conversons, such gans and osses sha be con-
sdered as gans and osses from saes or e changes of capfa assets hed for
more than 6 months. If such gans do not e ceed such osses, such gans
and osses sha not be consdered as gans and osses from saes or e changes
of capta assets.
The ureau recognzes that producng orchards are sub|ect to de-
precaton. (See O. 797, C. . 1, 130 (1919).) In the appcaton
of secton 7(|) of the Code, supra, rea estate and the deprecabe
mprovements thereon are treated as a unt.
The producton of frut from orchards or groves consttutes a
busness, and secton 117 (|) of the Code, supra, s appcabe to the
sae of an orchard or grove. The crops are produced wth the prmary
purpose of seng the frut to customers n the ordnary course of
the busness. Therefore, regardess of ther stage of deveopment,
any gan reazed from the sae of growng crops s ordnary ncome.
In vew of the foregong, t s hed that, for edera ncome ta
purposes, where ctrus groves are sod wth frut on the trees, a por-
ton of the seng prce must be aocated to the frut and the baance
to the and and trees. Gan from the sae of the frut w consttute
ordnary ncome. Gan from the sae of the and and trees may be
treated as capta gan under secton 117(|) of the Interna Revenue
Code, provded the recognzed gans from a transactons comng
wthn the purvew of that secton e ceed the recognzed osses there-
under.
Secton 29.22 (a)-21: Trust ncome ta abe to 1946-23-12440
the grantor as substanta owner thereof. Mm. 6071
Pocy regardng e tent of appcaton of Treasury Decson 54
C. . 1946-1, 19 , reatng to ta abty .of ncome of certan trusts.
Washngton 25, D. C.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
and Others Concerned:
Treasury Decson 54 C . 1946-1, 19 (11 . R., 65), deang
wth the ta aton of trust ncome wthn the prncpes of Ueverng v.
Cfford (309 U. S., 331 Ct. D. 1444, C. . 1940-1,105 ), was approved
December 29, 1945, to be effectve for ta abe years begnnng after
December 31,1945. In many nstances grantors who are ta abe under
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29.22(b)(9)-.
32
the provsons of Treasury Decson 54 upon the ncome of trusts
created pror to anuary 1, 1946, may desre to termnate ther sub-
stanta ownershp of the trust ncome through termnaton of contros
over such trusts.
It w, therefore, be the pocy of the ureau where the grantor s
contro over a trust created pror to anuary 1.1946, s termnated at
any tme durng the caendar year 1946, wth the resut that the trust
ncome on the ast day of such caendar year s no onger ta abe to
the grantor under the provsons of Treasury Decson 54 , not to
assert abty of the grantor under Treasury Decson 54 for any
part of the caendar year 1946. The ureau may, however, assert
abty of the grantor n such a case under secton 22(a) of the Inter-
na Revenue Code wthout reference to Treasury Decson 54 for that
part of the caendar year 1946 precedng the termnaton of the
grantor s contro over the trust.
Correspondence n regard to ths mmeograph shoud refer to ts
number and the symbos IT: IM.
Ths mmeograph s pubshed wthout pror genera notce of ts
proposed ssuance, nasmuch as ta payers, n order to secure the benefts
provded heren, must act pror to anuary 1, 1947, and notce and
pubc rue makng procedure n connecton herewth woud resut n
deay, whch s hereby found to be contrary to the pubc nterest
(See secton 4(a) of the dmnstratve Procedure ct, approved
une 11, 1946.)
Ths mmeograph, beng wthn the parenthetca e cepton to sec-
ton 4(c) of the dmnstratve Procedure ct, sha be effectve upon
ts fng for pubcaton n the edera Regster.
Wm. T. Sherwood,
ctng Commssoner.
pproved October 10, 1946.
oseph . O Conne, r.,
( ed wth the Dvson of the edera Regster October 15, 1946, .46 a. m )
S CTION 22(b). GROSS INCOM : CLUSIONS
ROM GROSS INCOM .
Secton 29.22(b) (9)-: Income from dscharge 1946-26-1245
of ndebtedness. T.D.5546
( so Secton 29.22(b) (10)-1 Secton 322,
Secton 29.322-7.)
TITL 20 -INT RN L R NU . C PT R I, SU C PT R . P RT 29.
INCOM T T L Y RS GINNING T R D C M R 31, 1941.
Reguatons 111 amended to conform to Pubc Law 57 , Seventy-
nnth Congress, reatng to the e cuson of ncome from the ds-
charge of ndebtedness and the tme for camng refund wth respect
to war osses.
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33
29.22(b)(9)- .
Washngton, D. C.
In order to conform Reguatons 111 26 C R, Part 29 to Pubc
Law 57 , Seventy-nnth Congress, approved uy 1, 194G page 2 5,
ths uetn , such reguatons are amended as foows:
29.22(b) (9)- of Reguatons 111 26 C R, 29.22(b) (9)-1 the
foowng:
PU LIC L W 57 (S NTY-NINT CONGR SS, S COND S S-
SION), PPRO D ULY 31, 1940.
e t enacted by the Senate and owe, of Representatves of the Unted
States of merca n Congress assembed, That secton 22(b) (9) and
(10) of the Interna Revenue Code, reatng to the e cuson of ncome
from the dscharge of ndebtedness, be amended by strkng out 194(3
n each of such paragraphs and nsertng n eu thereof 1947 .
Par. 2. Secton 29.22(b) (9)- of Reguatons 111, as amended by
Treasury Decson 5517, approved une 12,1916 page , ths uetn
26 C R, 29.22(b) (9)- , s further amended by strkng from the
frst paragraph and from the thrd paragraph anuary 1, 1947 and
nsertng m eu thereof n each nstance anuary 1, 191 .
Par. 3. There s nserted mmedatey precedng secton 29.22(b)
(10)-1 of Reguatons 111 26 C R, 29.22(b) (10)-1 the foowng:
e t enacted by the Senate and ouse of Representatves of the Unted
States of merca n Congress assembed, That secton 22(b) (9) and
(10) of the Interna Revenue Code, reatng to the e cuson of ncome
from the dscharge of ndebtedness, be amended by strkng out 1946
n each of such paragraphs and nsertng n eu thereof 1947 .
Par. 4. Secton 29.22(b) (10)- of Reguatons 111, as amended by
Treasury Decson 5517 26 C R, 29.22(b) (10)-1 , s further amended
by strkng from the frst sentence and from the ast sentence anuary
1, 1947 and nsertng n eu thereof n each nstance anuary 1,
194 .
Par. 5. There s nserted mmedatey precedng secton 29.322-1 of
Reguatons 111 26 C R, 29.322-1 the foowng:

T NSION O TIM OR CL IMING CR .DIT O R UND WIT R SP CT TO
W R LOSS S
Sec. 2. If a cam for credt or refund under the nterna-revenue aws
reates to an overpayment on account of the deductbty by the ta payer
of a oss n respect of property consdered destroyed or sezed under
secton 127(a) of the Interna Revenue Code, reatng to war osses, for
a ta abe year begnnng In 1)41 or 1942, the three-year perod of mta-
ton prescrbed n secton 322(b) (1) of the Interna Revenue Code sha
n no event e pre pror to December 31,1917. In the ease of such a cam
fed on or before December 31, 1047, the amount of the credt or refund
may e ceed the porton of the ta pad wthn the perod provded n sec-
ton 322(b) or (2) or (3) of the Interna Revenue Code, whchever s ap-
pcabe, to the e tent of the amount of the overpayment attrbutabe to
the deductbty of the oss descrbed n ths secton.
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5 29.22(b) (13)-1.
34
Par. 6. Secton 29.322-7, Reguatons 111, as amended by Treasury
Decson 5516, approved May 27, 1946 C. . 1946-1, 159 26 C R,
29.322-7 , s further amended by changng the ast sentence of (a)
of such secton to read as foows:
The provsons of ths subsecton are sub|ect to the e ceptons provded n sub-
sectons (6), (c), (d), and (e) of ths secton and n secton 2 of Pubc Law
7 (Seventy-nnth Congress), approved uy 31, 1946, e tendng to December 31,
1047, te tme for fng a cam for credt or refund based upon an overpayment
of the ta as a resut of the faure to take a war oss deducton n respect of
property consdered destroyed or sezed under secton 127(a) of the Code for a
ta abe year begnnng n 1941 or 1942.
Pah. 7. The amendment to Reguatons 111 26 C R. Part 29
(coverng ta abe years begnnng after December 31, 1941) made by
paragraph 6 of ths Treasury decson s hereby made appcabe to
ta abe years begnnng after December 31, 1940, and before anuary
I, 1942 (such years beng covered by Reguatons 103).
(Ths Treasury decson s ssued under the authorty contaned n
secton 62 of the Interna Revenue Code (53 Stat., 32 26 U. S. C, 62)
and Pubc Law 57 , Seventy-nnth Congress, approved uy 31, 1946.)
Ths Treasury decson s pubshed wthout pror genera notce of
ts proposed ssuance for the reason that notce and pubc rue-makng
procedure n connecton therewth are hereby found to be unnecessary.
See secton 4(a) of the dmnstratve Procedure ct, approved une
II, 1946. Ony mnor technca amendments are made to the regu-
atons..
Ths Treasury decson sha be effectve on the thrty-frst day after
the date of ts pubcaton n the edera Regster.
Wm. T. Sherwood,
pproved December 9,1946.
( ed wth the Dvson of the edera Regster December 12, 1946, .45 a. m.)
Secton 29.22(b) (10)-1: Income from dscharge of
ndebtedness of raroad corporatons.
INT L R NU COD .
Reguatons 111 amended. (See T. D. 5546, page 32.)
Secton 29.22(b) (13)-1: Compensaton of mem- 1946-19-12399
bers of mtary and nava forces. I. T. 3 17
INT RN L R NU COD .
Compensaton receved n ta abe years begnnng after December
1,1942, and before the termnaton of the present war as procamed
by the Presdent, by a commssoned offcer of the Unted States
Pubc eath Servce for actve servce performed wth the Unted
States Pubc eath Servce, or whe detaed for duty wth the
rray, Navy, or Coast Guard, s e cudbe from gross ncome under
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35
29.22(b) (13)-1.
secton 22(b) (13) ( ) of the Interna Revenue Code n an amount
not n e cess of 1,500.
Retrement pay receved n ta abe years begnnng after Decem-
ber 31, 1941, by a retred commssoned offcer of the Unted States
Pubc eath Servce for persona n|ures or sckness resutng
from actve servce performed wth the Unted States Pubc eath
Servce n tme of war, or whe detaed for duty wth the rmy,
Navy, or Coast Guard, s e cudbe from gross ncome under secton
22(b)(5) of the Code.
dvce s requested whether commssoned offcers of the Unted
States Pubc eath Servce who are n actve servce are entted to
the 1,500 e cuson from gross ncome provded n secton 22(b) (13)
( ) of the Interna Revenue Code for commssoned offcers and
commssoned warrant offcers of the mtary and nava forces of the
Unted States. dvce s aso requested whether the dsabty retre-
ment pay of a retred commssoned offcer of the Unted States Pubc
eath Servce s e cudbe from gross ncome under secton 22(b) (5)
of the Code as a penson, annuty, or smar aowance for persona
n|ures or sckness resutng from actve servce n the armed forces
of any country.
Secton 22(b) (5) and secton 22(b) (13) ( ) of the Interna Reve-
nue Code provde n part as foows:
(b) cusons from Gross Income. The foowng tems sha not be n-
cuded n gross ncome and sha be e empt from ta aton under ths chapter
Chapter 1 of the Code :

(5) Compensaton for n|ures or sckness. amounts receved
as a penson, annuty, or smar aowance for persona n|ures or sckness
resutng from actve servce n the armed forces of any country

(13) ddtona aowance fob mtary and nava personne.
( ) In the case of compensaton receved durng any ta abe year and
before the termnaton of the present war as procamed by the Presdent,
for actve servce as a commssoned offcer (or a commssoned warrant
offcer) n the mtary or nava forces of the Unted States durng such
war, so much of such compensaton as does not e ceed 1,500.
The provson of secton 22(b) (5) of the Code whch s set forth above
s appcabe wth respect to ta abe years begnnng after December
31, 1941. Secton 22(b) (13) ( ) of the Code s appcabe wth
respect to ta abe years begnnng after December 31, 1942.
Secton 212 (a) and (b) of the Pubc eath Servce ct (5 Stat.,
6 2,6 9 C. . 1944, 15) approved uy 1,1944, whch was a codfca-
ton of e stng aw, provdes n part as foows:
(a) or the purposes of ths secton
(1) the term fu mtary benefts means a rghts, prveges, m-
muntes, and benefts provded under any ew of the Unted States n the
case of commssoned offcers of the rmy (ncudng ther survvng bene-
fcares) on account of actve mtary servce, ncudng, but not mted to,
bura payments n the event of death, s months pay n case of death,
veterans compensaton and pensons and other veterans benefts, the rghts
provded under the Soders and Saors Cv Reef ct, as amended, and
under the Natona Servce Lfe Insurance ct, as amended, trave aow-
ances, ncudng per dem aowances for trave wthout regard to repeated
trave between two or more paces n the same vcnty, e empton from
payment of postage on ma, e empton of certan pay from edera ncome
ta aton, and other benefts, prveges and e ceptons under the Interna
Revenue aws and
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29.22(b) (13)- .
36
(2) the term mted mtary benefts means fu mtary benefts,
e cept veterans compensaton and pensons and other veterans benefts,
and egbty under the Natona Servce Lfe Insurance ct, as amended,
(h) Commssoned offcers of the Servce (ncudng ther survvng benef-
cares)
(1) sha be entted to mted mtary benefts wth respect to a actve
servce n tme of war
(2) sha be entted to fu mtary benefts wth respect to actve servce
performed whe detaed for duty wth the rmy, Navy, or Coast Guard
(3) sha be entted to fu mtary benefts wth respect to actve serv-
ce outsde the contnenta mts of the Unted States, or n aska, n tme
of war
(4) sha be entted to fu mtary benefts wth respect to actve servce
performed whe the Servce s part of the mtary forces of the Unted
States pursuant to e ecutve order of the Presdent. Itacs supped.
The dfference between the term fu mtary benefts, as defned
n secton 212(a)(1) of the Pubc eath Servce ct, supra, and
the term mted mtary benefts, as defned n secton 212(a) (2)
of that ct, s mmatera for edera ncome ta purposes. ccord-
ngy, for such purposes, whether the actve servce of a commssoned
offcer of the Unted States Pubc eath Servce n tme of war was
or was not performed outsde the contnenta mts of the Unted
States, or n aska, s of no consequence. Nor s t matera, for
edera ncome ta purposes, that the actve servce of a commssoned
offcer of the Unted States Pubc eath Servce was or was not per-
formed whe the Unted States Pubc eath Servce was part of
the mtary forces of the Unted States pursuant to ecutve order
of the Presdent snce, under secton 216 of the Pubc eath Servce
ct, Ihe commssoned corps of the Unted States Pubc eath Serv-
ce may be decared a mtary servce ony n tme of war and for
no onger than the duraton of such war.
In vew of the anguage of secton 212(a) of the Pubc eath
Servce ct, supra, t appears that t was the ntent of Congress to
e tend to commssoned offcers, actve and retred, of the Unted
States Pubc eath Servce the same treatment for edera ncome
ta purposes as s provded for commssoned offcers of the rmy,
sub|ect to the mtatons prescrbed n secton 212(b) of the Pubc
eath Servce ct, supra.
It s hed, therefore, that compensaton receved n ta abe years
begnnng after December 31, 1942, and before the termnaton of
the present war as procamed by the Presdent, by a commssoned
offcer of the Unted States Pubc eath Servce for actve servce
performed wth the Unted States Pubc eath Servce, or whe
detaed for duty wth the rmy, Navy, or Coast Guard, s e cudbe
from gross ncome under secton 22(b) (13) ( ) of the Interna
Revenue Code n an amount not n e cess of 1,500. It s further hed
that retrement pay receved n ta abe years begnnng after Decem-
ber 31, 1941, by a retred commssoned offcer of the Unted States
Pubc eath Servce for persona n|ures or sckness resutng from
actve servce performed wth the Unted States Pubc eath Serv-
ce n tme of var, or whe detaed for duty wth the rmy, Navy, or
Coast Guard, s e cudbe from gross ncome under secton 22(b) (5)
of the Code.
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37
S 29.22(b) U3)-.
Secton 29.22(b) (13) -1: Compensaton of 1946-22-12435
members of mtary and nava forces. I. T. 3 24
( so Secton 23(e), Secton 29.23 (e)-
Secton 1 2, Secton 29.1 2-1.)
INT RN L R NU COD ND R NU CT O 191 .
Treatment for edera ncome ta purposes of compensaton
and aowances receved by a servceman for actve servce n the
mtary forces of the Unted States whch, pursuant to a partner-
shp agreement, are turned over to the partnershp of whch he s
a member.
O. D. 121 (C. . 1, 97 (1919)), O. D. 64 (C. . 3, 125 (1920)),
and . R. M. 25 (C. . 2, 104 (1920)) modfed.
dvce s requested wth respect to the edera ncome tu treat-
ment to be accorded compensaton and aowances receved by a
servceman for actve servce n the mtary forces of the Unted
States whch, pursuant to a partnershp agreement, are turned over
to a partnershp.
In the case under consderaton, the ta payer s a member of a
partnershp. Upon commencement of mtary servce, he agreed
wth hs partners that he woud turn over to the partnershp the
entre amount of hs mtary compensaton and aowances n re-
turn for the payment to hm of hs usua proportonate share of the
partnershp earnngs.
The entre amount of compensaton receved by an ndvdua dur-
ng ta abe years begnnng after December 31, 1940, and before
the termnaton of the present war as procamed by the Presdent,
for actve servce as a member beow the grade of commssoned of-
fcer (or commssoned warrant offcer) m the mtary or nava
forces of the Unted States durng such war, and so much of the
compensaton as does not e ceed 1,500 receved by an ndvdua
durng ta abe years begnnng after December 31, 1942, and before
the termnaton of the present war as procamed by the Presdent,
for actve servce as a commssoned offcer (or commssoned war-
rant offcer) n the mtary or nava forces of the Unted States
durng such war, are e cudbe from gross ncome. (See secton
22(b) (13) of the Interna Revenue Code and secton 29.22(b) (13)-1
of Reguatons 111.) Money aowances for subsstence and per dem
aowances n eu of subsstence pad to offcers of the commssoned
personne of the rmy, Navy, Marne Corps, Coast Guard, Coast
and Geodetc Survey, and the Pubc eath Servce are not sub-
|ect to edera ncome ta . (See Mm. 3413, C. . -, 29 (1920).)
Commutaton of quarters and the renta vaue of quarters occuped
by offcers of the rmy and members of the Coast Guard, Coast
and Geodetc Survey, and the Pubc eath Servce do not const-
tute ta abe ncome for edera ncome ta purposes. (See Cfford
anes v. Unted States. 60 Ct. Cs., 552, T. D. 3724, C. . I -2,
136 (1925), and I. T. 2232, C. . I -2, 144 (1925).) Sectons 1 1,
1 2(c), and 1 3(a) of the Interna Revenue Code provde n part,
respectvey, that (1) ndvduas carryng on busness n partner-
shp sha be abe for ncome ta ony n ther ndvdua capacty,
(2) n computng the net ncome of each partner, he sha ncude,
whether or not dstrbuton s made to hm, hs dstrbutve share of
the ordnary net ncome or the ordnary net oss of the partnershp,
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S 29.22(n)-.
3
and (3) the net ncome of the partnershp sha be computed n the
same manner and on the same bass as n the case of an ndvdua.
The prmary queston for determnaton n the present case s
whether the compensaton and aowances receved by the servceman
become, at any tme, a part of earnngs and profts of the partnershp.
Obvousy, a partnershp can not e st for the purpose of servng n the
armed forces, and t s cear that compensaton and aowances receved
by an ndvdua for mtary servce can not be transmuted, n the
manner here nvoved, nto earnngs and profts (as such) of a
partnershp of whch he s a member.
In the nstant case there s a coatera arrangement between the
partners as ndvduas whereby, n effect, the servceman agrees, for
the purpose of determnng dstrbutve shares of partnershp ncome
or oss to poo hs mtary compensaton and aowances wth part-
nershp ncome, wth the understandng that f the amount thus
contrbuted by hm to the poo e ceeds hs share of the pooed ncome
(consstng of hs compensaton and aowances and partnershp
earnngs) such e cess w beong to hs copartners. If, on the other
hand, hs share of the ncome pooed e ceeds hs compensaton and
aowances, such e cess w be hs dstrbutve share of the partner-
shp ncome. In other words, such coatera arrangement may
entte the servceman, n addton to hs servce compensaton and
aowances, to a dstrbutve share of partnershp ncome whch w
be ta abe to hm as a partner. On the other hand, he may be re-
qured to pay over part or a of hs compensaton and aowances to
hs copartners to compensate them for esser partnershp earnngs or
osses. In that event the amount of hs compensaton and aowances
whch the servceman s requred to pay to hs copartners under the
poong arrangement s a deductbe oss to hm under secton 23(e)
of the Code and ta abe ncome to hs copartners.
Inasmuch as the compensaton and aowances receved by the serv-
ceman for hs servces n the armed forces are not to be regarded
as partnershp ncome, as such, e must account for such compensa-
ton and aowances n hs ndvdua return to the e tent that they
are not e cudbe from gross ncome under secton 22(b) (13) of the
Code, Mn. 3413, supra, and the rue n Cfford anes v. Unted
States, supra.
O. D. 121 (C. . 1,97 (1910)), O. D. 64 (C. . 3,125 (1920)), and
. R. M. 25 (C. . 2,101 (1920)) are modfed to the e tent that they
are nconsstent herewth.
S CTION 22(n). GROSS INCOM : D INITION O
D UST D GROSS INCOM .
Secton 29.22 (n)-: d|usted gross ncome. 1946-26-124.09
L T. 3 29
INT RN L R NU COD .
Deductbty of the Indana gross ncome ta , In computng ad-
usted gross ncome for edera Income ta purposes, n the case of
an ndvdua ta payer who s engaged n a trade or busness.
I. T. 3766 (C. . 1945, 3) modfed.
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39
29.23(a)-6.
Reconsderaton has been gven to I. T. 3766 (C. . 1945, 3), re-
atng to the deductbty of the Indana gross ncome ta n comput-
ng ad|usted gross ncome, as denned n secton 22 (n) of the Interna
Revenue Code, n so far as such rung s appcabe to an ndvdua
ta payer who s engaged n a trade or busness.
Secton 22(n) (1) of the Interna Revenue Code provdes as foows:
(n) Defnton of d|usted Gross Income . s used n ths chapter the
term ad|usted gross ncome means the gross ncome mnus
(1) Trade and busness deductons. The deductons aowed by secton
23 whch are attrbutabe to a trade or busness carred on by the ta payer,
f such trade or busness does not consst of the performance of servces
by the ta payer as an empoyee
In I. T. 3766, supra, t was hed n part that where the Indana gross
ncome ta s pad by an ndvdua ta payer on account of the recept
by hm of gross ncome t s not deductbe from gross ncome n com-
putng ad|usted gross ncome under secton 22(n) of the Code.
In that rung no dstncton was made between an ndvdua ta payer
engaged n a trade or busness and one not engaged n a trade or bus-
ness, snce t was beeved that the Indana gross ncome ta , as m-
posed upon ndvduas, was not attrbutabe to an ndvdua s trade
or busness.
Upon further consderaton, t s hed that the Indana gross ncome
ta s drecty attrbutabe to a trade or busness carred on by the
ta payer wthn the meanng of secton 22(n) (1) of the Code, to the
e tent that such ta s pad or accrued by an ndvdua ta payer on
gross ncome derved from a trade or busness. ccordngy, so much
of the Indana gross ncome ta as s aocabe to the recept of gross
ncome from an ndvdua ta payer s trade or busness s an aowabe
deducton from gross ncome n computng ad|usted gross ncome for
edera ncome ta purposes.
I. T. 3766, supra, s modfed n so far as t s nconsstent wth the
foregong concuson.
S CTION 23(a). D DUCTIONS ROM GROSS
INCOM : P NS S.
Secton 29.23 (a)-1: usness e penses.
INT RN L R NU COD .
edera stamp ta es pad on transfers or conveyances of securtes
or rea estate upon saes thereof as a deaer. (See I. T. 3 06, page 41.)
Secton 29.23 (a)-6: Compensaton for persona servces.
INT RN L R NU COD .
aue of meas and odgng furnshed by a father to hs unemanc-
pated mnor chd. (See I. T. 3 12, page 29.)
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29.23(c)-. 40
Secton 29.23(a)-: penses of farmers.
INT RN L R NU COD ND R NU CTS O 191 ND 1921.
mounts e pended n deveopment of farms, orchards, and ranches.
1. T. 1610 (C. . II-, 5 (1923)) revoked. (See Mm. 6030, page 45.)
Secton 29.23 (a)-15: Nontrade or nonbusness e penses.
INT RN L R NU COD .
nnua commsson pad out of corpus of a testamentary trust to a
trustee pursuant to State aw. (See I. T. 3 30, page 47.)
S CTION 23(c). D DUCTIONS ROM GROSS
INCOM : T S G N R LLY.
Secton 29.23 (c)-: Ta es. 1946-17-12375
L T. 3 13
INT RN L R NU COD .
d|ustment of edera ncome and e cess profts ta abtes for
ta abe years endng after une 30,1945, n whch the accrua date of
the New York State franchse ta fas, necesstated by the reducton
n the rate of such ta , shoud be made by submttng amended
edera ncome and e cess profts ta returns to the coector of nter-
na revenue for the dstrct n whch the orgna returns were fed,
together wth a check for the resutng net defcency.
dvce s requested reatve to the manner n whch corporatons
whch deducted accrued New York State franchse ta at the rate of
6 per cent n ther edera ncome and e cess profts ta returns fed
for ta abe years endng after une 30, 1945, shoud effect ad|ustment
of ther edera ncome and e cess profts ta abtes for such years.
or edera ncome ta purposes, the New York State franchse ta ,
mposed on busness corporatons by secton 209, artce 9- , chapter
62 of the New York ta aw, accrues on the frst day of a corporaton s
ta abe year. (See I. T. 3697, C. . 1944, 116.) On March 12, 1946,
the rate of the ta was reduced from 6 per cent to 41 per cent by
secton 2, chapter 110, Laws of New York, 1946, effectve for years
endng after une 30, 1945. The rate of 6 per cent remans n effect
for years ended not ater than une 30, 1945. Many ta payers have
accrued the New York State franchse ta and taken t as a deducton,
for edera ncome and e cess profts ta purposes, at the rate of 6 per
cent nstead of at the rate of 4 per cent, resutng n an overaecrua.
The queston nvoved s what procedure shoud be foowed wth
respect to ad|ustments made necessary by the change n rate.
It s hed that ad|ustment of edera ncome and e cess profts ta
abtes for ta abe years endng after une 30, 1945, n whch the
accrua date of the New York State franchse ta fas, necesstated
by the reducton n the rate of such ta , shoud be made by submttng
amended edera ncome and e cess profts ta returns to the coector
of nterna revenue for the dstrct n whch the orgna returns were
fed, together wth a check for the resutng net defcency.
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41
29.23(c)-2.
Secton 29.23(c)-2: edera dutes and e cse 1946-13-12336
ta es. I. T. 3 06
( so Secton 23(a), Secton 29.23(a)- Secton 24,
Secton 29.24-2 Secton 111, Secton 29.111-1.)
INT RN L R NU COD .
ffect, for edera ncome ta purposes, of secton 23(c) (1) ( )
of the Interna Revenue Code, added by secton 111 of the Revenue
ct of 1043 and appcabe to ta abe years begnnng after De-
cember 31, 1943, n cases n Whch edera stamp ta es are pad on
ssuance, transfers, or conveyances of bonds, stocks, or rea estate.
dvce s requested as to the effect, for edera ncome ta purposes,
of secton 23(c)(1)( ) of the Interna Revenue Code, added by
secton 111 of the Revenue ct of 1943 and appcabe to ta abe years
begnnng after December 31, 1943, n cases n whch edera stamp
ta es are pad on ssuance, transfers, or conveyances of bonds, stocks,
or rea estate.
Secton 23(c)(1) of the Interna Revenue Code provdes that n
computng net ncome there sha be aowed as deductons:
(c) Ta es Ge.nebay.
(1) owance n genera. Ta es pad or accrued wthn the ta abe
year, e cept
( ) edera ncome ta es
( ) war-profts and e cess-profts ta es mposed by Tte II of the
Revenue ct of 1917, Tte III of the Revenue ct of 191 , Tte III of
the Revenue ct of 1921, secton 216 of the Natona Industra Re-
covery ct, or secton 702 of the Revenue ct of 1034, or Subchapter
of Chapter 2, or by any such provsons as amended or suppemented

(D) estate, nhertance, egacy, successon, and gft ta es
( ) ta es assessed aganst oca benefts of a knd tendng to ncrease
the vaue of the property assessed but ths paragraph sha not e cude
the aowance as a deducton of so much of such ta es as s propery
aocabe to mantenance or nterest charges ard
( ) edera mport dutes, and edera e cse and stamp ta es (not
descrbed n subparagraph ( ), ( ), (D), or ( ) ), but ths subsecton
sha not prevent such dutes and ta es from beng deducted under
subsecton (a).
It s hed that, for ta abe years begnnng after December 31,1943,
for whch years edera mport dutes and edera e cse and stamp
ta es covered by secton 23(c)(1)( ), supra, are, thereunder, no
onger specfcay deductbe as ta es, payments of edera stamp
ta es shoud be treated as foows for edera ncome ta purposes:
(1) edera stamp ta es pad, on transfers or conveyances of
securtes or rea estate upon saes thereof as a deaer (merchant)
theren may be treated as ordnary and necessary busness e penses
whch are deductbe under secton 23(a)(1)( ) of the Interna
Revenue Code. If such ta es are so treated, they may not aso be
apped as offsets aganst seng prces n determnng amounts
reazed and gans or osses under secton 111 of the Code
(2) edera stamp ta es pad on transfers or conveyances of secu-
rtes or rea estate upon saes thereof as a trader or other nondeaer
are seng costs or offsets aganst seng prces to be taken nto ac-
count ony n determnng (net) amounts reazed and gans or osses
under secton 111 of the Code on the saes
72 29 47 4
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1 29.23(0-5. 42
(3) edera stamp ta es pad by a corporaton on the ssuance of
ts bonds upon orgna fnancng, or refnancng, are e haustbe
capta e pendtures, amortzabe over the term or fe of the bonds
and
(4) edera stamp ta es pad bv a corporaton on ssuance or
transfers of stocks upon ts organzaton, or reorganzaton, are perma-
nent rather than e haustbe capta e pendtures, and no deducton
s aowabe therefor.
S CTION 23(e). D DUCTIONS ROM GROSS INCOM :
LOSS S Y INDI IDU LS.
Secton 29.23 (e)-: Losses by ndvduas.
INT RN L R NU COD .
Contrbuton of mtarv compensaton and aowances by a servce-
man to a partnershp. (See I. T. 3 24, page 37.)
S CTION 23(1). D DUCTIONS ROM GROSS
INCOM : D PR CI TION.
Secton 29.23 (1)-5: Method of computng depre- 1946-19-12400
caton aowance. I. T. 3 1S
( so Secton 41, Secton 29.41-2.)
INT RN L R NU COD ND R NU CT O 1926.
Use of the decnng baance method of computng deprecaton
L T. 2369 (C. . I-2, 63 (1927)) modfed.
Reconsderaton has been gven to I. T. 2369 (C. . I-2,63 (1927)),
whch hods (syabus) that the ureau w nether approve nor ds-
approve the use of the decnng baance method of computng depre-
caton n advance of the audt of ta payer s return.
The ureau now hods that the use of the decnng baance method
of computng deprecaton w be approved, for edera ncome ta
purposes, provded t accords wth the method of accountng reguary
empoyed n keepng the books of the ta payer and resuts n reason-
abe deprecaton aowances and proper refecton of net ncome for
the ta abe year or years nvoved.
It s hed further that the decnng baance method and other
methods of computng deprecaton are methods of accountng for a
change n the use of whch, for edera ncome ta purposes, the Com-
mssoner s consent must frst be obtaned as prescrbed n secton
29.41-2 of Reguatons 111.
I. T. 2309, supra, s hereby modfed n so far as t hods that the
ureau w nether approve nor dsapprove the use of the decnng
baance method of computng deprecaton n advance of the audt of
a ta payer s return.
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43
(S 29.23(p)-.
S CTION 23 (p). D DUCTIONS ROM GROSS INCOM :
CONTRI UTIONS O N MPLOY R TO N MPLOY-
S TRUST OR NNUITY PL N ND COMP NS TION
UND R D RR D-P YM NT PL N.
Secton 29.23(p)-: Contrbutons of an 1946-13-12337
empoyer to an empoyees trust or annuty Mm. 6021
pan and compensaton under a deferred
payment pan In genera.
Deducton of contrbutons to an empoyees trust or under em-
poyees annuty pan where rghts of empoyees to or derved from
the contrbutons are not vested at the tme the contrbutons are
made.
Offce of Commssoner of Interna Revenue.
Washngton 25, D. C, May 29,1946.
eads of ed Dvsons, Technca Staff, and Others Concerned:
1. In computng net ncome, contrbutons pad by an empoyer to
a trust formng part of a penson, proft-sharng, or stock bonus pan,
or under a pan for the purchase of retrement annutes are deduct-
be even though the rghts of empoyees to or derved from such
contrbutons are not vested or are forfetabe at the tme such contr-
butons are made, but ony f certan statutory requrements are sats-
fed. Thus, under secton 23 (p) (1) of the Interna Revenue Code, as
amended by secton 162(b) of the Revenue ct of 104 2, such nonvested
contrbutons pad by an empoyer n a ta abe year begnnng after
December 31, 1941, are aowabe as deductons ony f the trust or
pan meets the appcabe requrements of secton 165(a), and then
ony to the e tent the contrbutons are ordnary and necessary e -
penses and are compensaton for servces actuay rendered by the
empoyees, and ony wthn the mtatons provded n secton
2 (p) (1) ( ), ( ), (C), and ( ), sub|ect to the e cepton provded
n secton 162(d) (1) (C) of the.Revenue ct of 1942.
2. Under some condtons, the ack of provson for vestng the
rghts of empoyees to or derved from the contrbutons may resut
n dscrmnaton n favor of offcers, stockhoders, supervsors, or
hghy compensated empoyees or may dsquafy the contrbuton as
an ordnary and necessary e pense or as compensaton for servces
actuay rendered, and so dsquafy the contrbuton as a deducton.
Dscrmnaton n favor of empoyees of such casses may, however, be
prevented by other provsons of a pan or by the partcuar facts
and crcumstances of a case so that vestng of such rghts s not neces-
sary to meet the appcabe requrements of secton 165(a) of the
Code and, where such requrements are met, wthn certan mts (set
forth beow), the contrbutons may be consdered as ordnary and
necessary e penses and as compensaton for servces actuay rendered
and so aowabe as deductons despte ack of such vested rghts.
.3. In the case of a penson or annuty pan meetng the appcabe
requrements of secton 165(a| of the Code, the mtatons provded
n secton 23(p) (e cept the mtaton provded n secton 23(p) (1)
( ) () for certan ta abe years, deat wth under paragraph 4 of ths
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29.23(d)- .
44
mmeograph) are based on actuaray determned costs of the pan.
Ordnary where a sgnfcant proporton of the empoyees nomnay
covered by the pan are key to forfet rghts, n such determnatons
the effect of antcpated forfetures s dscounted or s mted by dsre-
gardng empoyees who are key to forfet rghts. Where the effect of
forfetures s reasonaby antcpated and mted by dscount or other-
wse, contrbutons w be consdered as compensaton for servces ac-
tuay rendered and. f the sum of such compensaton and other com-
pensaton s reasonabe for the servces actuay rendered, as ordnary
and necessary e penses, and the contrbutons w, accordngy, be
aowed as deductons under secton 23(p) (1) to the e tent of the m-
tatons theren provded based on costs determned n accordance wth
the appcabe reguatons. Thus, even though contrbutons may not
be vested n partcuar empoyees, they may nevertheess be deducted
under secton 23(p)() to the-e tent of the mtatons provded
theren based upon reasonabe estmates and assumptons as to the cost
of the benefts whch, n accordance wth the pan, w actuay be
receved by empoyees. It may be noted that, n order to compy wth
the foregong requrements, there must be a defnte pan and formua
for contrbutons or benefts, upon whch such costs may be based and
determned.
4. In the case of a penson or annuty pan meetng the appcabe
requrements of secton 165(a), the mtaton provded n secton
23(p) (1) ( ) (), appcabe to a ta abe year begnnng n 1942 and
to the frst ta abe year endng wthn or wth the frst year of the
pan or trust, s based on the compensaton of empoyees under the
trust or for whom retrement annutes are purchased. Contrbutons
n a ta abe year to whch such mtaton s appcabe w be consd-
ered as compensaton for servces actuay rendered and, f the sum
of such compensaton and other compensaton s reasonabe for the
servces actuay rendered, as ordnary and necessary e penses, and
the contrbutons w, accordngy, be aowed as deductons to the
e tent of such mtaton based on the compensaton otherwse pad
or accrued durng such year to the empoyees for whom benefca
nterests are provded under the trust or pan n such year.
5. In the case of a proft-sharng or stock bonus trust meetng the
appcabe requrements of secton 105(a), the mtatons provded n
secton 23(p) (1) are based on the compensaton of empoyees or bene-
fcares under the trust or pan. Contrbutons n a ta abe year to
whch such mtatons are appcabe, f made and aocated n accord-
ance wth the defnte formuas provded n the pan, w be consdered
as compensaton for servces actuay rendered and, f the sum of such
compensaton and other compensaton s reasonabe for the servces
actuay rendered, as ordnary and necessary e penses, and the contr-
butons w, accordngy, be aowed as deductons to the e tent of
such mtatons based on the compensaton otherwse pad or accrued
durng such year to empoyees for whom benefts or credts are ao-
cated under the trust from such contrbutons.
6. The e tent to whch contrbutons pad bofore September 1,
1942, to a trust or toward the purchase of retrement annutes for
empoyees whose rghts to or derved from such contrbutons are not
vested or are forfetabe at the tme such contrbutons are made may
be aowabe as deductons under secton 23(a) or secton 23(p) of
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45
( 29.24r-2.
the Code, or n accordance wth secton 162(d) (1) (C) of the Revenue
.ct of 1942, w depend upon a the provsons and condtons of the
pan or arrangement and a other reevant facts and crcumstances.
7. Correspondence and nqures from the foowng regardng ths
mmeograph shoud refer to ts number and to the symbos ndcated:
Coectors of nterna revenue, C: Co nterna revenue agents n
charge, IT: PS heads of fed dvsons of the Technca Staff,
TS: RM.
oseph D. Nunan, r.,
Commssoner.
S CTION 23(aa). D DUCTIONS ROM GROSS INCOM :
OPTION L ST ND RD D DUCTION OR INDI IDU LS.
Secton 29.23 (aa)-: Standard deducton.
INT RN L R NU COD .
ffect of fng orm W-2 by an ndvdua entted to and camng
the benefts of secton 251 of the Code. (See I. T. 3 16, page 93.)
S CTION 24. IT MS NOT D DUCTI L .
Secton 29.24-1: Persona and famy e penses.
INT RN L R NU COD .
aue of meas and odgng furnshed bv a father to hs unemanc-
pated mnor chd. (See 1.1. 3 12, page 29.)
Secton 29.24-2: Capta e pendtures.
INT RN L R NU COD .
edera stamp ta es pad by a corporaton on ssuance of ts bonds
and on ssuance or transfers of ts stocks. (See I. T. 3 06, page 41.)
Secton 29.24-2: Capta e pendtures. 1946-14-12342
( so Secton 23(a), Secton 29.23(a)-.) Mm. 6030
. mounts e pended n deveopment of farms, orchards, and ranches.
Washngton, I). C., une 20,1946.
eads of ed Dvsons of the Technca Staff, and Otfers Con-
cerned:
Secton 29.23(a)- of Reguatons 111 provdes n part:
mounts e pended In the deveopment of farms, orchards, and ranches pror
to the tme when the productve state s reached may be regarded as Investments
of capta.
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29.24-2.
46
It has come to the attenton of the ureau that many ta payers,
accountants, and attorneys have construed ths provson of the regu-
atons as permttng the ta payer to captaze or to charge to e -
pense, at hs opton, amounts e pended n the deveopment of farms,
orchards, and ranches pror to the tme the productve state s
reached, regardess of whether the tems represent nvestments of
capta or ordnary and necessary busness e penses.
The contenton that capta tems may be e pensed, at the opton
of the ta payer, s based upon an nterpretaton of artce 110 of
Reguatons 62 (dentca wth secton 29.23(a)- of Reguatons
111 n so far as the above-quoted provson s concerned) whch was
pubshed as I. T. 1610 (C. . II-, 5 (1923)), to the effect that the
ta payer has the opton of chargng the e pendtures n queston to
e pense or of captazng them.
Secton 24(a)(2) of the Interna Revenue Code provdes that no
deducton sha be aowed n any case n respect of ny amount pad
out for new budngs or for permanent mprovements or betterments
made to ncrease the vaue of any property or estate.
It s the poston of the ureau that a correct nterpretaton of sec-
ton 29.23(a)- of Reguatons 111 gves the ta payer the opton to
captaze, pror to the tme when the productve state s reached, e -
pendtures ncurred durng the perod of deveopment whch mght
otherwse be deductbe as current e penses, but t does not permt
capta tems to be treated as ordnary and necessary busness
e penses.
Typca tems whch are requred to be captazed, and to whch the
opton does not appy, are such preparatory e pendtures as the cost
of cearng brush, trees, and stumps eveng and condtonng and
the cost of trees and the pantng of trees drng and equppng
wes budng rrgaton canas and dtches ayng rrgaton ppes
nstang dran te or dtches to prevent eroson straghtenng creek
beds to correct eroson constructng earthen, masonry, or concrete
tanks, reservors, dams, or dtches Dudng roads and the cost of
physca equpment havng a fe n e cess of one year.
pendtures ncurred durng the deveopment perod whch repre-
sent ordnary and necessary e pense tems as an ncdent of current
operatons, such as the upkeep of a grove or orchard, ta es, water for
rrgaton purposes, and cutvatng and sprayng of trees may, under
the provsons of secton 29.23(a)- of Reguatons 111, be ether
captazed or deducted at the eecton of the ta payer.
Where, however, wth respect to ta abe years begnnng pror to
uy 1, 1946, ta payers have, n ther returns, treated the above-men-
toned preparatory e pendtures as ordnary and necessary e penses,
such treatment w not be dsturbed, and the rue stated n ths mmeo-
graph wth respect to preparatory e pendtures w be apped ony
wth respect to such costs ncurred for ta abe years begnnng on or
after uy 1,1946. or purposes of ths paragraph, capta tems such
as farm machnery, equpment, budngs, automobes, and work,
breedng, or dary anmas w not be aowed as ordnary and neces-
sary e pense deductons, regardess of the treatment thereof by ta -
payers n ther returns.
I. T. 1610 (C. . II-, 5 (1923)) s revoked.
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47
29.24- .
Correspondence from the foowng regardng ths mmeograph
shoud refer to the number hereof and to the symbos ndcated: Co-
ectors of nterna revenue, C: Co nterna revenue agents n
charge, IT: IM heads of fed dvsons of the Technca Staff,
TS: RM.
Wm. T. Sherwood,
ctng Commssoner.
Secton 29.24- : Lfe or termnabe nterests. 1916-26-12460
( so Secton 23(a), Secton 29.23(a)-15.) I. T. 3 30
INT RN L R NU COD .
The amount of the annua commsson pad out of the corpus of a
testamentary trust to a trustee pursuant to State aw s deductbe from
the gross ncome of the trust n determnng the amount of net ncome
of the trust. owever, n determnng the amount of ncome whch s
ta abe to the fe benefcary of a testamentary trust, the provsons of
secton 24(d) of the Interna Revenue Code w be apped, and where
such a benefcary s entted, under the State aw appcabe to the trust
or under the provsons of the trust nstrument, to the Income of the trust
wthout reducton for the amount of the commssons chargeabe aganst
corpus, the fu amount of ncome dstrbuted or dstrbutabe s ta abe
to hm.
dvce s requested wth respect to the treatment for edera n-
come ta purposes of annua commssons pad out of the corpus of a
testamentary trust to a trustee pursuant to State aw. The prmary
queston to be determned s whether the ncome benefcary of a
testamentary trust s ta abe upon the entre amount of ncome ac-
tuay receved by hm from the trust or whether he may deduct there-
from trustee s commssons chargeabe aganst trust corpus.
Secton 24(d) of the Interna Revenue Code provdes n part as
foows:
(d) o dkrs of Lfe or Termnabe Interest. mounts pad under the aws of
any State as ncome to the hoder of a fe or termnabe Interest
acqured by gft, bequest, or nhertance sha not be reduced or dmnshed
by any deducton aowed by ths cnpter (e cept the deductons pro-
vded for n subsectons (1) and (m) of secton 23) for the purpose of computng
the net ncome of an estate or trust but not aowed under the aws of such
State for the purpose of computng the ncome to whch such hoder
s entted.
Secton 29.24- of Reguatons 111 provdes n part as foows:
No deductons sha be aowed In the case of a fe or termnabe nterest
acqured by gft, bequest, or Inhertance, f the estate or trust s entted to a
deducton under Chapter 1 but there s no reducton of the ncome of the fe
or termnabe nterest. or e ampe, an estate or a trust n a certan State
ses securtes at a oss f, under the aws of that State, the benefcary suffers
no actua oss, then even though the estate or trust s permtted to deduct such
oss n makng ts return, the benefcary whose ncome has not been dmnshed
thereby s not entted to a deducton on account of such oss, but must ncude n
hs return the fu amount dstrbuted or dstrbutabe, (See secton 162.)

The ncome dstrbutabe to the benefcares of a trust s deter-
mned by the anguage of the nstrument creatng the trust and the
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29.41-2.
4
appcabe State aw controng the admnstraton of the trust. (See
reuer, dmnstrator, v. Ueverng, 291 U. S., 35, Ct. D. 7 2, C. .
III-1, 242 (1934) Commssoner v. ohn . Lews, r., ct u ., 141
ed. (2d). 221, affrmng 1 T. C, 449 rthur Letts, r., v. Comms-
soner, 30 . T. ., 00, acquescence, C. . II1-2.11 (1934). affrmed.
4 ed. (2d), 760 ames II. Proctor et ah. ecutors, v. Whte, 26
ed. Supp., 161 ce C. atze v. Mtche, 3 ed. (2d), 42 , T. D.
366 , C. . I -1,191 (1925), certorar dened, 26 U. S.. 690.) Thus
the ncome dstrbutabe to the benefcares of a trust s not deter-
mned by the edera statute but by the trust nstrument and the
appcabe State aw. Therefore, the dstrbutabe ncome w not
necessary equa the statutory net ncome of the trust before the de-
ducton authorzed by secton 162(b) of the Interna Revenue Code.
The proper appcaton of secton 24(d) of the Interna Revenue
Code, supra, to the queston rased n the nstant nqury s ustrated
n I. T. 3601 (C. . 1943, 412), the syabus of whch reads as foows:
In the case of a trust the ncome of whch s dstrbutabe to the benefcares
In whoe or n part, where the trustee eects to amortze bond premum by de-
ductng the amount thereof n the return fed for the trust on orm 1041, the
dstrbutabe ncome of the trust determned n accordance wth the provsons
of secton (52(b) of the Interna Revenue Code s the fu amount otherwse ds-
trbutabe wthout reducton for amortzaton of bond premum n a cases
where, under the aw appcabe to the trust or under the provsons of the
trust nstrument, the ncome dstrbutabe to the benefcares sha not be re-
duced by such deducton for amortzaton.
It s hed that the amount of the annua commsson pad out of the
corpus of a testamentary trust to a trustee pursuant to State aw s
deductbe from the gross ncome of the trust n determnng the amount
of net ncome of the trust. (See secton 29.23(a)-15 of Reguatons
111, as amended by T. D. 5513, C. . 1946-1, 61.) owever, n deter-
mnng the amount of ncome whch s ta abe to the fe benefcary
of a testamentary trust, the provsons of secton 24(d) of the Code
w be apped, and where such a benefcary s entted, under the
State aw appcabe to the trust or under the provsons of the trust
nstrument, to the ncome of the trust wthout reducton for the amount
of the commssons chargeabe aganst corpus, the fu amount of n-
come dstrbuted or dstrbutabe s ta abe to hm.
P RT I . CCOUNTING P RIODS ND M T ODS O CCOUNTING.
S CTION 41. G N R L RUL .
Skcton 29.41-2: ases of computaton and changes n
accountng methods.
INT RN L R NU COD .
Change n method of computng deprecaton. (See I. T. 3S1S,
page 42.)
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29.51-1.
P RT -R TURN ND P YM NT O T .
S CTION 51. INDI IDU L R TURNS.
Secton 29.51-1: Indvdua returns. 1946-20-12-110
G. C. M. 2500
INT RN L R NU COD ND R NU CTS OP 1926, 192 , 1932, 19 4, 1936.
ND 1U3 .
That part of the Income receved durng the perod of admns-
traton by the estate of a deceased husband, who ded whe dom-
ced n Caforna, whch s derved from the survvng wfe s share
of communty property acqured by the communty on or after uy
29, 1927, the effectve date of secton 161(a) of the Cv Code of
Caforna, s ta abe to the wfe for edern Income ta purposes.
G. C. M. 23 11 (C. . 1943, 1026) and G. C. M. 24292 (C. . 1944,
162) modfed.
n opnon s requested wth respect to the treatment to be accorded
ncome derved from Caforna communty property acqured by the
communty on or after uy 29, 1927 (the effectve date of secton
161 (a) of the Cv Code of Caforna), and receved durng the perod
of admnstraton of the deceased husband s estate, n vew of the-
decson of the Unted States Crcut Court of ppeas for the Nnth
Crcut n /Stea Wheeer shop v. Commssoner (152 ed. (2d),
3 9).
In the case under consderaton, the decedent ded on pr 10,1942,
whe domced n the State of Caforna. of hs property was
hed n communty wth hs wfe, who survved hm. Part of the-
property was acqured pror to uy 29,1927, and part of the property
was acqured on and after that date. The ncome receved by the e -
ecutor of the husband s estate has been segregated to refect that
derved from property acqured pror to uy 29, 1927, and that
derved from property acqured on and after that date. One-haf of
the atter ncome has not been ncuded n the gross ncome of the
estate, but t has been ncuded n the gross ncome of the wdow.
In G. C M. 23 11 (C. . 1943,1026) and G. C. M. 24292 (C. . 1944,
162) t was hed, nter aa, that any ncome receved by the e ecutor or
admnstrator durng the perod of admnstraton of the deceased hus-
band s estate, ncudng the ncome from the wfe s share of the commu-
nty property and any gan derved from the sae of any part or share
of the communty property, shoud be ta ed to the husband s estate. In
reachng that concuson, reance was paced upon the decsons n
C ommshoner v. Rose . Larson (131 ed. (2d), 5) and ce .
Rosenberg v. Commssoner (115 ed. (2d), 910), both of whch hod
that a of the communty ncome receved durng the perod of ad-
mnstraton of the husband s estate s ta abe to the estate. The
Larson case nvoved the communty property aws of the State of
Washngton and the Rosenberg case nvoved Caforna communty
property acqured pror to uy 29, 1927. The foowng statement
was made n G. C. M. 23 11, supra, regardng the Rosenberg case:
Snce the communty property nvoved n the Rosenberg case, supra, was
ncqured pror to uy 29, 1927, the court coud have decded, for edera ncome
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29.51-1.
50
ta purposes, that the hnsband, and consequenty hs estate, was the soe owner
thereof and, therefore, that a the Income therefrom was ta abe to the estate.
The court dd not foow ths reasonng but hed that the ncome receved by the
estate of the deceased husband was ta abe soey to the estate because the wfe s
nterest n the communty property was sub|ect to admnstraton under secton
202 of the Caforna Probate Code. The anguage of the court, supra, s broad
enough to cover communty property acqured on and after uy 29, 1927, n whch
the wfe as a present, e stng, and equa nterest, nasmuch as such property
aso s sub|ect to admnstraton under secton 202 of Caforna Probate Code.
One of the questons n Stea Wheeer shop v. Commssoner,
supra, s the treatment to be accorded ncome receved from com-
munty property acqured after uy 29, 1927, durng admnstraton
of the deceased husband s estate. The decedent s wdow consdered
that one haf of the ncome was ta abe to her and ncuded that haf
n her gross ncome for edera ncome ta purposes, but The Ta
Court of the Unted States decded (4 T. C, 5 ) that such ncome
was ta abe to the estate. In reversng The Ta Court, the Unted
States Crcut Court of ppeas for the Nnth Crcut stated that the
ta payer, beng the owner of a one-haf nterest n the communty
property, was the owner of one-haf of the ncome therefrom. In ts
opnon, the crcut court stated as foows:
The Ta Court appears to have assumed that, upon decedent s death, petton-
er s haf of the communty property ceased to be hers and became a part of
decedent s estate. The assumpton s ncorrect. Pettoner s haf, ke dece-
dent s haf, was sub|ect to admnstraton, but, unke hs haf, her haf never
became a part of hs estate.
In support of The Ta Court s decson, respondent ctes Rosenberg v. Com-
mssoner (9 Cr., 115 ed. (2d), 910), Commssoner v. Larson (9 Cr., 131 ed.
(2d), 5), and arbour v. Commssoner (5 Cr., 9 ed. (2d), 474 Ct. D. 12 7,
C. . 1937-2, 279 ). These cases have no reevancy here, for the foowng
.reasons:
The Rosenberg case nvoved communty property acqured n Caforna
before uy 29, 1927 the date on whch secton 161a of the Caforna Cv
Code became effectve. The nstant case nvoves communty property acqured
n Caforna after uy 29, 1927.
The Larson case nvoved communty property n the State of Washngton.
Ths court hed that, by the aw of that State, the ownershp of ncome
derved from such property, ncudng that derved from the wfe s haf, after the
husband s death and durng admnstraton of hs estate, s n the e ecutor
or admnstrator. There s no such aw wth respect to communty property
acqured n Caforna after uy 29, 1927.
The arbour case nvoved communty property n the State of Te as. The
Crcut Court of ppeas for the fth Crcut hed that, by the aw of Te as,
communty property upon the husband s death, s an entrety regarded
as beongng to hs estate. There s no such aw wth respect to communty
property acqured n Caforna after uy 29, 1927.
In vew of the decson n Stea Wheeer shop v. Commssoner,
supra, t s the opnon of ths offce that that part of the ncome
receved durng the perod of admnstraton by the estate of a
deceased husband, who ded whe domced n Caforna, whch s
derved from the survvng wfe s share of communty property ac-
qured by the communty on or after uy 29, 1927, the effectve date
of secton 161 (a) of the Cv Code of Caforna, s ta abe to the wfe
G. C. M. 23 11, supra, and G. C. M. 24292, supra, are modfed to
accord wth the above-stated concuson.
. P. Wenche,
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51
29.51-1.
Secton 29.51-1: Indvdua returns. 1946-23-12441 .
I. T. 3 25 /
INT RN L R NU COD . /
Under the aw of the State of Coorado, the aonveyance by a hus-
band to hs wfe by vad gft of a |ont nterest n rea or persona
property w, for edera ncome ta purposes, effectvey estabsh
a |ont tenancy n the property, and ncome from such property, as
we as gans or osses from the sae thereof, may be dvded and re-
ported by the spouses In equa amounts n separate edera ncome
ta returns.
dvce s requested as to the treatment for edera ncome ta pur-
poses of ncome and gan (or oss) derved from property hed by a
husband and wfe n |ont tenancy n the State of Coorado under the
crcumstances stated beow.
husband purchased certan shares of stock n 1942 for whch he
pad 4,000 out of hs own capta. t the tme of purchase, the stock
was paced n |ont tenancy wth the wfe. In 1945 a dvdend of
400 was pad on the stock whch was ater sod for 12,000. The
queston presented s whether the dvdend and the proft on the sae
may be dvded equay and reported by the husband and wfe n sep-
arate edera ncome ta returns by reason of the fact that the stock
was hed n |ont tenancy. dvce s aso requested as to the treat-
ment of the ncome and proft n such a case where the property con-
ssts of mproved rea estate.
Secton 1, chapter 10 , of the 1935 Coorado Statutes nnotated
provdes as foows:
The property rea and persona, whch any woman In ths State may own at
the tme of her marrage, and the rents, ssues, profts and proceeds thereof, and
any rea, persona or m ed property whch sha come to her by descent, devse
or bequest, or the gft of any person e cept her husband, ncudng presents or
gfts from her husband, as |ewery, sver, tabeware, watches, money and wearng
appare, sha reman her soe and separate property, notwthstandng her mar-
rage, and not be sub|ect to the dsposa of her husband, or abe for hs debts.
Itacs supped.
It s evdent from the above-quoted secton of the Coorado statutes
that the common aw rue as to a wfe s nabty to own property or
to contro the ncome therefrom has been aboshed n the State of Co-
orado. wfe s now abe to own property n that State ether sever-
ay or |onty. (See Whyman v. ohnston, 62 Coo., 461,163 Pac, 76.)
There appears to be ampe authorty that the Coorado courts w
recognze a vad gft of propertv between husband and wfe. (See
otkn v. Pye, 91 Coo., 221. 14 Pac. (2d), 1 7: Thomas v. Mackey,
3 Coo., 390: Me drum v. Medrum. 15 Coo., 47 , 24 Pac. 10 3 oster
v. errer, 39 Coo., 39 , 9 Pac, 7 7 Wech v. rown, 46 Coo., 129,
103 Pac, 296 and Thomas v. Thomas, 70 Coo., 29, 197 Pac, 243.)
The Coorado aw aso appears to recognze that a |ont tenancy may
e st between husband and wfe both as to rea and persona property,
provded the nstrument creatng the |ont tenancy compes wth the
statutory requrements. (See state of watfcow k, 94 Coo., 222, 29
Pac. (2d), 639, and senhardt v. Lowe, 105 Coo., 417. 9 Pac. (2d),
1001.)
ccordngy, t s hed that under the aw of the State of Coorado
the conveyance by a husband to hs wfe by vad gft of a |ont nter-
est n rea or persona property w, for edera ncome ta purposes,
effectvey estabsh a |ont tenancy n the property, and ncome from
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29.51-55.
52
such property, as we as gans or osses from the sae thereof, may be
dvded and reported by the spouses n equa amounts n separate
edera ncome ta returns.
Secton 29.51-2: orm of return.
INT RN L R NU COD .
ffect of fng orm W-2 by an ndvdua entted to and camng
the benefts of secton 251 of the Code. (See I. T. 3 16, page 93.)
S CTION 55. PU LICITY O R TURNS.
1946-16-12370
T. D. 5525
TITL 26 INT RN L R NU . CII r-T R I, SU C PT R . P RT 45 ,
SU P RT . INSP CTION Y CONGR SSION L COMMITT .
Inspecton of ncome, e cess-profts, decared vaue e cess-profts,
and capta stock ta returns by the Speca Commttee to Investgate
the Operaton of the Natona-defense Program.
Washngton 25, D. C.
To Coector of Interna Revenue and Others Concerned:
Pursuant to the provsons of sectons 55(a), 50 , 603, 729(a), and
1204 of the Interna Revenue Code, ncome ta , capta stock and de-
cared vaue e cess-profts ta returns for the years 1939 to 1945, ncu-
sve, made under the Interna Revenue Code, and e cess-profts ta
returns for the years 1940 to 1945, ncusve, sha be open to nspecton
by the Speca Commttee estabshed pursuant to Senate Resouton 71,
Seventy-seventh Congress, to nvestgate the operaton of the natona-
defense program, or by any duy authorzed subcommttee thereof, for
the purpose of carryng out the provsons of the sad Senate Resou-
ton 71, Seventy-seventh Congress, as contnued by varous Senate
resoutons.
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 and any offcer or empoyee of
the Treasury Department sha furnsh such commttee or subcom-
mttee wth any data reatng to or contaned n any such return, or
sha make such return avaabe for nspecton by the commttee or
subcommttee or by such e amners or agents as the commttee or sub-
commt tee may desgnate or appont, n the offce of the Commssoner
of Interna Revenue. ny nformaton thus obtaned by the com-
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53
29.55(b)- .
mttee or subcommttee thereof sha be hefd confdenta provded,
however, that any porton or portons thereof reevant or pertnent to
the purpose of the nvestgaton may be submtted by the commttee
to the Unted States Senate.
ohn W. Snyder,
Secretary of the Treasury.
pproved uy 29. 1946.
arry S. Truman,
The Whte ouse.
( ed wth the Dvson of the edera Regster ugust 2, 1946, 11.44 a. m.)
CUTI ORD R 9764 INSP CTION O INCOM , C SS-PRO ITS, D -
CL R D LU C SS-PRO ITS, ND C PIT L STOC T R TURNS Y
T SP CI L COMMITT ST LIS D PURSU NT TO S N T R SOLU-
TION 71, S NTY-S NT CONGR SS, IRST S SSION, TO IN STIG T
T OP R TION O T N TION L D NS PROGR M.
y vrtue of the authorty vested n me by sectons 55(a), 50 . 603,
1204, and 729(a) of the Interna Revenue Code (53 Stat,, 1, 29, 111,
171 54 Stat., 974,9 9), t s hereby ordered as foows:
Income, e cess-profts, decared vaue e cess-profts, and capta
stock ta returns made under the Interna Revenue Code for the years
1939 to 1945, ncusve, sha be open to nspecton by the Speca Com-
mttee estabshed pursuant to Senate Resouton 71, Seventy-seventh
Congress, agreed to March 1, 1941, to nvestgate the operaton of the
natona-defense program, or by any duy authorzed subcommttee
thereof, for the purpose of carryng out the provsons of the sad
Senate Resouton 71, Seventy-seventh Congress, as contnued by var-
ous Senate resoutons, ncudng Senate Resouton 55, Seventy-nnth
Congress, and sub|ect to the condtons stated n the Treasury Decson
reatng to the nspecton of such returns by that commttee, approved
by me ths date.
Ths order sha be pubshed n the edera Regster.
arry S. Truman.
The Whte ouse,
uy 29,1946.
( ed wth the Dvson of the edera Regster uy 30, 194G, 11.24 a. m.)
Secton 29.55(b)-: Inspecton of returns. 1946-24-12445
I. T. 3 26
INT RN L R NU COD .
The Wthbo dng Statement ( orm W-2), reatng to wages pad
and ncome a wthhed, s an ncome return wthn the meanng of
secton 55(f) (1) of the Interna Revenue Code, and that secton of
the Code woud appy f a copy of the statement were to be furnshed
to any person other than the ndvdua empoyee concerned.
dvce s requested whether copes of the Wthhodng Statement
( orm W-2), reatng to wages pad and ncome ta wthhed, may
propery be furnshed by an empoyer to a muncpa agency.
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29.111-1.
54
Secton 55(f) (1) of the Interna Revenue Code provdes n part that
t sha be unawfu for any person to prnt or pubsh n any manner
whatever not provded by aw any ncome return, or any part thereof
or source of ncome, profts, osses, ot e pendtures appearng n any
ncome return. Secton 29.55(b)- of Reguatons 111 provdes that
any propery authorzed offca, body, or commsson, awfuy charged
wth the admnstraton of any State ta aw, or propery desgnated
representatves of such offca, body, or commsson, may, n the ds-
creton of the Commssoner, nspect ncome returns for the purpose of
such admnstraton. Secton 29.55(b)- of Reguatons 111 aso
provdes that for the purposes of that secton the word returns
sha ncude nformaton returns, schedues, sts, and other wrtten
statements fed wth the Commssoner desgned to be suppementa
to or to become a part of ncome returns.
The Wthhodng Statement ( orm W-2) s furnshed by empoyers
to empoyees n accordance wth secton 1625(a) of the Interna
Revenue Code. Secton 1625(b) of the Code provdes n part that a
dupcate of such statement f made and fed n accordance wth
reguatons prescrbed by the Commssoner, wth the approva of
the Secretary, sha consttute the return requred to be made n
respect of empoyees wages under secton 147 of the Code, whch
reates to returns of nformaton as to payments of 500 or more.
It s hed, therefore, that the Wthhodng Statement ( orm W-2)
s ah ncome return wthn the meanng of secton 55(f) (1) of the
Code, and that secton of the Code woud appy f a copy of the
statement were to be furnshed to any person other than the ndvdua
empoyee concerned. ccordngy, copes of the Wthhodng State-
ment ( orm W-2) may not propery be furnshed by an empoyer to a
muncpa agency.
ny person who s entted, under secton 55 of the Code and the
reguatons ssued thereunder, to nformaton ncuded n a Wth-
hodng Statement ( orm W-2) may procure t by proper appcaton
to the ureau of Interna Revenue. (Cf. I. T. 3677, C. . 1944. 174,
reatve to the mpoyee s Wthhodng empton Certfcate ( orm
W-4).)
SU C PT R C SUPPL M NT L PRO ISIONS.
SUPPL M NT . COMPUT TION O N T INCOM .
S CTION 111. D T RMIN TION O MOUNT O ,
ND R COGNITION O , G IN OR LOSS.
Secton 29.111-1: Computaton of gan or oss.
INT RN L R NU COD .
edera stamp ta es pad on transfers or conveyances of securtes
or rea estate upon saes thereof as a trader or other nondeaer. (See
I. T. 3 06, page 41.)
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55
I 29.112(b)(1)- .
S CTION 112(b). R COGNITION O G IN OR LOSS:
C NG S SOL LY IN IND.
Secton 29.112 b) (1)-1: Property hed for 1946-16-12363
productve use n trade or busness or for I. T. 3 10
nvestment.
( so Secton 117, Secton 29.117-1.)
INT RN L R NU COD .
The converson of Unted States currency nto Me can pesos by
a ctzen of the Unted States traveng n Me co and the recon-
verson of the Me can pesos nto Unted States currency do not
consttute an e change of property hed for productve use In trade
or busness or for nvestment for property of a ke knd to be hed
for productve use n trade or busness or for nvestment, under
secton 112(b) (1) of the Interna Revenue Code. The gan or oss
reazed wth respect to such a transacton by a ta payer who s not
a deaer n foregn currency consttutes capta gan or oss to be
taken nto account to the e tent prescrbed n secton 117(b) of
the Code n computng net capta gan, net capta oss, and net
ncome.
dvce s requested whether the converson of Unted States cur-
rency nto Me can pesos by a ctzen of the Unted States traveng
n Me co and the reconverson of the Me can pesos nto Unted
States currency may be treated as an e change of property hed for
productve use n trade or busness or for nvestment for property
of a ke knd to be hed for productve use n trade or busness or
for nvestment, under secton 112(b) (1) of the Interna Revenue Code.
If not, advce s requested whether the gan or oss reazed on such
a transacton by a ta payer who s not a deaer n foregn currency
consttutes capta gan or oss to be taken nto account to the e tent
prescrbed n secton 117(b) of the Interna Revenue Code n com-
putng net capta gan, net capta oss, and net ncome.
In the case under consderaton, the ta payer, a ctzen of the
Unted States, traveed nto Me co. Whe there he deposted Unted
States currency n a Me can bank, requestng that the bank purchase
Me can pesos and mantan an account n pesos. fter severa
months, durng whch tme there were no transactons n the account,
the ta payer requested the bank to reconvert the Me can pesos nto
Unted States currency and send t to hm. The bank comped wth
ths request and cosed the account. The vaue of the Me can pesos
measured n terms of the Unted States doar dffered at the tme
the account was cosed from the vaue when the account was opened.
The ta payer had no other transactons n foregn currency.
Secton 112(b) (1) of the Interna Revenue Code provdes as
foows:
(b) changes Soey In nd.
(1) Property hed for productve use or nvestment. No gan or oss
sha be rcognzed f property hed for productve use n trade or busness
or for nvestment (not ncudng stock n trade or other property hed pr-
mary for sae, nor stocks, bonds, notes, choses n acton, certfcates of
trust or benefca nterests, or other securtes or evdences of ndebtedness
or nterest) s e changed soey for property of a ke knd to be hed ether
for productve use n trade or busness or for nvestment.
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29.112(b)(1)- .
56
It s hed that the converson of Unted States currency nto Me can
pesos by a ctzen of the Unted States traveng n Me co and the
reconverson of the Me can pesos nto Unted States currency do
not consttute an e change of property hed for productve use n
trade or busness or for nvestment for property of a ke knd to be
hed for productve use n trade or busness or for nvestment, under
secton 112(b) (1) of the Code, supra.
Secton 117 (a) and (b) of the Interna Revenue Code provdes n
part as foows:
(a) Defntons. s used n ths chapter
(1) Capta assets. The term capta assets means property hed
by the ta payer cwhether or not connected wth hs trade or busness),
but docs not ncude sock n trade of the ta payer or other 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, or property hed by the ta payer
prmary for sae to customers n the ordnary course of hs trade or bus-
ness, or property, used n the trade or busness, of a character whch s
sub|ect to the aowance for deprecaton provded n secton 23(1), or an
obgaton of the Unted States or any of ts possessons, or of a State
or Terrtory, or any potca subdvson thereof, or of the Dstrct of
Coumba, ssued on or after March 1, 1941, on a dscount bass and payabe
wthout nterest at a f ed maturty date not e ceedng one year from the
date of ssue, or rea property used n the trade or busness of the ta payer

(b) Percentage Taken Into rcouNT. In the case of n ta payer, other
than a corporaton, ony the foowng percentages of the gan or oss recognzed
upon the sae or e change of a capta asset sha be taken nto account n
computng net capta gan, net capta oss, and net ncome:
100 per centum f the capta asset has been hed for not more than 6
months
50 per centum f the capta asset has been hed for more than 6 months.
Transactons n foregn e change are generay consdered as n-
vovng the purchase and sae of foregn currency, ether n the con-
duct of a trade or busness or as a specuaton or nvestment. (See
Lous D. eaumont v. Commssoner, 25 . T. ., 474, acquescence.
C. . I-1, 1 (1932) P. Cannzzaro Co. v. Commssoner, 19
. T. ., 3 0 ames . Wheatey v. Commssoner, . T. ., 1246,
acquescence, C. . TI-1, 34 (192 ) The oyce- oebe Co. v. Com-
mssoner, ( . T. ., 403, acquescence, C. . I-2, 4 (1927) Theo-
dore Tedemann Sons, Inc., 1 . T. ., 1077.)
The term capta assets ncudes a casses of property not spe-
cfcay e cuded by the defnton of that term n secton 17(a) (1)
of the Code, supra. (See secton 29.117-1 of Reguatons 111.) There
s no provson n the Code whch precudes foregn currency, as such,
from beng cassfed as a capta asset. Under the facts n ths case,
t fas wthn such cassfcaton.
In vew of the foregong, t s hed that the gan or oss reazed
n the transacton under consderaton consttutes capta gan or
oss to be taken nto account to the e tent prescrbed n secton 117(b)
of the Code n computng net capta gan, net capta oss, and net
ncome.
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57
29.112(0-1.
S CTION 112(f). R COGNITION O G IN OR LOSS:
IN OLUNT RY CON RSIONS.
Secton 29.112(f )-: Renvestment of proceeds 1946-25-12452
of nvountary converson. I. T. 3 27
INT RN L R NU COD .
Where a ta payer, whose power pant was requstoned by the
War Shppng dmnstraton under crcumstances amountng to
an nvountary converson, fnances the constructon of a new pant
to repace the requstoned factes by the use of borrowed funds,
or by the use of ts own funds, n antcpaton of the award to be
receved from the War Shppng dmnstraton, the repayment of
such borrowed funds, or the rembursement of Its own funds, from
the proceeds of the Invountary converson w not meet the requre-
ments of secton 112(f) of the Interna Revenue Code, reatng to
the nonrecognton of gan resutng from Invountary conversons.
dvce s requested whether a ta payer may ava tsef of the
provsons of secton 112(f) of the Interna Revenue Code, reatng
to the nonrecognton of gan resutng from nvountary conversons,
under the crcumstances herenafter set forth.
The ta payer s engaged prncpay n furnshng eectrcty to
customers n the State of R, and t was utzng for the purpose of
generatng eectrcty a power pant whch t had acqured n 1931.
The War Shppng dmnstraton requstoned the power pant n
1945 under crcumstances amountng to an nvountary converson
wthn the meanng of secton 112(f) of the Code. The generatng
capacty of ths pant represented appro matey one-s th of the
ta payer s tota generatng capacty, and n order to nsure contnuty
of servce, a temporary connecton was made wth another power
company system for a term of two years or unt the ta payer coud
bud a pant to repace the requstoned factes. Later n 1945,
three undeveoped hydroeectrc stes were acqured wth the ntenton
of repacng the capacty of the power pant by the deveopment of
one or more of such stes. The amount of the award to be pad by the
War Shppng dmnstraton for the power pant whch was requs-
toned has not yet been determned.
The precse queston presented s: In the event that constructon to
repace the power pant s started and competed n whoe or n part
pror to recept of the proceeds from the requstonng, and such con-
structon s fnanced n whoe or n part from bank oans or other
temporary borrowng, or from the ta payer s own funds, w the
payment of such oans, or rembursement of the ta payer s own funds,
from the proceeds of the nvountary converson consttute an e pend-
ture n good fath n the acquston of other property smar or
reated n servce or use to that nvountary converted, wthn the
meanng of secton 112(f) of the Code, and quafy for nonrecognton
of gan to the e tent of such e pendture
In Twnboro Corporaton v. Commssoner (149 ed. (2d), 574,
certorar dened, 66 Sup. Ct., 93), the Unted States Crcut Court of
ppeas for the Second Crcut hed that an owner of property whch
had been condemned may not buy smar property n antcpatory
repacement of the award, pay for t out of hs own funds, recoup hm-
72 20 47 5
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29.113(a)(5)- .
5S
sef ater out of the award when he gets t, and treat any gan as e empt
under secton 112(f) of the Interna Revenue Code.
ppyng the prncpes of the above-cted decson n the Twnboro
case, t s hed that f the ta payer n the nstant case fnances the con-
structon of a new pant to repace the power pant requstoned by
the War Shppng dmnstraton by the use of borrowed funds, or by
the use of ts own funds, n antcpaton of the award to be receved
from the War Shppng dmnstraton, the repayment of such bor-
rowed funds, or the rembursement of ts own funds, from the proceeds
(when receved) of the nvountary converson w not meet the re-
qurements of secton 112(f) of the Interna Revenue Code. In reach-
ng ths concuson, t was determned that no dstncton shoud be
made between ta payers usng borrowed funds and ta payers usng
ther own funds. The acquescence (C. . 1940-1, 5) n Washngton
Raway d ectrc Co. v. Commssoner (40 . T. ., 1249), cted and
dscussed n the- opnon n the Twnboro case, s mted strcty
to the facts of that case and shoud not be consdered as estabshng
a genera precedent.
S CTION 113(a). D UST D SIS OR D T RMINING
G IN OR LOSS: SIS (UN D UST D) O PROP RTY.
Secton 29.113(a) (5)-: ass of property ac- 1946-15-12355
qured by bequest, devse, or nhertance. I. T. 3 0
INT RN L R NU COD .
The bass (unnd|usted) for determnng gan or oss upon the sae
or other dsposton of Te as communty property by the e ecutor or
admnstrator of a deceased husband s estate, or by the wdow after
dstrbuton to her of the communty property, s (1) as regards the
wfe s one-haf shnre of such property the cost, or other bass, to the
communty, and (2) wth respect to the husband s one-haf share, the
far market vaue as of the date of hs death.
dvce s requested as to the bass for determnng gan or oss for
edera ncome ta purposes wth respect to Te as communty prop-
erty whch s sod by the e ecutor or admnstrator of a deceased
husband s estate, or by the wdow after dstrbuton to her of the com-
munty property.
In the case under consderaton, the decedent, domced n and a
resdent of the State of Te as, bequeathed to hs wdow hs entre
estate, whch conssted of hs share of communty property acqured
by hs persona servces. Pursuant to the provsons of secton
11(e) (2) of the Interna Revenue Code, the vaue of a communty
property owned by the decedent and hs wfe as of the date of hs
death was ncuded n the gross estate for edera estate ta purposes.
Ordnary debts have been pad, but some assets of the estate must be
sod to provde funds wth whch to pay the edera estate ta and the
State nhertance ta .
Secton 113(a) (5) of the Interna Revenue Code provdes n part
as foows:
S C. US. D UST D SIS OR D T RMINING G IN OR LOSS.
(a) ass (Unad|usted) of Pbopeety. The bass of property sha be the cost
of such property e cept that

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59
29.116-1.
(5) Property transmtted at death. If the property was acqured by
bequest, devse, or nhertance, or by the decedent s estate from the decedent,
the bass sha be the far market vaue of such property at the tme of such
acquston.
In the State of Te as, the nterest of a wfe n communty property
s a present vested nterest, equa and equvaent to that of her husband,
and one-haf of the communty ncome s her ncome. (See opkns v.
acon, 2 2 US., 122, Ct. D. 260, C. . I -2, 201 (1930).) Owner-
shp by the wfe of her share n communty property does not cease
upon death of her husband. ( orrest v. Moreno ct a., 161 S. W. (2d),
364.) ut durng admnstraton of the deceased husband s estate
the communty property s chargeabe wth the debts of the husband
for the purpose of payng such debts, the communty property s
regarded as beongng to the decedent s estate, and the entre ncome
of such property s ta abe to the decedent s estate. ( arbour v.
Commssoer, 9 ed. (2d), 474, Ct. D. 1267, C. . 1937-2, 279, and
authortes cted theren.)
It appears that n the State of Te as a wfe, after the death of her
husband, retans her nterest n an undvded one-haf of the com-
munty property, and does not take her share as a egatee, devsee or
her, but as an outrght owner of such property. Ths s true notwth-
standng the contro e ercsed by the deceased husband s e ecutor, or
admnstrator, over the entre communty property for purposes of
admnstraton of hs estate. It foows that wth respect to a survv-
ng wfe s share of communty property, such property s not acqured
by bequest, devse, or nhertance, nor s t acqured by the deceased
husband s estate from the decedent. Consequenty, the bass of such
property s not to be determned under secton 113(a) (5) of the Code,
supra, rrespectve of the fact that for edera estate ta purposes such
property s requred to be ncuded n the gross estate of the deceased
husband.
In vew of the foregong, t s hed that the bass (unad|usted) for
determnng gan or oss upon the sae or other dsposton of Te as
communty property by the e ecutor or admnstrator of a deceased
husband s estate, or by the wdow after dstrbuton to her of the com-
munty property, s (1) as regards the wfe s one-haf share of such
property the cost, or other bass, to the communty, and (2) wth re-
spect to the husband s one-haf share, the far market vaue as of the
date of hs death.
S CTION 116. CLUSIONS ROM G OSS INCOM .
Secton 29.116-1: arned ncome from sources 1946-21-12427
wthout the Unted States. I. T. 3 19
INT RN L R NU COD .
n mercan ctzen who estabshes to the satsfacton of the
Commssoner of Interna Revenue that he was a bona fde resdent
of the Phppnes durng hs entre ta abe year endng after uy 4,
1946 (the date of Phppne ndependence), s entted to the e emp-
ton provded by secton 116(a) of the Interna Revenue Code, reat-
ng to earned ncome from sources wthout the Unted States.
dvce s requested whether an mercan ctzen who s a resdent
of the Phppnes durng the entre ta abe year 1946 s entted to
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I29.116-1.
no
the e empton (e cuson from gross ncome) provded by secton
116(a) of the Interna Revenue Code, reatng to earned ncome from
sources wthout the Unted States.
The nqury arses by reason of the change n status of the Phppne
Isands from that of a possesson of the Unted States to that of a
foregn country on uy 4, 1946. In accordance wth the ct of March
24, 1934 (4 Stat., 456), and Procamaton of the Presdent on uy 4,
1946 (Procamaton 2695, edera Regster No. 132, oume 11, dated
uy 9, 1946, page 7517), the Phppne Isands became a foregn
country to be known as the Repubc of the Phppnes, as provded
by rtce II, secton 1 of the Phppne Consttuton.
The e empton provded by secton 116(a)(1) of the Interna
Revenue Code reates to earned ncome, as defned n secton 116(a)
(3) of the Code, receved from sources wthout the Unted States (e -
cept amounts pad by the Unted States or any agency thereof) by an
mercan ctzen who estabshes to the satsfacton of the Comms-
soner of Interna Revenue that he s a bona fde resdent of a foregn
country or countres durng the entre ta abe year. The queston
presented s whether the quoted statutory anguage may be construed
to ncude an mercan ctzen who, at the cose of hs frst ta abe
year endng after uy 4, 1946, w have been a bona fde resdent of
the Phppnes durng the entre ta abe year.
eretofore, an mercan ctzen resdng n the Phppnes has had
the beneft of e empton from the Unted States ( edera) ncome ta ,
by vrtue of secton 251 of the Interna Revenue Code, on a tems of
gross ncome from sources outsde the Unted States, e cept amounts
receved by hm wthn the Unted States, provded he coud satsfy
two condtons, vz, that 0 per cent or more of hs gross ncome (com-
puted wthout the beneft of secton 251) for the 3-year perod m-
medatey precedng the cose of the ta abe year (or such part of such
perod mmedatey precedng the cose of the ta abe year as may be
appcabe) was derved from sources wthn a possesson of the Unted
States, and that 50 per cent or more of hs gross ncome (computed
wthout the beneft of secton 251) for the same perod or part thereof
mmedatey precedng the cose of the ta abe year was derved from
the actve conduct of a trade or busness wthn a possesson of the
Unted States ether on hs own account or as an empoyee or agent of
another.
In vew of the change of status of the Phppnes from that of a
possesson of the Unted States on uy 4, 1946, to that of a foregn
country, t seems that some mercan ctzens now resdng n the
Phppnes may not be abe to satsfy the percentage requrements of
secton 251 of the Code for any part of the ta abe year 1946 up to
and ncudng uy 3, 1946, because of unsetted condtons n the
Isands after the termnaton of more than three years of occupaton
by the apanese mtary forces. Snce many of such mercan
ctzens w, at the cose of the year 1946, have been bona fde res-
dents of the Phppnes durng the entre ta abe year 1946, they
desre to know f for the ta abe year 1946 they may be accorded at
east the beneft of the more restrcted e empton, to the e tent of
ther earned ncome, provded by secton 116(a) of the Code. The
fact that the ega character of ther resdence has changed n the
mdde of the year because of the operaton of an ct of Congress,
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61
29.116-2.
wthout any actua change of resdence durng the year, serves as an
argument n ther favor.
Snce secton 251 of the Code requres, as one of the condtons to
the benefts t provdes, that 50 per cent or more of the mercan
ctzen s gross ncome for a specfed perod pror to the cose of the
ta abe year must have been derved from the actve conduct of a
trade or busness wthn a possesson, t can be sad that such sec-
ton s n arge part based upon actua presence or resdence n the
possesson durng the ta abe year, and that the e empton t provdes
f- premsed to a consderabe e tent upon resdence outsde the Unted
States, . e., a resdence of the san e nature as that requred by secton
116(a) of the Code. Inasmuch as, n ths ght, there s a concdence
n basc premse of the e emptons provded by the two sectons, there
s good reason to concude, n the speca crcumstances affectng the
year 1946 brought about by Phppne ndependence on uy 4, 1946,
that a bona fde resdence by an mercan ctzen n the Phppnes
durng the entre year 1946 may be taken to quafy such ctzen for
the beneft of secton 116(a) of the Code. owever, up to and ncud-
ng uy 3, 1946, he w be entted to e cude any addtona tems
of gross ncome wthn the scope of secton 251 of the Code, provded
he can quafy under that secton for any appcabe perod (wthn
the meanng of that secton) precedng that date.
ccordngy, t s hed that an mercan ctzen who estabshes
to the satsfacton of the Commssoner of Interna Revenue that he
was a bona fde resdent of the Phppnes durng hs entre ta abe
year endng after uy 4, 1946 (the date of Phppne ndepend-
ence), s entted to the e empton provded by secton 116(a) of
the Interna Revenue Code.
Secton 29.116-2: Income of foregn gov-
ernments, nternatona organzatons, and
ther empoyees.
( so Secton 1621(a), Secton 405.102,
Reguatons 116.)
TITL 26 INT RN L R NU . C PT R I, SU C PT R ND SU C P-
T R D. P RT 29 ND P RT 405.
Reguatons 111 and 116 amended to conform to certan provsons
of the Internatona Organzatons Immuntes ct.
Offce of Commssoner of Interna Rf.vence,
Washngton, D. C.
edera Reguatons, Cum. Sup. to sectons 1,4 (a), (b),and (), ,9,
and 10 of the Internatona Organzatons Immuntes ct (Tte I,
Pubc Law 291, Seventy-nnth Congress), approved December 29,
1945 C. . 1946-1, 323 , and Reguatons 116 Part 405 o fsuch Tte
26,1944 Sup. to sectons 1,4 (e) and (), and 10 of such Internatona
Organzatons Immuntes ct, such reguatons are amended as
foows:
1946-14-12343
T. D. 5522
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29.116-2.
62
R GUL TIONS 111.
29.116-1 the foowng:
S C. 4. INT RN TION L ORG NIZ TIONS IMMUNITI S CT
(TITL I, PU LIC L W 291, S NTY-NINT CONGR SS,
PPRO D D C M R 29, 1945).
The Interna Revenue Code s hereby amended ns foows:
(a) ffectve wth respect to ta abe years begnnng after December
31, 1943, secton 116(c), reatng to the e cuson from gross ncome of
ncome of foregn governments, s amended to read as foows:
(c) Income of oreon Governments and of Internatona Organ-
zatons. The ncome of foregn governments or nternatona organza-
tons receved from nvestments n the Unted States n stocks, bonds,
or other domestc securtes, owned by such foregn governments or by
nternatona organzatons, or from nterest on deposts n banks n
the Unted States of moneys beongng to such foregn governments or
nternatona organzatons, or from any other source wthn the Unted
States.
(b) ffectve wth respect to ta abe years begnnng after December
31, 1943, secton 116(h) (1), reatng to the e cuson from gross ncome
of amounts pad empoyees of foregn governments, s amended to read
as foows:
(1) Rue for e cuson. Wages, fees, or saary of any em-
poyee of a foregn government or of an nternatona organzaton
or of the Commonweath of the Phppnes (ncudng a consuar or
other offcer, or a nondponatc representatve), receved as com-
pensaton for offca servces to such government, nternatona
organzaton, or such Commonweath
( ) If such empoyee s not a ctzen of the Unted States, or Is
a ctzen of the Commonweath of the Phppnes (whether or not
a ctzen of the I nted States) and
( ) If, n the case of an empoyee of a foregn government or of
the Commonweath of the Phppnes, the servces are of a character
smar to those performed by empoyees of the Government of the
Unted States n foregn countres or n the Commonweath of the
Phppnes, ns the case may be and
(C) If, n the case of an empoyee of a foregn government or the
Commonweath of the Phppnes, the foregn government or the
Commonweath grants an equvaent e empton to empoyees of the
Government of the Unted States performng smar servces n
such foregn country or such Commonweath, as the case may be.

approved anuary , 1944 C. . 1944, 264 , s further amended as
( ) y strkng out the headng of such secton and nsertng n eu
thereof the foowng:
Sec. 29.116-2. Income of oregn Governments, Internatona Organzatons,
and T n mpoyees. (a) oregn governments and ther empoyees.
( ) y nsertng at the end of such secton the foowng:
(b) Internatona organzatons and ther empoyees. Sub|ect to the prov-
sons of secton 1 of the Internatona Organzatons Immuntes ct (the prov-
sons of whch secton are herenafter set forth), the ncome of an nternatona
organzaton (as defned n secton 3797(a) (1 )) receved from nvestments n
the Unted States n stocks, bonds, or other domestc securtes, owned by such
nternatona organzaton, or from nterest on deposts n banks n the Unfted
States of m.oneys beongng to such nternatona organzaton, or from any other
source wthn the Unted States, s e empt from edera ncome ta . n organ-
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63
29.116-2.
zaton desgnated by the Presdent through approprate ecutve order as
entted to en|oy the prveges,, e emptons, and mmuntes provded n the
Internatona Organzatons Immuntes ct may en|oy the benefts of the
e empton wth respect to ncome of the prescrbed character receved by such
organzaton pror to the date of the ssuance of such ecutve order, f (1) the
ecutve order does not provde otherwse and (2) the organzaton s a pubc
nternatona organzaton n whch the Unted States partcpates, pursuant to a
treaty or under the authorty of an ct of Congress authorzng such partcpaton
or makng an appropraton for such partcpaton, at the tme such ncome Is
receved. The e empton s effectve ony wth respect to ta abe years begn-
nng after December 31, 1943.
Sub|ect to the provsons of sectons 1, , and 9 of the Internatona Organza-
tons Immuntes ct, wages, fees, or saary of any offcer or empoyee of an nter-
natona organzaton (as defned n secton 3797(a) (1 )) receved as compensa-
ton for offca servces to such nternatona organzaton s e empt from edera
ncome ta , f such offcer or empoyee (1) s not a ctzen of the Unted States
or (2) s a ctzen of the Commonweath of the Phppnes (whether or not a
ctzen of the Unted States). n ndvdua of the prescrbed cass who receves
wages, fees, or saary as compensaton for offca servces to an organzaton
desgnated by the Presdent through approprate ecutve order as entted to
en|oy the prveges, e emptons, and mmuntes provded n the Internatona
Organzatons Immuntes ct and who has been duy notfed to and accepted by
the Secretary of State as an offcer or empoyee of such organzaton, or who has
been desgnated by the Secretary of State, pror to forma notfcaton and accept-
ance, as a prospectve offcer or empoyee of such organzaton, may en|oy the
benefts of the e empton wth respect to compensaton of the prescrbed charac-
ter earned by such Indvdua ether pror to the date of the ssuance of such
ecutve order, or pror to the date of such acceptance or desgnaton by the
Secretary of State, for offca servces to such organzaton, f (1) the ecutve
order does not provde otherwse, (2) the organzaton s a pubc nternatona
organzaton In whch the Unted States partcpates, pursuant to a treaty or
under the authorty of an ct of Congress authorzng such partcpaton or
makng an appropraton for such partcpaton, at the tme such compensaton Is
earned, and (3) the ndvdua s an offcer or empoyee of such organzaton at
such tme. The compensaton of ctzens of the Unted States (other than
ctzens of the Commonweath of the Phppnes) who are offcers or empoyees
of an nternatona organzaton s not e empt from ncome ta . ( ut see
secton 116(a).) The e empton wth respect to wages, fees, or saary, referred
to above, s effectve ony wth respect to ta abe years begnnng after December
1,1943.
Sectons 1, , and 9 of the Internatona Organzatons Immuntes ct provde
as foows:
Secton 1. or the purposes of ths tte Internatona Organzatons
Immuntes ct , the term nternatona organzaton means a
pubc Internatona organzaton In whch the Unted States partcpates
pursuant to any treaty or under the authorty of any ct of Congress
authorzng such partcpaton or makng an appropraton for such par-
tcpaton, and whch sha have been desgnated by the Presdent through
approprate ecutve order as beng entted to en|oy the prveges,
e emptons, and mmuntes heren provded. The Presdent sha be
authorzed, n the ght of the functons performed by any such nter-
natona organzaton, by approprate ecutve order to wthhod or
wthdraw from any such organzaton or ts offcers or empoyees any
of the prveges, e emptons, and mmuntes provded for n ths tte
(ncudng the amendments made by ths tte) or to condton or mt
the en|oyment by any such organzaton or ts offcers or empoyees of
any such prvege, e empton, or Immunty. The Presdent sha be
authorzed, f n hs |udgment such acton shoud be |ustfed by reason
of the abuse by an nternatona organzaton or ts offcers and empoyees
of the prveges, e emptons, and Immuntes heren provded or for
any other reason, at any tme to revoke the desgnaton of any nter-
natona organzaton under ths secton, whereupon the nternatona
organzaton In queston sha cease to be cassed as an nternatona
organzaton for the purposes of ths tte.
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I 29.116-2.
64
Sec. . (a) No person sha be entted to the benefts of ths tte
Internatona Organzatons Immuntes ct uness he (1) sha have
been duy notfed to and accepted by the Secretary of State as a
offcer, or empoyee or (2) sha have been desgnated by the
Secretary of State, pror to forma notfcaton and acceptance, as a
prospectve offcer, or empoyee .
(b) Shoud the Secretary of State determne that the contnued
presence n the Unted States of any person entted to the benefts of
ths tte s not desrabe, he sha so nform the nterna-
tona organzaton concerned , and after such person sha
have had a reasonabe ength of tme, to be determned by the Secretary
of State, to depart from the Unted States, he sha cease to be entted to
such benefts.
(c) No person sha, by reason of the provsons of ths tte, be con-
sdered as recevng dpomatc status or as recevng any of the prv-
eges ncdent thereto other than such as are specfcay set forth
heren|
Sec. 9. The prveges, e emptons, and mmuntes of nternatona
organzatons and of ther offcers and empoyees , provded
for n ths tte Internatona Organzatons Immuntes ct , sha be
granted notwthstandng the fact that the smar prveges, e emptons,
and mmuntes granted to a foregn government, ts offcers, or empoyees,
may be condtoned upon the e stence of recprocty by that foregn
government: 1 rovdcd, That nothng contaned n ths tte sha be
construed as precudng the Secretary of State from wthdrawng the
prveges, e emptons, and mmuntes heren provded from persons
who are natonas of any foregn country on the ground that such country
s fang to accord correspondng prveges, e emptons, and mmuntes
to ctzens of the Unted States.
the foowng:
(TITL I, PU LIC L W 291, S NTY-NINT CONGR SS,
PPRO D D C M R 29, 1945).
The Interna Revenue Code s hereby amended as foows:

(1) Secton 3797(a), reatng to defntons, s amended by addng at
the end thereof a new paragraph as foows:
(1 ) Internatona organzaton. The term Internatona
organzaton means a pubc nternatona organzaton entted to
en|oy prveges, e emptons, and mmuntes as an Internatona
organzaton under the Internatona Organzatons Immuntes
ct.
R GUL TIONS 116.
Par. 4. There s nserted mmedatey precedng the capton Sec-
ton 142G (g) and (h) of the Interna Revenue Code as set forth
precedng secton 405.101 the foowng:
S CTION 4(e) O T INT RN TION L ORG NIZ TIONS IM-
MUNITI S CT (TITL I, PU LIC L W 291. S NTY-NINT
CONGR SS, PPRO D D C M R 29, 1945).
(e) Secton 1621(a)(5), reatng to the defnton of wages for
the purpose of coecton of ncome ta at the source, s amended by
Insertng after the words foregn government the words or an
nternatona organzaton .
Par. 5. There s nserted mmedatey precedng secton 405.101 the
foowng:
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65
29.116-2.
S CTION 4(1) O T INT RN TION L ORG NIZ TIONS IM-
MUNITI S CT (TITL I, PU LIC L W 291, S NTY-NINT
CONGR SS).
The Interna Revenue Code Is hereby amended as foows:
(1) Secton 3797(a), reatng to defntons, Is amended by addng
at the end thereof a new paragraph as foows:
(1 ) Internatona organzaton. The term Internatona
organzaton means a pubc Internatona organzaton entted
to en|oy prveges, e emptons, and mmuntes as an nternatona
organzaton under the Internatona Organzatons Immuntes
ct
S CTION 1 O T INT RN TION L ORG NIZ TIONS IMMUNI-
TI S CT (TITL I, PU LIC L W 291, S NTY-NINT
CONGR SS).
or the purposes of ths tte Internatona Organzatons Immuntes
ct , the term nternatona organzaton means a pubc nterna-
tona organzaton n whch the Unted States partcpates pursuant to
any treaty or under the authorty of any ct of Congress authorzng
such partcpaton or makng an appropraton for such partcpaton,
and whch sha have been desgnated by the Presdent through appro-
prate ecutve order as beng entted to en|oy the prveges, e emp-
tons, and mmuntes heren provded. The Presdent sha be au-
thorzed, In the ght of the functons performed by any such Internatona
organzaton, by approprate ecutve ordet to wthhod or wthdraw
from any such organzaton or ts offcers or empoyees any of the prv-
eges, e emptons, and mmuntes provded for n ths tte (Incudng
the amendments made by ths tte) or to condton or mt the en|oy-
ment by any such organzaton or ts offcers or empoyees of any such
prvege, e empton, or mmunty. The Presdent sha be authorzed,
f n hs udgment such acton shoud be ustfed by reason of the abuse
by an nternatona organzaton or ts offcers and empoyees of the
prveges, e emptons, and mmuntes heren provded or for any other
reason, at any tme to revoke the desgnaton of any Internatona or-
ganzaton under ths secton, whereupon the Internatona organzaton
n queston sha cease to be cassed as an nternatona organzaton
for the purposes of ths tte.
thereof the foowng:
(/) Compensaton pad by foregn government or nternatona organzaton.
(1) Servces for foregn government.
( ) y nsertng at the end thereof the foowng:
(2) Servces for nternatona organzaton. Sub|ect to the provsons of
secton 1 of the Internatona Organzatons Immuntes ct, remuneraton pad
for servces performed wthn or wthout the Unted States by an empoyee for
an nternatona organzaton as defned n secton 3797(a) (1 ) s e cepted from
the term wages. The term empoyee as used n the precedng sentence
ncudes not ony an empoyee who s a ctzen or resdent of the Unted States
but aso an empoyee who s a nonresdent aen ndvdua. The term em-
poyee aso ncudes an offcer. n organzaton desgnated by the Presdent
through approprate ecutve order as entted to en|oy the prveges, e emp-
tons, and mmuntes provded n the Internatona Organzatons Immuntes
ct may en|oy the benefts of the e cuson from wages wth respect to remuner-
aton pad for servces performed for such organzaton pror to the date of the
ssuance of such ecutve order, f (1) the ecutve order does not provde
otherwse and () the organzaton s a pubc Internatona organzaton n
whch the Unted States partcpates, pursuant to a treaty or under the author-
ty of an ct of Congress authorzng such partcpaton or makng an appro-
praton for such partcpaton, at the tme such servces are performed. The
e cuson from wages s effectve ony wth respect to remuneraton of the pre-
scrbed character pad on or after December 29,1945.
Par. 6. Secton 405.102(/) s amended as foows:
thereof and nsertng n eu
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29.116-2.
60
sectons 62 and 3791 of the Interna Revenue Code (53 Stat., 32, 467
26 U. S. C, 1940ed., 62,3791), secton 1621 (a) of the Interna Revenue
Code (57 Stat., 126 26 U. S. C, Supp. I , 1621(a)), and sectons
1,4 (a), (b), (e), and (), , and 9 of the Internatona Organzatons
Immuntes ct (Tte I, Pubc Law 291, Seventy-nnth Congress),
approved December 29, 1945.)
oseph D. Nunan, r.,
Commssoner of Interna Revenue.
( ed wth the Dvson of the edera Regster une IT, 1946, 1.29 p. m.)
Secton 29.116-2: Income of foregn govern- 1946-17-12376
ments, nternatona organzatons, and ther I. T. 3 14
empoyees.
INT RN L R NU COD .
Ta abty of a corporaton a of the stock of whch s owned by
a foregn government.
Modfcaton of I. T. 37 9 (C. . 1946-1,100).
Reference s made to I. T. 37 9 (C. . 1946-1,100), revokng O. D.
62 (C. . 3, 124 (1920)), and hodng that even though the stock of
a corporaton may be whoy owned by a foregn government, the
ncome of such a corporaton s not e empt from edera ta aton
under secton 116(c) of the Interna Revenue Code.
I. T. 37 9, supra, was promugated wthout retroactve effect, the
rung theren beng made appcabe from and after pr 1, 1946.
It was the purpose n draftng the nonretroactve provson of I. T.
37 9 that any nterest upon bonds or smar obgatons accrung to
such corporatons pror to pr 1, 1946, athough becomng due and
payabe on or after that date, shoud not e sub|ect to the wthhodng
provsons of sectons 143(b) and 144 of the Interna Revenue Code.
ccordngy, the ast paragraph of I. T. 37 9, supra, s hereby mod-
fed to read as foows:
Pursuant to authorty contaned n secton 3791(h) of the Interna Revenue
Code, ths rung and the revocaton of O. D. 62 , supra, w be apped wthout
retroactve effect from and after pr 1, 1946. ccordngy, nterest accrung
to such a corporaton pror to pr 1, 1916, athough becomng due and payabe
on or after that date, w not be sub|ect to edera ncome ta aton. owever,
no refund w be made of any ncome, e cess profts, and decared vaue e cess-
profts ta es whch may have been pad.
oseph D. Nunan, r.,
pproved uy 25, 1946.
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67
29.116-4.
Secton 29.116-4: cuson of certan 1946-1-4-12344
cost-of-vng aowances. I. T. 3 07
INT RN L R NU COD .
The 25 per cent dfferenta above grade pay receved under secton
2 of the ct of uy 3, 1930 (40 Stat., 1003, 1005), by cvan em-
poyees of the War Department who are statoned at overseas posts
of duty consttutes part of the empoyees basc compensaton and s
not such a cost-of-vng aowance as may be e cuded from gross
Income under secton 116( ) of the Interna Revenue Code.
dvce s requested whether the 25 per cent dfferenta above grade
pay receved under secton 2 of the ct of uy 3,1930 (46 Stat., 1003.
1005), by cvan empoyees of the War Department who are statoned
at overseas posts of duty consttutes a cost-of-vng aowance wthn
the purvew of secton 116(|) of the Interna Revenue Code.
Secton 116(|) of the Code e cudes from gross ncome (1) amounts
receved as cost-of-vng aowances by cerks and empoyees n the
oregn Servce of the Unted States, (2) amounts receved as post
aowances by ambassadors, mnsters, dpomatc, consuar, or oregn
Servce offcers, and (3) amounts receved as cost-of-vng aowances
by other cvan offcers or empoyees of the Unted States Government
statoned outsde contnenta Unted States, n accordance wth regua-
tons approved by the Presdent. The nstant nqury nvoves the
ast-mentoned aowances.
The basc aw under whch the War Department dfferentas are
pad s the ct of uy 3, 1930 (46 Stat., 1003). s ponted out n
the Comptroer Genera s decson (22 Comp. Gen., 491), the 25 per
cent dfferenta above grade pay s authorzed by the ong-standng
admnstratve practce of hs ofhee. Ths practce s foowed for the
beneft of edera empoyees of varous agences and fed servces
who occupy postons outsde the contnenta mts of the Unted
States.
The Comptroer Genera has hed that the dfferenta n pay, not
to e ceed 25 per cent of grade pay, s authorzed soey because of the
ocaton of the pace where the dutes of the poston are to be per-
formed (22 Comp. Gen., 79, and 24 Comp. Gen., 1 1) that the em-
poyee s entted to the entre saary attached to such poston (ncud-
ng the dfferenta) so ong as he s n a duty status n the partcuar
poston (22 Comp. Gen., 9) and that the dfferenta s a part of
an empoyee s base compensaton from whch retrement deductons
are requred to be made and on the bass of whch the ncrease n com-
pensaton and the saary mtatons of the overtme and addtona
compensaton ct of December 22, 1942 ( 56 Stat., 106 ), shoud be
computed (22 Comp. Gen., 769). The purpose of ths dfferenta s
to permt the pay of the empoyee to be ad|usted by admnstratve
acton to correspond, so far as may be practcabe, to the rates estab-
shed by the Cassfcaton ct of 1923, as amended, for postons n
departmenta servces n the Dstrct of Coumba.
Under reguatons approved by the Presdent, ssued n Suppe-
ment to udget Crcuar No. - , dated anuary 11, 1944, the pay-
ment of cost-of-vng aowances whch were prevousy payabe
ony to empoyees of the State Department s e tended to empoyees
of certan other agences under the authorty of secton 304 of the
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29.117-1.
6
rst Suppementa Natona Defense ppropraton ct, 1944 (57
Stat., 611, 642), approved December 23, 1943. Paragraph 1 of the
above-mentoned crcuar states n part as foows:
Secton 304 of the ct of December 23, 1943, e tends these benefts to em-
poyees of a other departments and estabshments, e cept the Departments
of War and yavy. Itacs supped.
In recommendng that these cost-of-vng aowances be e empted
from edera ncome ta , Senate Report No. 627, Seventy-eghth Con-
gress, frst sesson (C. . 1944, 973, 992), emphaszed that the aow-
ances contempated are those whch-are granted to empoyees to meet
offca e penses ncurred by them n behaf of the Government. The
commttee ponted out that payment of these aowances s nds-
tngushabe from the payment of aowances to defray the e penses
of operaton of the estabshment, the cost of the offca entertan-
ment whch s necessary undertaken, the trave whch empoyees are
ordered to perform, or the renta pad for quarters approprate to
house essenta actvtes. The commttee report states: The stua-
ton s acute and as the aowances are to meet offca needs as ds-
tngushed from persona requrements, the e cuson of such aow-
ances from ta consderaton for ths cass of personne s n the pubc
nterest.
In vew of the foregong, t s hed that the 25 per cent dfferenta
above grade pay receved under secton 2 of the ct of uy 3, 193u,
supra, by cvan empoyees of the War Department who are sta-
toned at overseas posts of duty, whch pay has been admnstratvey
approved by the Comptroer Genera, consttutes a part of the em-
poyees basc compensaton and s not such a cost-of-vng aowance
as may be e cuded from gross ncome under secton 116(|) of the
Interna Revenue Code. (See G. C. M. 24162, C. . 1944,266, reatng
to the 25 per cent dfferenta aowed edera empoyees as addtona
compensaton under the ct of November 26,1940, 54 Stat, 1211.)
S CTION 117. C PIT L G INS ND LOSS S.
Secton 29.117-1: Meanng of terms. 1946-25-12453
I. T 3 2
INT RN L R NU COD .
deaer n securtes may treat as capta assets, as defned n
secton 117(a) (1) of the Interna Revenue Code, securtes acqured
for nvestment purposes, provded t s estabshed that (1) such se-
curtes are acqured and hed for nvestment and are not part of
those hed for sae to customers, and (2) they are not of a type
ordnary sod to the deaer s customers.
dvce s requested whether a deaer n securtes may treat as cap-
ta assets, as defned n secton 117(a) (1) of the Interna Revenue
Code, securtes acqured soey for nvestment purposes.
In the nstant case, a partnershp dong busness as a deaer n
securtes nvests ts surpus funds n securtes from tme to tme soey
for the purpose of makng an nvestment of such funds. The secur-
tes thus acqured are segregated physcay and n the partnershp
accounts from securtes hed for sae to customers. They are not n-
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69
29.117-1.
euded n the partnershp nventory, are never sod to customers, and
are not of a type ordnary sod to customers.
In genera, capta assets are denned n secton 117(a) (1) of the
Interna Revenue Code to ncude any property hed by a ta payer
(whether or not connected wth hs trade or busness) e cept (1) stock
n trade or other property of a knd whch woud propery be ncuded
n nventory f on hand at the cose of the ta abe year, (2) property
hed prmary for sae to customers n the ordnary course of the ta -
payer s trade or busness, (3) deprecabe property used n the trade or
busness| and (4) rea property used n the trade or busness.
Securtes hed for sae to customers n the ordnary course of bus-
ness are not capta assets as defned above, and gans and osses on
saes of such securtes by deaers n securtes are not sub|ect to the
mtatons of secton 117 (b), (c), and (d) of the Code. owever,
securtes owned by a deaer n securtes, f acqured and hed for n-
vestment rather than for sae n the ordnary course of busness, are
capta assets sub|ect to the mtatons of secton 117 of the Code.
(See I. T. 2502 C. . III-2,12 (1929).) or edera ncome ta
purposes, a deaer n securtes may be consdered as hodng securtes
for nvestment ony f t can be estabshed that such securtes have
been acqured and are hed under substantay dfferent crcumstances
(from the standpont of hodng them as nvestments as dstngushed
from stock n trade) than securtes whch are reguary deat n by
the deaer n the ordnary course of busness, that such securtes are
segregated n a separate account, and that they are at no tme nter-
mnged wth other securtes hed for sae to customers by such deaer.
It s necessary for the deaer to determne and ndcate at the tme of
the purchase of the securtes that they are purchased for nvestment
purposes and not for resae to customers. In addton, t s ony those
securtes acqured by a deaer whch are of a type dfferent from those
retaed to customers n the ordnary course of busness whch may,
under any crcumstances, be consdered to quafy as nvestments. If
securtes of a nature smar to those ordnary sod to customers are
acqured by a deaer, t w be presumed that they are acqured for sae
to customers, regardess of the manner of acquston and hodng.
ccordngy, a deaer n securtes may treat as capta assets, as
defned n secton 117(a) (1) of the Interna Revenue Code, securtes
acqured for nvestment purposes, provded t s estabshed, as pre-
scrbed n the precedng paragraph, that (1) such securtes are ac-
qured and hed for nvestment and are not part of those hed for sae
to customers, and (2) they are not of a type ordnary sod to the
deaer s customers.
Secton 29.117-1: Meanng of terms.
INT RN L R NU COD .
Purchase and sae of Me can pesos. (See I. T. 3 10, page 55.)
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29.117-1.
70
Secton 29.117-7: Gans and osses from n- 1946-16-12364
vountary conversons and from the sae or I. T. 3 11
e change of certan property used n the
trade or busness.
INT RN L R NU COD .
Where deprecabe equpment used In the ta payer s trade or
busness s sod for an amount n e cess of the ceng prce estab-
shed by the Offce of Prce dmnstraton, ony that part of the
gan from the sae whch conssts of the dfference between the
ceng prce and the ta payer s ad|usted bass of the equpment s
sub|ect to the provsons of secton 117(|) of the Interna Revenue
Code, and the amount of the gan n e cess of the ceng prce s
ta abe as ordnary ncome.
dvce s requested reatve to the treatment for edera ncome ta
purposes of a gan from the sae of deprecabe equpment used n a
ta payer s trade or busness where the seng prce of such equpment
s n e cess of the ceng prce estabshed by the Offce of Prce
dmnstraton.
The ta payer purchased the equpment n queston more than s
months pror to ts sae, and used such equpment n ts trade or bus-
ness unt t was sod for a prce n e cess of the ceng prce estabshed
by the Offce of Prce dmnstraton. The equpment s of a char-
acter whch s sub|ect to the aowance for deprecaton provded n
secton 23(1) of the Interna Revenue Code and, therefore, does not
consttute a capta asset under secton 117(a) of the Code. There
were no other saes or e changes of property used n the trade or bus-
ness of the ta payer, no saes or e changes of property consttutng
capta assets, and no compusory or nvountary conversons of ether
of such casses of property n the year of the sae.
Under (he provsons of secton 117(|) (2) of the Code, gan reazed
from the sae of the equpment consttutes net ong-term capta gan
whch s sub|ect to the treatment prescrbed by secton 117 (b) and (c)
of the Code.
Secton 4(a) of the mergency Prce Contro ct of 1942 (56 Stat.,
23, 2 ) provdes n part as foows:
(a) It sha be unawfu, regardess of any contract, agreement, ease, or other
obgaton heretofore or hereafter entered nto, for any person to se or dever
any commodty, or otherwse to do or omt to do any act, n voaton
of any reguaton or order under secton 2, or of any prce schedue effectve n
accordance wth the provsons of secton 20G, or of any reguaton, order, or
requrement under secton 202(b) or secton 205(f), or to offer, soct, attempt,
or agree to do any of the foregong.
In ths case, to treat the amount receved n e cess of the ceng
prce as a part of the seng prce of the equpment, sub|ect to the
provsons of secton 117(|) of the Code, s to aow the ta payer
to dstort the true nature of the seng prce and to encourage the
consequent dsregard of the ant-nfatonary poces estabshed by
the mergency Prce Contro ct of 1942. (See I. T. 3724, C. .
1945, 57.)
ccordngy, t s hed that where deprecabe equpment used n
the ta payer s trade or busness s sod for an amount n e cess of
the ceng prce estabshed by the Offce of Prce dmnstraton,
ony that part of the gan from the sae whch conssts of the dffer-
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71
29.131-2.
ence between the ceng prce and the ta payer s ad|usted bass of
the equpment s sub|ect to the provsons of secton 117(|) of the
Code, and the amount of the gan n e cess of the ceng prce s
ta abe as ordnary ncome.
Secton 29.117-7: Gans and osses from nvountary
conversons and from the sae or e change of certan
property used n the trade or busness.
INT RN L R NU COD .
Sae of ctrus groves wth frut on the trees. (See I. T. 3 15,
page 30.)
SUPPL M NT C CR DITS G INST T .
S CTION 131. T S O OR IGN COUNTRI S ND
POSS SSIONS O UNIT D ST T S.
Secton 29.131-2: Meanng of terms. 1946-19-12401
( so Secton 251, Secton 29.251-4.) T. D. 5534
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 T R D C M R 31, 1941.
Reguatons 111 amended to gve effect to the change of status of
the Phppne Isands from a possesson of the Unted States to a
separate sef-governng naton as of uy 4, 1940.
Washngton, D. O.
Reguatons 111 Part 29, Tte 26, Code of edera Reguatons,
Cum. Sup. are amended as foows:
Paragraph 1. Secton 29.131-2 s amended by nsertng after the
words the Phppnes the words pror to uy 4,1946.
Par. 2. Secton 29.251-4 s amended as foows:
( ) y nsertng n the second sentence mmedatey after the words
the Phppne Isands the words pror to uy 4, 1946.
( ) y strkng out the thrd sentence and nsertng n eu thereof
the foowng:
Pror to uy 4, 1946, the Phppne Isands came wthn the cassfcaton of
possessons of the Unted States for edera ncome ta purposes, notwth-
standng the estabshment of the Commonweath of the Phppnes under the
ct of March 24, 1934 ( 4 Stat., 456). The Phppne Isands on uy 4, 1946,
became a separate sef-governng naton.
(Ths Treasury decson s ssued under the authorty contaned
n secton 62 of the Interna Revenue Code (53 Stat., 32 26 U. S. 0.,
1940 ed., 62).)
Stewart erkshre,
ctng Commssoner of Interna Revenue,
pproved ugust 2 ,1946.
( ed wth the Dvson of the edera Regster ugust 29,194 ,11.47 a. m|
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141. 72
Secton 29.131-5: Countres whch do or do 1946-21-1242
not satsfy the smar credt requrement. I. T. 3 20
INT RN L R NU COD .
Newfoundand satsfes the smar credt requrement of secton
131(a) (3) of the Interna Revenue Code.
SUPPL M NT D. R TURNS ND P YM NT OP T .
S CTION 141. CONSOLID T D R TURNS.
Reguatons 104, Secton 23.11: Consodated 1946-21-12429
returns for subsequent years. I. T. 3 21
nterna revenue code.
ecton wth respect to fng separate edera Income ta re-
turns for fsca years endng n 1947 by affated corporatons whch
fe consodated edera ncome and e cess profts ta returns for
fsca years endng n 1940.
dvce s requested whether affated corporatons whch fe con-
sodated edera ncome and e cess profts ta returns for fsca
years endng n 1946 may eect to fe separate edera ncome ta
returns for fsca years endng n 1947.
Secton 141(a) of the Interna Revenue Code, as amended, provdes
n part as foows:
(a) Prvege to e Consodated Income and cess-I rofts-Ta Re-
turns. The makng of consodated returns sha be upon the cond-
ton that the affated group sha make both a consodated ncome-ta return
and a consodated e cess-profts-ta return for the ta abe year, and that a
corporatons whch at any tme durng the ta abe year have been members of
the affated group makng a consodated ncome-ta return consent to a the
consodated ncome- and e cess-profts-ta reguatons prescrbed under subsec-
ton (b) pror to the ast day prescrbed by aw for the fng of such return.

Secton 23.11(a) of Reguatons 104, as amended by Treasury
Decson 50 7 (C. . 1941-2, 141), reatng to consodated ncome
ta returns of affated corporatons, provdes as foows:
(a) Consodated Returns Requred for Subsequent Years.
If a consodated return s 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 In e stence uness (1) a corporaton (other
than a corporaton created or organzed, drecty or ndrecty, by a member of
the group) has become a member of the group durng such subsequent ta abe
year, or (2) 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 consodated returns, or (3) the Com-
mssoner, pror to the tme of makng the return, upon appcaton made by the
common parent corporaton and for good cause shown, grants permsson to
change.
It s hed that the amendments to the Interna Revenue Code by the
Revenue ct of 1945 do not gve rse to an eecton to fe separate
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73
29.143-1.
edera ncome ta returns for fsca years endng n 1947 by affated
groups whch fe tonsodated ncome and e cess profts ta returns
for fsca years endng n 1946. ccordngy, affated corporatons
whch fe consodated ncome and e cess profts ta returns for fsca
years endng n 1946 w not be permtted to fe separate ncome ta
returns for fsca years endng n 1947, uness one of the other con-
dtons provded n secton 23.11(a) of Reguatons 104, supra, s
met, or uness the aw or reguatons wth respect to fsca years endng
n 1947 are so amended as to make ess advantageous to affated groups
as a cass the contnued fng of consodated ncome ta returns. (See
I. T. 37 0. C. . 1946-1,113 cf. I. T. 3794, C. . 1946-1, 114, and I. T.
3779, C. . 1946-1,112.)
S CTION 143. WIT OLDING O T
T SOURC .
Secton 29.143-1: Wthhodng ta at source. 1946-1 -12397
( so Secton 144, Secton 29.144-1.) T. D. 5532
TITL 26- INT RN L R NU . C PT R I, SU C PT R , P RT 7 T -
TION PURSU NT TO TR TI S. SU P RT UNIT D INGDOM, T L
Y RS GINNING T R D C M R 31, 1944.
Reease of e cess ta wthhed, and e empton from, or reduc-
ton n rate of, wthhodng under sectons 143 and 144 of the
Interna Revenue Code n the case of resdents of the Unted ng-
dom and of foregn corporatons managed and controed n the
Unted ngdom, as affected by the recproca Income ta conven-
ton between the Unted States and the Unted ngdom.
Treasury Deartment,
Washngton, D. C.
To Coectors of Interna Revenue, Wthhodng gents, and Others
Concerned:
Secton 7.500. Introductory. The ncome ta conventon between
the Unted States and the Unted ngdom of Great rtan and
Northern Ireand, sgned pr 16, 1945, and effectve (for the pur-
poses of Unted States ncome and e cess profts ta es) for ta abe
years begnnng on or after anuary 1, 1945 (herenafter referred to
as the conventon), provdes n part as foows:
rtce I.
(1) The ta es whch are the sub|ect of the present conventon are:
(a) In the Unted States of merca: The edera ncome ta es, ncudng
surta es and e cess profts ta es (herenafter referred to as Unted States
ta ).
(6) In the Unted ngdom of Great rtan and Northern Ireand: The
Income ta (ncudng surta ), the e cess profts ta and the natona de-
fense contrbuton (herenafter referred to as Unted ngdom ta ).
(2) The present conventon sha aso appy to any other ta es of a sub-
stantay smar character mposed by ether contractng party subsequenty
to the date of sgnature of the present conventon or by the government of any
terrtory to whch the present conventon s e tended under rtce II.
T2 29 0 17-
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29.143-1.
74
rtce If.
(1) In the present conventon, uness the conte t otherwse requres:
(a) The term Unted States means the Unted States of merca, and
when used n a geographca sense means the States, the Terrtores of
aska and awa, and the Dstrct of Coumba.
(6) The term Unted ngdom means Great rtan and Northern
Ireand, e cudng the Channe Isands nud the Ise of Man.
(c) The term terrtory of one of the contractng partes and terrtory
of the other contractng party mean the Unted States or the Unted ng-
dom as the conte t requres.
(d) The term Unted States corporaton means a corporaton, assoca-
ton or other ke entty created or organzed n or under the aws of the
Unted States.
(e) The term Unted ngdom corporaton means any knd of urdca
person created under the aws of the Unted ngdom.
(f) The terms corporaton of one contractng party and corpora-
ton of the other contractng party means a Unted States corporaton or a
Unted ngdom corporaton as the conte t requres.
(g) The term resdent of the Unted ngdom means any person
(other than a ctzen of the Unted States or a Unted States corporaton)
who Is resdent n the Unted ngdom for the purposes of Unted ngdom
ta and not resdent n the Unted States for the purposes of Unted States
ta . corporaton s to be regarded as resdent n the Unted ngdom
If ts busness s managed and controed n the Unted ngdom,
(ft) The term resdent of the Unted States means any ndvdua
who s resdent n the Unted States for the purposes of Unted States ta
and not resdent n the Unted ngdom for the purposes of Unted ngdom
ta , and any Unted States corporaton and any partnershp created or
organzed n or under the aws of the Unted States, beng a corporaton or
partnershp whch Is not resdent n the Unted ngdom for the purposes
of Unted ngdom ta .
() The term Unted ngdom enterprse means an ndustra or com-
merca enterprse or undertakng carred on by a resdent of the Unted
ngdom.
(/) The term Unted States enterprse means an ndustra or com-
merca enterprse or undertakng carred on by a resdent of the Unted
States.
(fc) The terms enterprse of the contractng partes mean a Unted
States enterprse or a Unted ngdom enterprse, as the conte t requres.
(I) The term permanent estabshment when used wth respect to an
enterprse of one of the contractng partes means a branch, management,
factory or other f ed pace of busness, but does not Incude an agency
uness the agent has, and habtuay e ercses, a genera authorty to
negotate and concude contracts on behaf of such enterprse or has a stock
of merchandse from whch he reguary fs orders on ts behaf. n
enterprse of one of the contractng partes sha not be deemed to have a
permanent estabshment n the terrtory of the other contractng party
merey because It carres on busness deangs In the terrtory of such
other contractng party through a bona fde commsson agent, broker
or custodan actng In the ordnary course of hs busness as such. The
fact that an enterprse of one of the contractng partes mantans n
the terrtory of the other contractng party a f ed pace of busness
e cusvey for the purchase of goods or merchandse sha not of tsef
consttute such f ed pace of busness a permanent estabshment of such
enterprse. The fact that a corporaton of one contractng party has a
subsdary corporaton whch s a corporaton of the other contractng
party or whch s engaged n trade or busness n the terrtory of such
other contractng party (whether through a permanent estabshment
or otherwse) sha not of Itsef consttute that subsdary corporaton a.
permanent estabshment of ts parent corporaton.
(2) or the pur|wses of rtces I, II, III, I and I a resdent of the
Unted ngdom sha not be deemed to be engaged n trade or busness n the
Unted States n any ta abe year uness such resdent has a permanent estabsh-
ment stuuted theren n such ta abe year. The same prncpe sha be apped.
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75
5 29.143-1.
mutats mutands, by the Unted ngdom n the case of a resdent of the Unted
States.
(3) In the appcaton of the provsons of the present conventon by one of the
contractng partes any term not otherwse defned sha, uness the conte t
otherwse requres, have the meanng whch t has under the aws of that con-
tractng party reatng to the ta es whch are the sub|ect of the present conventon.

rtce I.
(1) The rate of Unted States ta on dvdends derved from a Unted States
corporaton by a resdent of the Unted ngdom who s sub|ect to Unted ng-
dom ta on such dvdends and not engaged n trade or busness n the Unted
States sha not e ceed 15 percent: Provded that such rate of ta sha not e ceed
5 per cent f such resdent s a corporaton controng, drecty or ndrecty,
at east 95 per cent of tte entre votng power n the corporaton payng the
dvdend, and not more than 25 per cent of the gross ncome of such payng
corporaton s derved from nterest and dvdends, other than nterest and dv-
dends receved from ts own subsdary corporatons. Such reducton of the rate
to 5 per cent sha not appy f the reatonshp of the two corporatons has been
arranged or s mantaned prmary wth the ntenton of securng such reduced
rate.
(2) Dvdends derved from sources wthn the Unted ngdom by an nd-
vdua who Is (a) a resdent of the Unted States, (6) sub|ect to Unted States
ta wth respect to such dvdends, and (c) not engaged n trade or busness n
the Unted ngdom, sha be e empt from Unted ngdom surta .
(3) ther of the contractng partes may termnate ths artce by gvng
wrtten notce of termnaton to the other contractng party, through dpomatc
channes, on or before the 30th day of une n any year after the year 1945. and
n such event paragraph (1) hereof sha cease to be effectve as to Unted States
ta on and after the 1st day of anuary, and paragraph (2) hereof sha cease
to be effectve as to Unted ngdom ta on and after the 6th day of pr, n
the year ne t foowng that n whch such notce s gven.
btcb II.
(1) Interest (on bonds, securtes, notes, debentures, or on any other form
of ndebtedness) derved from sources wthn the Unted States by a resdent
of the Unted ngdom who s sub|ect to Unted ngdom ta on such nterest
and not engaged n trade or busness n the Unted States, sha be e empt
from Unted States ta but such e empton sha not appy to such nterest
pad by a Unted States corporaton to a corporaton resdent In the Unted
ngdom controng, drecty or ndrecty, more than 50 per cent of the entre
votng power n the payng corporaton.
(2) Interest (on bonds, securtes, notes, debentures, or on any other form of
ndebtedness) derved from sources wthn the Unted ngdom by a resdent
of the Unted States who s sub|ect to Unted States ta on such nterest and
not engaged n trade or busness n the Unted ngdom, sha be e empt from
Unted ngdom ta but such e empton sha not appy to such nterest pad
by a corporaton resdent n the Unted ngdom to a Unted States corpora-
ton controng, drecty or ndrecty, more than 50 per cent of the entre vot-
ng power n the payng corporaton.
rtce III.
(1) Royates and other amounts pad as consderaton for the use of, or for
the prvege of usng, copyrghts, patents, desgns, secret processes and for-
muae, trade-marks, and other ke property, and derved from sources wthn
the Unted States by a resdent of the Unted ngdom who s sub|ect to Unted
ngdom ta on such royates or other amounts and not engaged n trade or
busness n the Unted States, sha be e empt from Unted States ta .
(2) Royates and other amounts pad as consderaton for the use of, or for
the prvege of usng, copyrghts, patents, desgns, secret processes and for-
muae, trade-marks, and other ke property, and derved from sources wthn
the Unted ngdom by a resdent of the Unted States who s sub|ect to Unted
States ta on such royates or other amounts and not engaged n trade or
busness n the Unted ngdom, sha be e empt from Unted ngdom ta .
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29.143-1.
76
( ) or the purposes of ths artce the term royates sha be deemed
to ncude reutas n respect of moton pcture fms.
rtce I .
(1) The rate of Unted States ta on royates In respect of the operaton
of mnes or quarres or of other e tracton of natura resources, and on rentas
from rea property or from an nterest n such property, derved from sources
wthn the Unted States by a resdent of the Unted ngdom who s sub|ect to
Unted ngdom ta wth respect to such royates or rentas and not engaged
n trade or busness n the Unted States, sha not e ceed 15 per cent: Provded
that any such resdent may eect for any ta abe year to be sub|ect to Unte
States ta as f such resdent were engaged n trade or busness n the Unted
States.
(2) Royates n respect of the operaton of mnes or quarres or of other
e tracton of natura resources, and rentas from rea property or from an n-
terest n such property, derved from sources wthn the Unted ngdom by an
ndvdua who s (a) a resdent of the Unted States, (6) sub|ect to Unted
States ta wth respect to such royates and reutas, and ( ) not engaged
In trade or busness n the Unted ngdom, sha be e empt from Unted ng-
dom surta .
rtce .
(1) ny saary, wage, smar remuneraton, or penson, pad by the Govern-
ment of the Unted States to an ndvdua (other than a rtsh sub|ect who s
not aso a ctzen of the Unted States) n respect of servces rendered to the
Unted States n the dscharge of governmenta functons, sha be e empt from
Unted ngdom ta .
(2) ny saary, wage, smar remuneraton, or penson, pad by the Govern-
ment of the Unted ngdom to an ndvdua (other than a ctzen of the
Unted States who s not aso a rtsh sub|ect) n respect of servces rendered
to the Unted ngdom In the dscharge of governmenta functons, sha be e -
empt from Unted States ta .
(3) The provsons of ths artce sha not appy to payments n respect of
servces rendered n connecton wth any trade or busness carred on by ether
of the contractng partes for purposes of proft.

rtce II.
(1) ny penson (other than a penson to whch rtce appes), and any
fe annuty, derved from sources wthn the Unted States by an ndvdua who
Is a resdent of the Unted ngdom sha be e empt from Unted States ta
(2) ny penson (other than a penson to whch rtce appes), and any
fe annuty, derved from sources wthn the Unted ngdom by an ndvdua
who s a resdent of the Unted States sha be e empt from Unted ngdom ta
(3) The term fe annuty means a stated sum payabe perodcay at stated
tmes, durng fe or durng a specfed or ascertanabe perod of tme, under an
obgaton to make the payments n consderaton of money pad.

rtce III.
(1) The present conventon sha be ratfed and the nstruments of ratfca-
ton sha be e changed at Washngton as soon as possbe.
(2) Upon e change of ratfcatons, the present conventon sha have effect
(a) as respects Unted States ta , for the ta abe years begnnng on or
after the 1st day of anuary, 1945
(6) () as respects Unted ngdom ncome ta , for the year of assessment
begnnng on the tt day of pr, 1945, and subsequent years () as respects
Unted ngdom surta , for the year of assessment begnnng on the 6th day
of pr, 1044, and subsequent years and (111) as respects Unted ngdom
e cess profts ta and natona defense contrbuton, for any chargeabe
accountng perod begnnng on or after the 1st day of pr, 1945, and for
the une pred porton of any chargeabe accountng perod current at th t
date.
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77
29.143-1.
rtce I .
(1) The present conventon sha contnue In effect Indefntey but ether of
the contractng partes may, on or before the 30th day of une n any year after
the year 1946, gve to the other contractng party, through dpomatc channes,
notce of termnaton and, In such event, the present conventon sha cease to be
effectve
(a) as respects Unted States ta , for the ta abe years begnnng on or
after the 1st day of anuary In the year ne t foowng that n whch such
notce Is gven
(6) (1) as respects Unted ngdom ncome ta , for any year of assessment
begnnng on or after the 6th day of pr n the year ne t foowng that n
whch such notce s gven () as respects Unted ngdom surta , for any
year of assessment begnnng on or after the 6th day of pr In the year n
whch such notce s gven and () as respects Unted ngdom e cess
profts ta and natona defense contrbuton, for any chargeabe accountng
perod begnnng on or after the 1st day of pr In the year ne t foowng
that n whch such notce s gven and for the une pred porton of any
chargeabe accountng perod current at that date.
(2) The termnaton of the present conventon or of any artce thereof sha
not have the effect of revvng any treaty or arrangement abrogated by the present
conventon or by treates prevousy concuded between the contractng partes.

s used n ths Treasury decson, uness the conte t otherwse
requres, the terms defned n the above artces of the conventon sha
have the meanngs so assgned to them.
Sec. 7.501. Dvdends. (a) Genera. The rate of ta mposed by
secton 211(a) of the Interna Revenue Code (reatng to nonresdent
aen ndvduas not engaged n trade or busness wthn the Unted
States) and by secton 231(a) of the Interna Revenue Code (reatng
to foregn corporatons not engaged n trade or busness wthn the
Unted States) s 30 per cent. Such rate n the case of dvdends
receved n any ta abe year begnnng on or after anuary 1, 1945,
from sources wthn the Unted States by (1) a nonresdent aen
(ncudng a nonresdent aen ndvdua, fducary, and partnershp)
who s a resdent of the Unted ngdom or (2) a foregn corporaton
(whether or not organzed under the aws of the Unted ngdom)
whch s managed and controed n the Unted ngdom, s reduced
to 15 per cent under the provsons of rtce I of the conventon
f such aen or corporaton
() s sub|ect to Unted ngdom ta on such dvdends, and
() at no tme durng the ta abe year n whch such dvdend
was so receved was engaged n trade or busness wthn the Unted
States.
or the purposes of rtces I, II, III, and I of the conventon,
a nonresdent aen or foregn corporaton s not engaged n trade
or busness wthn the Unted States uness such aen or foregn
corporaton has a permanent estabshment stuated theren at some
tme n the ta abe year. Thus, f a nonresdent aen who s a res-
dent of the Unted ngdom, performs persona servces wthn the
Unted States durng the caendar year 1945, has at no tme durng
such year a permanent estabshment wthn the Unted States, and
s sub|ect to Unted ngdom ta wth respect to a dvdend derved
by hm from Unted States sources, he s entted to the reduced rate
of ta wth respect to such dvdend, as provded n rtce I of
the conventon even though by reason of hs havng rendered persona
servces wthn the Unted States he s engaged n trade or busness
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29.143-1.)
7
theren n that year wthn the meanng of secton 211(b) of the In-
terna Revenue Code. The fact that the payee of the dvdend s,
owng to the appcaton of reefs or e emptons under Unted ng-
dom revenue aws, not requred to pay Unted ngdom ta on such
dvdend does not prevent the appcaton of the reducton of the rate
of Unted States ta wth respect to such dvdend. If the dvdend
woud have been sub|ect to Unted ngdom ta had the payee thereof
derved suffcenty arge an ncome to requre payment of ta , then
abty to Unted ngdom ta e sts for the purposes of the reduc-
ton n the rate of Unted States ta . s to what consttutes a perma-
nent estabshment, see rtce 11(1) (I) of the conventon.
In the case of dvdends pad on or after anuary 1, 1945, by a
corporaton created under the aws of the Unted ngdom no wth-
hodng of Unted States ta s requred.
(b) Dvdends pad by a Unted States subsdary corporaton.
Under the provso of rtce I (1) of the conventon, dvdends pad
by a domestc corporaton to a foregn corporaton controng, drecty
or ndrecty, at the tme the dvdend s pad 95 per cent or more of
the votng power n such domestc corporaton, are sub|ect to ta at
the rate of ony 5 per cent, f (1) not more than 25 per cent of the
gross ncome of the domestc corporaton payng the dvdend for
the 3-year perod mmedatey precedng the ta abe year n whch
the dvdend s pad conssts of dvdends and nterest (other than
dvdends and nterest pad to such domestc corporaton by ts own
subsdary corporatons, f any), and (2) the reatonshp between
such domestc corporaton and such foregn corporaton has not been
arranged or mantaned prmary wth the ntenton of securng such
reduced rate of 5 per cent.
Thus, for e ampe, the Corporaton s a domestc corporaton,
97 per cent of the entre votng stock of whch s controed by the T
Company, Ltd., a foregn corporaton managed and controed n the
Unted ngdom, not havng a permanent estabshment, n the Unted
States at any tme durng the caendar year 1945, and sub|ect to Unted
ngdom ta wth respect to any dvdends receved by t or credted
to ts account n the Unted States. The Corporaton makes ts
ncome ta returns on the caendar year bass and throughout each
of the years 1942, 1943, and 1944 derved not more than 25 per cent
of ts gross ncome from nterest and dvdends from corporatons
other than ts own subsdary corporatons. The reatonshp between
the Corporaton and the Y Company, Ltd., s a reatonshp ar-
ranged and mantaned wthout reference to the reduced rate of 5
per cent on dvdends provded n the provso n rtce T(1) of
the conventon. dvdend was pad by the Corporaton to the Y
Company, Ltd., on uy 1,1945. The reduced rate of ta of 5 per cent
s appcabe to such dvdend.
ny domestc corporaton whch cams or contempates camng
that dvdends pad or to be pad by t on or after anuary 1, 1945,
are sub|ect ony to the 5 per cent rate sha fe, as soon as practcabe,
wth the Commssoner of Interna Revenue, the foowng nforma-
ton: (1) the date and pace of ts organzaton (2) the ocaton of
the management and contro of the foregn corporaton to whch the
dvdend s pad or to be pad (3) the number of outstandng shares
of stock of the domestc corporaton havng votng power and the
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79
29.143-1.
votng power thereof (4) the person or persons benefcay ownng
such stock of the domestc corporaton and ther reatonshp to such
foregn corporaton (5) the amount of gross ncome, by years, of the
payng corporaton for the 3-year perod mmedatey precedng the
ta abe year n whch the dvdend s pad (6) the amount of nterest
and dvdends, by years, ncuded n the gross ncome of the domestc
corporaton and the amount of nterest and dvdends, by years, re-
ceved by such corporaton from ts subsdary corporatons, f any
and (7) the reatonshp between , the domestc corporaton and the
foregn corporaton to whch t pays the dvdend.
s soon as practcabe after such nformaton s fed, the Com-
mssoner of Interna Revenue w determne whether the dvdends
concerned fa wthn the scope of the provso of rtce I (1) of
the conventon and may authorze the reease of e cess ta wthhed
wth respect to dvdends whch come wthn such provso. In any
case n whch the Commssoner of Interna Revenue has notfed such
domestc corporaton that t comes wthn such provso, the reduced
rate of 5 per cent appes to any dvdends subsequenty pad bv such
corporaton to the foregn corporaton uness the stock ownershp of
the domestc corporaton, or the character of ts ncome, or the pace
of management and contro of the corporaton to whch the dvdend
s pad, materay changes, and, f such change or changes occur, such
corporaton sha prompty notfy the Commssoner of Interna
Revenue of the then e stng facts wth respect to suc stock owner-
shp, ncome, and contro.
(c) ffect on wthhodng of address n Unted ngdom. or the
purposes of wthhodng of the ta n the case of dvdends, every
nonresdent aen (ncudng a nonresdent aen ndvdua, fducary,
or partnershp) whose address s n the Unted ngdom sha be
deemed by Unted States wthhodng agents to be a resdent of the
Unted ngdom and sub|ect to Unted ngdom ta , and every cor-
poraton whose address s n the Unted ngdom sha be deemed by
such wthhodng agents to be a foregn corporaton managed and
controed n the Unted ngdom and sub|ect to Unted ngdom ta .
(d) Rate of wthhodng. On and after September 5, 1946 (10
days after the date on whch ths Treasury decson was fed wth
the Dvson of the edera Regster), wthhodng n the case of
dvdends pad to nonresdent aens and foregn corporatons, whose
addresses are n the Unted ngdom, sha (e cept (1) n any case
n whch, pror to the date of payment of such dvdend, the Com-
mssoner of Interna Revenue has notfed the payng corporaton
that such dvdend fas wthn the provso of rtce I (1) of the
conventon, and (2) n any case n whch the Commssoner notfes
the wthhodng agent that the reduced rate sha not appy) be at the
rate of 15 per cent.
In the case of every dvdend pad to a person whose addreas s n
the Unted ngdom, there sha be shown on the check or draft repre-
sentng such .dvdend or on an accompanyng statement, ether n
wrtng or stamped thereon by means of a rubber stamp or other sut-
abe devce, the rate of ta at whch Unted States ta has been wth-
hed from such dvdend.
In any case n whch a custodan account s mantaned wth a bank
n the Unted States by a nonresdent aen or foregn corporaton
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29.143-1.
0
whose address s n the Unted ngdom and such aen or corporaton
notfes ts custodan that the reduced rate of ta of 15 per cent shoud
not appy to dvdends pad by such custodan wth respect to such
account, the custodan sha wthhod the ta at the rate of 30 per cent
wth respect to such dvdends at the source wthout regard to the
reduced rate of wthhodng provded n ths Treasury decson.
The precedng provsons reatve to resdents of the Unted ng-
dom and to foregn corporatons managed and controed n the Unted
ngdom are based upon the assumpton that the payee s the actua
owner of the capta stock from whch the dvdend s derved and
consequenty s the person abe to the ta upon such dvdend. s
to acton by the recpent who s not the owner of the dvdend, see
secton 7.507 of ths Treasury decson.
Sec. 7.502. Interest. (a) Genera. Interest (other than nterest
fang wthn the scope of (6) of ths secton), whether on bonds,
securtes, notes, debentures, or any other form of ndebtedness (n-
cudng nterest on obgatons of the Unted States and on obga-
tons of nstrumentates of the Unted States) receved n any ta abe
year begnnng on or after anuary 1, 1945, from sources wthn the
Unted States by (1) a nonresdent aen (ncudng a nonresdent
aen ndvdua, fducary, and partnershp) who s a resdent of the
Unted ngdom, or (2) a foregn corporaton (whether or not organ-
zed under the aws of the Unted ngdom) whch s managed and
controed n the Unted ngdom, s e empt from Unted States
ta under the provsons of rtce II of the conventon f such aen,
or corporaton
() s sub|ect to Unted ngdom ta on such nterest, and
() at no tme durng the ta abe year n whch such nterest
was so derved had a permanent estabshment stuated wthn
the Unted States.
Such nterest s, therefore, not sub|ect to the wthhodng provsons
of the Interna Revenue Code.
To obvate wthhodng at the source n the case of coupon bond
nterest, the nonresdent aen resdent n the Unted ngdom or the
foregn corporaton managed and controed n the Unted ngdom
sha fe, n dupcate, wth each presentaton of nterest coupons for
payment, orm 1001-U . Such form sha be sgned by the owner
of the nterest, trustee or agent, and sha show the name and address
of the obgor, and the name and the address of the owner of such
nterest and the amount of such nterest. Such form sha contan
a statement that the owner s a resdent of the Unted ngdom or s
a foregn corporaton managed and controed n the Unted ng-
dom, and that the owner has no permanent estabshment n the Unted
States and s chargeabe to the Unted ngdom ta wth respect to
the ncome.
The e empton from Unted States ta contempated by rtce II
of the conventon, n so far as t concerns coupon bond nterest, s an
e empton appcabe ony to the owner of such nterest. The person
presentng such coupon or on whose behaf t s presented sha, for
the purpose of the e empton, be deemed to be the owner of the nterest
ony f he s, at the tme the coupon s presented for payment, the
owner of the bond from whch the coupon has been detached. If
the person presentng the coupon s not the owner of the bond, orm
1001, and not orm 1001-U , sha be e ecuted.
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29.143-1.
The orgna and dupcate ownershp certfcates, orm 1001-U ,
must be forwarded to the Commssoner wth the quartery return,
orm 1012, as provded n e stng reguatons wth respect to orm
1001. (See secton 29.143-7, Reguatons 111.) orm 1001-U need
not be sted on orm 1012.
In the case of nterest coupons presented n the Unted ngdom
by a nonresdent aen or by a foregn corporaton, not chargeabe to
Unted ngdom ta n respect of such nterest, ownershp certfcates,
orm 1001, sha be fed as provded n e stng reguatons wthout
reference to the provsons of the conventon. (See secton 29.143-4,
Reguatons 111.)
To obvate wthhodng at the source n the case of nterest other
than nterest payabe by means of coupons, the nonresdent aen who
s a resdent of the Unted ngdom, or the foregn corporaton man-
aged and controed n the Unted ngdom, sha fe, n dupcate,
wth the wthhodng agent n the Unted States, orm 1001 -U .
Such form sha be sgned by the owner of the ncome, trustee or
agent, and sha show the name and address of the obgor and the
name and the address of the owner of such nterest. Such form sha
contan a statement that the owner s a resdent of the Unted ng-
dom or s a foregn corporaton managed and controed n the Unted
ngdom, and that the owner has no permanent estabshment n the
Unted States and s chargeabe to Unted ngdom ta wth respect
to such nterest. The degree of abty to Unted ngdom ta suf-
fcent to entte the owner of the nterest (ncudng coupon bond
nterest) to e empton from wthhodng s the same as that wth re-
spect to dvdends. (See secton 7.501(a) of ths Treasury decson.)
orm 1001 -U must be fed for each caendar year and shoud
be so fed not ater than a date 20 days precedng the date of the frst
payment of the ncome n such caendar year. If a ta payer fes such
form for 1946, no addtona orm 1001 -U need be fed pror to the
caendar year 194 .
The dupcate of orm 1001 -U shoud be mmedatey forwarded
by the wthhodng agent to the Commssoner of Interna Revenue,
Records Dvson, Washngton 25, D. C.
In the case of nterest pad on or after anuary 1,1945, by a corpora-
ton created under the aws of the Unted ngdom no wthhodng of
Unted States ta s requred.
(b) empton not appcabe to nterest pad by subsdary corpora-
ton to ts parent corporaton. rtce II (1) of the conventon
provdes n part that the e empton from Unted States ta of n-
terest pad to resdents of the Unted ngdom (as defned n rtce
11(1) (g) of the conventon) sha not appy to nterest pad by a
domestc corporaton to a foregn corporaton managed and controed
n the Unted ngdom f such foregn corporaton contros, drecty
or ndrecty, more than 50 per cent of the votng power of a casses
of stock of such domestc corporaton. The e empton provsons of
rtce II (1) of the conventon have, therefore, no appcaton to
such nterest. In any case n whch (1) a foregn corporaton man-
aged and controed n the Unted ngdom derves nterest from a
domestc corporaton and (2) the reatonshp e stng between the
foregn corporaton and the domestc corporaton s such as to render
uncertan whether the e empton appes to such nterest, nether
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29.143-1.
2
orm 1001-U nor orm 1001 -U shoud be e ecuted by the foregn
corporaton. In such case a statement of the facts shoud be fed wth
the Commssoner of Interna Revenue, Washngton 25, D. C. s soon
as practcabe after such statement s fed the Commssoner of In-
terna Revenue w determne whether the nterest nvoved s en-
tted to e empton under the provsons of rtce II() of the
conventon, and w notfy such foregn corporaton whether the e -
empton provded n rtce II (1) of the conventon appes n such
case. If n such case the Commssoner of Interna Revenue deter-
mnes that such e empton appes, then orm 1001 -U shoud be
fed together wth a copy of the etter from the Commssoner of
Interna Revenue.
Sec. 7.503. Patent and Copyrght Royates and m Rent-
as. Royates and other ke amounts receved n any ta abe year
begnnng on or after anuary 1, 1945, from sources wthn the
Unted States by (a) a nonresdent aen (ncudng a nonresdent
aen ndvdua, fducary, and partnershp) who s a resdent of
the Unted ngdom, or (b) a foregn corporaton (whether or not
organzed under the aws of the Unted ngdom) whch s man-
aged and controed n the Unted ngdom, as consderaton for
the use of, or for the prvege of usng, copyrghts, patents, desgns,
secret processes and formuae, trade-marks, and other ke property,
are e empt from Unted States ta under the provsons of rtce
III of the conventon f such aen or corporaton
(1) s sub|ect to Unted ngdom ta on such royates or
other amounts, and
(2) at no tme durng the ta abe year n whch such royaty
or other amounts were so receved had a permanent estar|sh -
ment wthn the Unted States.
Such tems are, therefore, not sub|ect to the wthhodng provsons
of the Interna Revenue Code. or the purposes of rtce III of
the conventon and of ths secton the terms royates and
royates and other ke amounts ncude rentas for the use of,
or for the rght to use, moton pcture fms. s to what consttutes
. a permanent estabshment, see rtce .11(1) (I) of the conventon.
To obvate wthhodng at the source, the nonresdent aen who
s a resdent of the Unted ngdom, or the foregn corporaton
managed and controed n the Unted ngdom, sha fe, n dup-
cate, wth the wthhodng agent n the Unted States orm 1001 -
U . Such form sha be sgned by the owner of the ncome, trustee
or agent, and sha show the name and address of the payor of the
royaty or other ke amount, and the name and the actdress of the
owner of such ncome. Such form sha contan a statement that
the owner s a resdent of the Unted ngdom or s a foregn cor-
poraton managed and controed n the Unted ngdom, and that
the owner has no permanent estabshment n the Unted States and
s chargeabe to Unted ngdom ta wth respect to such ncome.
The degree of abty to Unted ngdom ta suffcent to entte
the payee of the ncome to e empton from wthhodng s the same
as that wth respect to dvdends. (See secton 7.501(a) of ths
Treasury decson.)
The dupcate copy of orm 1001 -U shoud be mmedatey
forwarded by the wthhodng agent to the Commssoner of Interna
Revenue, Records Dvson, Washngton 25, D. C.
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29.143-1.
Sec. 7.504. Rea Property Rentas and Natura Resource
Royates. The rate of ta mposed by secton 211(a) of the In-
terna Revenue Code (reatng to nonresdent aen ndvduas not
engaged n trade or busness wthn the Unted States) and by sec-
ton 231(a) of the Interna Revenue Code (reatng to foregn cor-
poratons not engaged n trade or busness wthn the Unted States)
s 30 per cent. Such rate n the case of rea property rentas and
royates n respect of the operaton of natura resources receved on
or after anuary 1, 1945, from sources wthn the Unted States by
(a) a nonresdent aen (ncudng a nonresdent aen ndvdua,
fducary, and partnershp) who s a resdent of the Unted ng-
dom or (b) a foregn corporaton (whether or not organzed under
the aws of the Unted ngdom) whch s managed and controed
n the Unted ngdom, s reduced to 15 per cent under the pro-
vsons of rtce I of the conventon f such aen or corporaton
(1) s sub|ect to Unted ngdom ta on such royates or
other amounts, and
(2) at no tme durng the ta abe year n whch such renta
or royaty or other amount was so receved had a permanent
estabshment stuated wthn the Unted States.
s to what consttutes a permanent estabshment, see rtce
11(1) (I) of the conventon.
In order to secure the beneft of the reduced rate of ta provded n
rtce I of the conventon at the tme the rea property renta or
natura resource royaty s pad, the nonresdent aen who s a resdent
of the Unted ngdom, or the foregn corporaton managed and con-
troed n the Unted ngdom, sha fe, n dupcate, wth the wth-
hodng agent n the Unted States orm 1001 -U . Such form sha
be sgned Dy the owner of the ncome, trustee or agent, and sha show
the name and address of the payor of the renta or royaty, and the
name and the address of the owner of such ncome. Such form sha
contan a statement that the owner s a resdent of the Unted ng-
dom or s a foregn corporaton managed and controed n the Unted
ngdom, and that the owner has no permanent estabshment n the
Unted States, and s chargeabe to Unted ngdom ta wth respect
to such ncome. s to the degree of abty to Unted ngdom ta
suffcent to entte the owner of the ncome to the reduced rate of 15
percent, see secton 7.501(a) of ths Treasury decson.
The dupcate copy of orm 1001 -U shoud be mmedatey for-
warded by the wthhodng agent to the Comnrssoner of Interna
Revenue, Records Dvson, Washngton 25, D. C.
Sec. 7.505. Pensons and Lfe nnutes. rtce II of the
conventon provdes n part that pensons (other than pensons pad by
the Unted States) and fe annutes derved on or after anuary 1,
1945, from sources wthn the Unted States by a nonresdent aen
ndvdua who s a resdent of the Unted ngdom sha be e empt
from Unted States ta .
The person payng such ncome shoud be notfed by etter from the
resdent of the Unted ngdom that the ncome s e empt from ta -
aton under the provsons of the conventon. Such etter sha contan
the address of the ndvdua. The etter of notfcaton, or a copy
thereof, shoud be mmedatey forwarded by the recpent to the Com-
mssoner of Interna Revenue, Records Dvson, Washngton 25,
D. C. Such etter sha consttute authorzaton to the payor of the
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29.143-1.
4
ncome to pay such ncome wthout deducton of the ta at the source
uness the Commssoner subsequenty notfes such payor that the ta
shoud be wthhed wth respect to payments made after such
notfcaton.
Sec. 7.506. Reease of cess Ta Wthhed at Source. (a)
Genera. In order to brng the conventon nto force and effect at
the earest practcabe date
(1) the reduced rate of ta of 15 per cent to be wthhed at the
source on dvdends, natura resource royates, and rea property
rentas, and
(2) e empton from ta otherwse wthhed at the source on
nterest, patent royates, copyrght royates, fm rentas, and
the ke,
are hereby made effectve begnnng anuary 1, 1946, n any case
n whch such dvdends, natura resource royates, rea property
rentas, nterest, patent royates, copyrght royates, fm rentas,
and the ke are derved from sources wthn the Unted States
by () a nonresdent aen (ncudng a nonresdent aen ndvdua,
fducary, and partnershp) who s a resdent of the Unted ngdom,
or () a foregn corporaton (whether or not organzed under the
aws of the Unted ngdom) whch s managed and controed n
the Unted ngdom.
ccordngy n the case of every nonresdent aen (ncudng a
nonresdent aen ndvdua, fducary, and partnershp) whose ad-
dress s n the Unted ngdom, and every foregn corporaton whose
address s n the Unted ngdom, where ta at the rate of 30 per cent
has been wthhed on or after anuary 1, 1946, from dvdends, there
sha be reeased by the wthhodng agent and pad over to the person
from whom t was wthhed an amount equa to 15 per cent of such
dvdend.
In the case of every such ta payer who furnshes to the wthhodng
agent orm 1001 -U as prescrbed n secton 7.502, 7.503, or 7.504
of ths Treasury decson where ta at the rate of 30 per cent has been
wthhed on or after anuary 1, 1946, there sha be reeased by the
wthhodng agent and pad over to the person from whom t was
wthhed an amount equa to ( ) the amount so wthhed n the case
of nterest (as to coupon bond nterest, see ne t paragraph), patent
royates, copyrght royates, fm rentas, and the ke, and ( ) any
amount so wthhed n e cess of 15 per cent of the amount of natura
resource royates and rea property rentas.
In the case of every such ta payer descrbed n the frst paragraph
of ths subsecton who furnshes to the wthhodng agent orm
1001-U , n dupcate, where ta at the rate of 2 or 30 per cent, as
the case may be, has been wthhed on or after anuary 1, 1946, from
coupon bond nterest, there sha be reeased by the wthhodng agent
and pad over to the person from whom t was wthhed an amount
equa to the ta wthhed from such nterest. orm 1001-U used for
ths purpose shoud be ceary marked Substtute n order to repace
orms 1001 prevousy fed. One orm 1001-U , n dupcate, may
be used to repace two or more orms 1001. The form marked
Substtute s to be used soey for the reease of e cess ta wthhed
n 1946. The use of orm 1001-U for the purpose of e empton
upon presentaton of nterest coupons s set forth n secton 7.502(a)
of ths Treasury decson.
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29.143-1.
s to refund of e cess ta wthhed durng the caendar year 1945,
see secton 7.511 of ths Treasury decson.
(6) Pensons and fe annutes. In order to brng the conventon
nto force and effect at the earest practcabe date the e empton from
ta otherwse wthhed at the source on pensons (other than pensons
pad by the Unted States) and fe annutes s made effectve begn-
nng anuary 1, 194f, n any case n whch such pensons and fe
annutes are derved from sources wthn the Unted States by a non-
resdent aen ndvdua who s a resdent of the Unted ngdom.
The person payng such ncome shoud be notfed by etter from the
resdent of the Unted ngdom that the ncome s e empt from ta a-
ton under the provsons of rtce II of the conventon. (See
secton 7.505 of ths Treasury decson.) Such etter sha consttute
authorzaton to the payor of the ncome to reease the ta wthhed
on or after anuary 1,1946, from such pensons and fe annutes.
(c) Subsdary s dvdends. Wth respect to a dvdend pad on or
after anuary 1,1945, by a domestc corporaton to a foregn corpora-
ton whose address s n the Unted ngdom, ta sha be wthhed at
the rate of 15 per cent uness pror to the date of payment of such
dvdend the Commssoner of Interna Revenue has notfed the payng
corporaton that such dvdend fas wthn the scope of the provso of
rtce I(1) of the conventon. s soon as practcabe after nfor-
maton requred under secton 7.501 (b) of ths Treasury decson s
fed, the Commssoner of Interna Revenue w determne whether
the dvdend nvoved fas wthn the scope of such provso and may
authorze the reease of- the e cess ta wthhed wth respect to
dvdends whch come wthn the scope of such provso.
Sec. 7.507. ddressee Not ctua Owner. If the recpent n the
Unted ngdom of the dvdend s a nomnee or agent through whom
the dvdend fows to a person other than the person descrbed n
secton 7.501(a) of ths Treasury decson as beng entted to the
reduced rate of ta of 15 per cent provded n rtce I of the con-
venton, such recpent n the Unted ngdom w wthhod an
addtona ta equvaent to 15 per cent of the gross dvdend pror to
dmnuton by the 15 per cent prevousy deducted n the Unted States.
The amounts so wthhed by the wthhodng agent n the Unted
ngdom w, on or before the 15th day after the cose of the caendar
year quarter n whch such wthhodng takes pace, be deposted wth
the Unted ngdom oard of Inand Revenue, wthout convertng
such amounts nto doars. ach wthhodng agent makng such de-
post w accompany such depost wth the approprate rtsh form
e ecuted as requred by the oard of Inand Revenue. The oard of
Inand Revenue have arranged that they w, on or before the end of
the caendar month n whch such depost s so made wth the oard,
remt by draft n Unted States doars the amounts so deposted to
the coector of nterna revenue, atmore, Md., Unted States of
merca, together wth the aggregate of any ot her amounts of Unted
States ta wthhed by the oard, forwardng wth such draft the
approprate rtsh form fed wth the oard by the Unted ngdom
wthhodng agents.
ducares and partnershps wth an address n the Unted ng-
dom are accorded the beneft of the reduced rate of wthhodng wth
respect to dvdends. If, however, the fducary or partnershp s
actng as a nomnee or agent recevng the dvdend for or on behaf
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29.143-1.
S6
of a person other than a person descrbed n secton 7.501(a) of ths
Treasury decson as beng entted to the reduced rate of ta , an ad-
dtona ta equa to 15 per cent of the gross dvdend pror to ts
dmnuton by the 15 per cent deducted n the Unted States w be
deducted by such fducary or partnershp and treated as provded n
the mmedatey precedng paragraph.
In any case n whch the fducary or partnershp receves a dvdend
from a Unted States domestc corporaton, f a benefcary of such
fducary or a partner n such partnershp s a nonresdent aen not
chargeabe to Unted ngdom ta wth respect to the porton of such
dvdend ncuded n such benefcary s share of the dstrbutabe n-
come of such fducary (f such fducary tsef s not chargeabe to
Unted ngdom ta on such dvdend), or n the dstrbutve share
of such partner n such partnershp s ncome, as the case may be, the
fducary or partnershp w wthhod an addtona ta equa to 15
per cent of the amount of such dvdend so ncuded.
Sec. 7.50 . Retukn of Ta Wthhed and Informaton Rf.tt|kn
Wth Respect to Persons Whose ddresses are n the Unted ng-
dom. very Unted States wthhodng agent sha make and fe wth
the coector, n dupcate, an nformaton return on orm 1042D, n
addton to the wthhodng return, orm 1042, for the caendar year
1946 and each subsequent caendar year, wth respect to: (a) dvdends
from whch a ta of 15 per cent was wthhed from persons whose ad-
dresses are n the Unted ngdom (5 per cent n the case of dvdends
fang wthn the scope of the provso of rtce I (1) of the con-
venton) (6) rea property rentas and natura resource royates
from whch a ta of 15 per cent was wthhed from persons whose ad-
dresses are n the Unted ngdom (c) royates and ke amounts
and nterest (other than coupon bond nterest reported on orm 1001-
U ) from whch no ta was wthhed from persons who have fur-
nshed to the wthhodng agent orm 1001 -U and (d) a other
f ed or determnabe annua or perodca ncome pad to such persons.
Sec. 7.509. enefcares of a Domestc state or Trust. non-
resdent aen who s a resdent of the Unted ngdom and who s a
benefcary of a domestc estate or trust sha be ent ted to the e emp-
ton, or reducton n the rate of ta , as the case may be, provded n
rtces I, II, III, and I of the conventon wth respect to
dvdends, nterest, royates, natura resource royates, and rentas
from rea property to the e tent such tem or tems are ncuded n
hs dstrbutve share of ncome of such estate or trust. In such case
such benefcary must, n order to be entted to the e empton or
reducton n the rate of ta , e ecute orm 1001 -U and fe such
form wth the fducary of such estate or trust n the Unted States.
Sec. 7.510. Refund of cess Ta Wthhed. If the ta wthhed
at the source upon dvdends, nterest, royates, natura resource roya-
tes, rea property rentas, pensons, or fe annutes pad durng the
caendar year 1945 s n e cess of the ta due from a ta payer under
the conventon, t w be necessary for the ta payer, n order to com-
pute the ta propery, to fe an ncome ta return. orm 1040N
(Unted ngdom) for ndvduas, and orm 1120N (Unted ng-
dom), for corporatons, for such ta abe year. The ta payer s tota
f ed or determnabe annua or perodca ncome from sources wthn
the Unted States shoud be reported on such return and n the event
securtes are hed n the name of a person other than the actua owner,
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7
29.14 -1.
the name of such person shoud be furnshed. There sha be ncuded
n such return the foowng statements:
(1) That the ta payer s a nonresdent aen (ncudng a non-
resdent aen ndvdua, fducary, or partnershp) resdent n
the Unted ngdom or s a foregn corporaton managed and
controed n the Unted ngdom
(2) That the ta payer had a permanent estabshment n the
Unted States at no tme durng the ta abe year n whch the
ncome was receved |
(3) That the ta payer s sub|ect to Unted ngdom ncome
ta upon the ncome wth respect to whch the benefts of the
conventon are camed.
owever, the statements requred by (2) and (3) are not appcabe
n the case of a ta payer whose ncome from sources wthn the Unted
States durng the caendar year 1945 conssted e cusvey of pensons
or fe annutes. s to addtona nformaton requred n the case
of a foregn corporaton camng a rate of 5 per cent on dvdends
pad by ts domestc subsdary corporaton, see secton 7.501(6) of
ths Treasury decson.
or the purposes of refund of e cess ta wthhed resutng from the
ta conventon, a propery e ecuted return on orm 1040N (Unted
ngdom) or orm 1120N (Unted ngdom) sha consttute a
cam for refund or credt wthn the meanng of secton 322 of the
Interna Revenue Code for the amount of the overpayment dscosed
by such return. n amended return, so-caed, sha not be con-
sdered a cam for refund or credt. ny ta pad n e cess of that
due from the owner of the ncome w be refunded by the Unted
States Government as requred by aw.
Sec. 7.511. Canadan Wthhodng gents. In the case of any
dvdend pad durng 1946 or subsequent years to a recpent whose
address s n Canada and who s a nomnee, agent, or custodan through
whom the dvdend fows to a person whose address s n the Unted
ngdom, no wthhodng by such nomnee or agent s requred. ny
ta so wthhed wth respect to dvdends on or after anuary 1,1946,
may be reeased to such person by the wthhodng agent n Canada.
In any case n whch nterest, rents, or royates are pad durng 1946
or subsequent years to such nomnee, agent, or custodan through
whom such ncome fows to a resdent of the Unted ngdom, no
wthhodng by such nomnee, agent, or custodan s requred f orm
1001-U or orm 1001 -U , as the case may be, s fed by such per-
son wth such nomnee, agent, or custodan, n the same manner as
provded n sectons 7.502, 7.503, and 7.504 of ths Treasury decson.
The dupcate of orm 1001 -U shoud be transmtted (attached to
orm 1042) by the Canadan nomnee, agent, or custodan to the
coector of nterna revenue, atmore, Md. ny ta so wthhed
wth respect to nterest, rents, or royates on or after anuary 1 1946,
pad to a resdent of the Unted ngdom who fes orm 1001-U or
orm 1001 -U , may be reeased to such person by the wthhodng
agent n Canada.
The provsons of Treasury Decson 5157, approved une 27, 1942
C. . 1942-2, 137 , are hereby amended to the e tent that they are
nconsstent wth ths secton and as so amended are made appcabe
to payments of dvdends, nterest, rents, or royates made by Canadan
wthhodng agents on and after anuary 1,1946.
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29.143-1.

secton 62 of the Interna Revenue Code (53 Stat., 32 26 U. S. C,
1940 ed., 62).)
Wm. T. Sherwood,
ctng Commssoner of I nterna Revenue.
pproved ugust 23,1946.
Secton 29.143-1: Wthhodng ta at source. 1946-20-12411
( so Secton 144, Secton 29.144-1.) Mn. 6063
enefts accorded resdents of Unted ngdom and foregn cor-
poratons managed and controed n Unted ngdom under Unted
States-Unted ngdom ncome ta conventon.
Washngton 25, D. C, September 6,19 6.
Offcers and mpoyees of the Interna Revenue Servce and Othen
Concerned:
Paragraph 1. Genera. Under the ncome ta conventon between
the Unted States and the Unted ngdom, effectve as to Unted
States ta aton for ta abe years begnnng on or after anuary 1,
1945, a resdent of the Unted ngdom who s cassfed as a non-
resdent aen of the Unted States and a corporaton managed and
controed n the Unted ngdom cassfed as a foregn corporaton
for Unted States ncome ta purposes are, under the condtons set
forth beow n paragraph 2, entted to the foowng e emptons or
parta e emptons from Unted States ncome ta :
nd of ncome from Unted States sources. empton or parta e empton.
Dvdends
Natura resource royates
Rea property rentas
Dvdends of Unted States corporatons sub-1
sdares of certan corporatons resdent In)
Unted ngdom. f
Royates (other than natura resource roya-
tes)
Interest (but see paragraph 2).
Pensons and fe annutes
Reduced rate of 15 per ceaL
Reduced rate of 5 per cent
Tota e empton.
Par. 2. Condtons of empton. In the case of dvdends, n-
terest, royates, natura resource royates, and rea property rentas,
the e empton or parta e empton appes to a nonresdent aen who
s a resdent of the Unted ngdom and to a foregn corporaton
managed and controed n the Unted ngdom f such aen or cor-
poraton (a) s sub|ect to Unted ngdom ta and (b) s not engaged
n trade or busness through a permanent estabshment n the Unted
States n the year n whch the ncome s pad. In the case of pensons
and fe annutes, a that s necessary s that the nonresdent aen
recpent be resdent n the Unted ngdom. These e emptons have
no appcaton to Unted States ctzens whether or not resdent n the
Unted ngdom. No e empton appes to nterest pad by a domes-
tc subsdary corporaton to ts Unted ngdom parent corporaton.
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29.143-1.
The e emptons and parta e emptons are gven effect n the Unted
States n the foowng manner:
(1) Dvdends. Under Unted States wthhodng reguatons,
wthhodng agents n the Unted States payng dvdends are author-
zed to appy the reduced rate of 15 per cent to dvdends pad on or
f ter September 5,1946, n the case of stockhoders whose addresses on
the records of the wthhodng agent are n the Unted ngdom.
There s no necessty for fng any form wth the wthhodng agent
n the case of dvdends. The reduced rate of ta w be apped to
dvdends pad on or after September 5,1946, and the e cess ta wth-
hed snce December 31, 1945, w be reeased on the same condtons.
reduced rate of 5 per cent on dvdends receved from Unted States
corporatons subsdares of certan corporatons resdent n the
Unted ngdom, becomes effectve upon such Unted States corpora-
tons obtanng a determnaton from the Commssoner of Interna
evenue that such dvdends are sub|ect to the reduced rate of 5 per
cent.
(2) Coupon bond nterest. In the case of coupon bond nterest,
there must be fed wth each nterest coupon or group of coupons when
resentng them for payment Unted States orm 1001-U e ecuted
y the bondhoder or hs agent. orm 1001-U marked subst-
tute w, when fed wth the wthhodng agent n the Unted
States, enabe hm to reease e cess ta wthhed on coupon bond nter-
est snce December 31,1945.
(3) Interest other than coupon bond nterest), royates, natura
resource royates, and rea property rentas. In the case of these
tems of ncome, there must be fed wth the wthhodng agent n the
Unted States orm 1001 -U . Ths form, when so fed, w enabe
the wthhodng agent n the Unted States to appy the e empton or
reduced rate of ta and to reease the e cess ta wthhed snce Decem-
ber 31,1945.
(4) Pen-nons and fe annutes. The recpent of these tems must
fe wth the payor n the Unted States a etter statng that he s a
resdent of the Unted ngdom. Ths w permt the wthhodng
agent to e empt future payments of such tems and reease the ta
wthhed on them snce December 31,1945.
Par. 3. Refund of cess Ta Wthhed. very nonresdent
aen who s a resdent of the Unted ngdom and every foregn cor-
poraton managed and controed n the Unted ngdom recevng
m 1945, from sources wthn the Unted States, dvdends, nterest,
royates, natura resource royates, rea property rentas, pensons,
or fe annutes, shoud fe orm 1040N (Unted ngdom) (n the
case of such aen) and orm 1120N (Unted ngdom) (n the case
of such corporaton) wth the coector of nterna revenue, atmore
2, Md., n order that refund may be made of e cess ta wthhed n that
year. Where the camant gets hs ncome through a Unted ng-
dom bank or markng name, he must furnsh nformaton necessary
to show the amounts of ta wthhed by the Unted States wthhodng
agents.
Par. 4. orms. The forms referred to n paragraphs 2 and 3 may
be obtaned from the oard of Inand Revenue, Somerset ouse, Lon-
don, W. C. 2, ngand. In the case of Unted States custodans or
72 20 T
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29.167-2.
90
agents actng on behaf of resdents of the Unted ngdom or Unted
ngdom corporatons, the forms may be obtaned from the coector
of nterna revenue, second New York dstrct, Customhouse, New
York 4, N. Y.
Pak. 5. Reguatons. The Unted States reguatons on wthhod-
ng at the source as affected by the conventon appear n Treasury
Decson 5532 page 73, ths uetn , approved ugust 23,1946.
shoud refer to the number thereof and the symbos ndcated: Coec-
tors of nterna revenue, C: Co nterna revenue agents n charge,
IT: and heads of fed dvsons of the Technca Staff, TS: RM.
Wm. T. Sherwood,
ctng Commssoner.
S CTION 144. P YM NT O CORPOR TION
INCOM T T SOURC .
Secton 29.144-1: Wthhodng n the case of nonresdent
foregn corporatons.
INT RN L R NU COD .
Reease of e cess ta wthhed and e empton from, or reducton n
rate of, wthhodng n the case of foregn corporatons managed and
controed n the Unted ngdom, as affected by the recproca ncome
ta conventon between the Unted States and the Unted ngdom.
(See T.D. 5532, page 73.)
Secton 29.144-1: Wthhodng n the case of
nonresdent foregn corporatons.
INT RN L R NU COD .
enefts accorded foregn corporatons, managed and controed n
the Unted ngdom, under the Unted States-Unted ngdom n-
come ta conventon. (See Mm. 6063, page .)
SUPPL M NT . ST T S ND TRUSTS.
S CTION 167. INCOM OR N IT O GR NTOR.
Secton 29.167-2: Dscretonary trusts for 1946-16-12365
mantenance or support of certan bene- G. C. M. 24946
fcares.
INT RN L R NU COD .
The ncome of a trust Is not ta abe to the grantor merey because
the corpus of the trust may, In the dscreton of the grantor actng
as trustee or cotrustee, or In the dscreton of another person, be
apped to the support or mantenance of benefcares whom the
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91
29.167-2.
grantor Is egay obgated to support. If, however, the corpus s
actuay so apped or dstrbuted, the grantor w be ta abe to
the e tent provded n secton 167(c) of the Interna Revenue Code.
n opnon s requested as to the status for edera ncome ta
purposes of the ncome of a trust n whch dscreton s vested n
another person, the trustee, or the grantor actng as trustee or cotrus-
tee, to appy or dstrbute the corpus of the trust for the support or
mantenance of a benefcary whom the grantor s egay obgated
to support. The queston nvoves the appcabty of the prncpes
of the decson n everng v. Stuart (317 U. S., 154, Ct. D. 1566,
C. . 1942-2, 19 ) to the provsons of secton 166 of the Interna
Revenue Code, n the ght of the enactment of secton 167(c) of the
Code, mtgatng the effect of the Supreme Court s determnaton.
fter the decson n the Stuart case, hodng that ncome of a
trust whch mght, n the dscreton of any person not havng an
adverse nterest n the dsposton thereof, be apped to the dscharge
of the ega obgatons of a grantor s ta abe n fu to hm under
secton 167(a) of the Code, whether or not used for such purpose,
Congress enacted secton 134(a) of the Revenue ct of 1943, whch
added subsecton (c) to secton 167 of the Code, provdng as foows:
(e) Income of a trust sha not be consdered ta abe to the grantor under
subsecton (a) or any other provson of ths chapter merey because such
ncome, n the dscreton of another person, the trustee, or the grantor
actng as trustee or cotrustee, may be apped or dstrbuted for the support or
mantenance of a benefcary whom the grantor s egay obgated to support
or mantan, e cept to the e tent that such Income s so apped or dstrbuted.
In cases where the amounts so apped or dstrbuted are pad out of corpus or
out of other than Income for the ta abe year, such amounts sha be consdered
pad out of Income to the e tent of the ncome of the trust for such ta abe
year whch s not pad, credted, or to be dstrbuted under secton 162 and
whch s not otherwse ta abe to the grantor.
Secton 167(c) of the Code conformed the aw to the admnstra-
tve practce of the ureau pror to the Stuart decson (see G. C. M.
1 972, C. . 1937-2 231), and, athough the pubshed rung does not
refer to trusts n whch the dscretonary power s over corpus rather
than ncome, the consderatons nvoved seem to be the same. There
s no record of any case n whch the Commssoner determned that
ncome of a trust was ta abe to the grantor merey because corpus
of that trust mght, n the dscreton of the grantor as trustee, or of
another person, be apped to the support of a dependent benefcary
of the grantor where corpus was not used for that purpose. nd,
athough secton 167(c) of the Code does not n terms refer to
secton 166 of the Code, t does provde that where corpus s used for
the support of the benefcary, the grantor sha be ta abe to the
e tent of the ncome whch s not ta abe under secton 162 of the
Code or otherwse ta abe to the grantor. In other words, secton
167(c) of the Code seems to contempate that the mere power to
appy corpus to the support of the benefcary sha not resut n
ta abty to the grantor, but that hs abty sha be mted
to an amount not n e cess of that actuay used.
In vew of the foregong, t s the opnon of ths offce that the
ncome of a trust s not ta abe to the grantor merey because the
corpus of the trust may, n the dscreton of the grantor actng as
trustee or cotrustee, or n the dscreton of another person, be apped
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29.202-1.
92
to the support or mantenance of benefcares whom the grantor s
egay obgated to support. If, however, the corpus s actuay so
apped or dstrbuted, the grantor w be ta abe to the e tent
provded n secton 167(c) of the Interna Revenue Code.
. P. Wenche,
SUPPL M NT . P RTN RS IPS.
S CTION 1 2. T O P RTN RS.
Secton 29.1 2-1: Dstrbutve share of partners.
INT RN L R NU COD ND R NU CT O 191 .
Dstrbuton of mtary compensaton and aowances contrbuted
by a servceman to a partnershp. (See I. T. 3 24, page 37.)
SUPPL M NT G. INSUR NC COMP NI S.
S CTION 202. D UST D NORM L-T
N T INCOM .
Secton 29.202-1: Reserve and other pocy 1946-26-12465
abty credt for ad|usted norma-ta T. D. 5MI
net ncome.
TITL 26 INT RN L R NU . C PT R I, SU P R OR P , P RT M.-
INCOM T T L Y RS GINNING T R D C M R 31. 1941.
gure to be used In determnng reserve and other pocy abty
credt for fe nsurance companes.
Offce of the Secretary of the Treasury,
Washngton, D. C, December 1 , 191f.
To Offcers and mpoyees of the Treasury Department and Other
Concerned:
Paragraph 1. y vrtue of the authorty vested n me by sector
202(b) of the Interna Revenue Code, as amended by secton 163 o:
the Revenue ct of 1912 (53 Stat., 71, 56 Stat., 70 26 U. S. C. and
Sup., 202(b)), t s hereby determned that the fgure to be used n
computng the reserve and other pocy abty credt of fe nsur-
ance companes for the ta abe year 1946 sha be .9595.
Par. 2. Pror genera notce of proposed rue makng and pubc
procedure t ereon are hereby found to be mpractcabe as deay m
determnaton and procamaton of the fgures announced heren woud
adversey affect the operatons of the ta payers nvoved.
Par. 3. Ths Treasury decson sha be effectve on the thrty-frst
day a fter the date of ts pubcaton n the edera Regster.
( ed wth the Dvson of the edera Regster December 17, 194 , .47 a. m.)
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93 29.251-1.
SUPPL M NT . POSS SSIONS O T UNIT D ST T S.
S CTION 251. INCOM ROM SOURC S WIT IN
POSS SSIONS O UNIT D ST T S.
Secton 29.251-1: Ctzens of the Unted States 1946-1 -12390
and domestc corporatons dervng ncome I. T. 3 16
from sources wthn a possesson of the Unted
States.
( so Secton 23(aa), Secton 29.23(aa)-
Secton 51, Secton 29.51-2.)
INT RN L R NU COD .
ta payer entted to and camng the benefts of secton 251 of
the Interna Revenue Code, reatng to ncome from sources wthn
possessons of the Unted States, has no eecton to pay edera
ncome ta under Suppement T of the Code or to fe orm W-2
as hs edera ncome ta return.
dvce s requested whether an ndvdua who s entted to the
benefts of secton 251 of the Interna Revenue Code, reatng to n-
come from sources wthn possessons of the Unted States, has an
eecton topay edera ncome ta under Suppement T of the Code
or to fe orm W-2 as hs edera ncome ta return. The specfc
nqury presented s whether such an ndvdua may fe an amended
edera ncome ta return on orm 1040 and cam the benefts of
secton 251 of the Code after havng fed orm W-2 as hs return.
Secton 51(f)(1) of the Interna Revenue Code provdes that an
ndvdua entted to eect to pay the ta mposed by Suppement T
of the Code, whose gross ncome s ess than 5,000 and s entrey from
one or more of certan desgnated sources, sha at hs eecton be
reeved, by usng the form prescrbed ( orm W-2) as the form for
the return for the purposes of secton 51 (f) of the Code, from showng
on the return the ta mposed by Chapter 1 of the Cocta, and n such
a case the ta sha be computed by the coector. Secton 51(f) (4)
of the Code provdes that the eecton to have the benefts of secton
51(f) of the Code sha be made by makng a return on the form pre-
scrbed as the form for the return for the purposes of that secton, and
an eecton so made sha consttute an eecton to pay the ta mposed
by Suppement T of the Code.
Secton 23 (aa) (3) of the Code provdes n effect that an eecton
by the ta payer to pay the ta under Suppement T of the Code sha
be consdered as hs eecton to take the standard deducton aowed by
secton 23 (aa) (1) of the Code, and t aso provdes that an eecton
to take the standard deducton sha be rrevocabe. owever, sec-
ton 29.23(aa)- of Reguatons 111 provdes, among other thngs,
that the standard deducton s not aowabe n the case of a ctzen
of the Unted States entted to the benefts of secton 251 of the Code.
It s hed that a ta payer entted to and camng the benefts of
secton 251 of the Interna Revenue Code has no eecton to pay ed-
era ncome ta under Suppement T of the Code or to fe orm W-2
as hs edera ncome ta return. Therefore, the fng of orm W-2
by such a ta payer does not consttute an eecton. s return shoud
be made on orm 1040 accompaned by the schedue on orm 1040 .
(See secton 29.251-1 of Reguatons 111.)
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29.466-1.
94
Secton 29.251-4: Defnton.
INT RN L R NU COD .
S CTION 322. R UNDS ND CR DITS.
Secton 29.322-7: Lmtatons upon the credtng
and refundng of ta es pad.
INT RN L R NU COD .
SU C PT R D. ICTORY T ON INDI IDU LS.
P RT II. COLL CTION O T T SOURC ON W G S.
S CTION 465. D INITIONS.
Secton 29.465-2: Wages.
INT RN L R NU COD .
Natona Labor Reatons oard back pay awards. Mm. 5530
(C. . 1943, 579) modfed. (See Mm. 6060, page 12 .)
S CTION 466. T COLL CT D T SOURC .
Secton 29.466-1: Requrement of wthhodng.
INT RN L R NG COD .
Natona Labor Reatons oard back pay awards. Mm. 5530
(C. . 1943,579) modfed. (See Mm. 6060, page 12 .)
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95 721.
C PT R 2. DDITION L T S.
SU C PT R . C SS PRO ITS T .
P RT L
S CTION 721. NORM LITI S IN INCOM
IN T L P RIOD.
Reguatons 112, Secton 35.721-7: poraton, 1946-24-2446
dscovery, prospectng, research, or deveopment. Mm. 60 2
Deveopment perod of o propertes n connecton wth the appca-
ton of secton 721(a) (2) (C) of the Interna Revenue Code.
Washngton 25, D. C, November 5, 19 f.
eads of ed Dvsons of the Technca Staff, and Others Con-
cerned:
One of the separate casses of ncome used n the determnaton of
abnormates n ncome n a ta abe year s descrbed n secton
721(a) (2) (C) of the Interna Revenue Code as foows:
(C) Income resutng from e poraton, dscovery, prospectng, research, or
deveopment of tangbe property, patents, formuae, or processes, or any com-
bnaton of the foregong, e tendng over a perod of more than 12 months
Secton 35.721-7 of Reguatons 112 provdes n part as foows:
n tem of ncome resutng from e poraton, dscovery, prospectng, research,
or deveopment s a such ncome for the ta abe year arsng out of a unt of
property such as an o ease or other mnera property defned n secton
29.23(m)-() of Reguatons 111
Secton 29.23(m)-() of Reguatons m defnes the term The
property, but does not defne the term mnera property. The
term mnera property s defned n secton 29.23(m)-(b) of the
reguatons as the mnera depost, the deveopment and pant neces-
sary for ts e tracton, and so much of the surface of the and ony as
s necessary for purposes of mnera e tracton. Some ta payers have
camed that for the purpose of secton 721(a)(2)(C) of the Code
a of the producng property shoud be consdered one property.
or e cess profts ta purposes, the ureau, as ndcated n secton
35.721-7 of Reguatons 112, has consdered an o ease as an e ampe
of a unt of property. Whe there has been some ambguty n the
use of the term property, there s nothng to ndcate that any unt
arger than a ease w as contempated by Congress. The determnaton
of the deveopment perod of a property s, therefore, based on the
concepton of a ease or ndvdua tract as the property.
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721. 96
Cases have arsen n whch drng was done a number of years pror
to the e cess profts ta years and after a ong perod another we was
dred and the whoe perod from the nta deveopment to the com-
peton of such we was camed as the deveopment perod. It has
aso been suggested that the tme consumed by premnary e poraton
and acquston of eases or propertes shoud be ncuded n the de-
veopment perod.
Geoogca and geophysca survey costs.have been the sub|ect of n-
tensve study by the ureau and repeated representatons by the
ndustry. The ureau s poston s that the cost of a such surveys
whch have for ther purpose the accumuaton of knowedge on whch
to base acton n the acquston or retenton of property s capta n
nature. Ony that sma porton of such surveys whch nave for ther
ob|ect the ocaton of the e act spot on whch to dr a we has been
recognzed as part of the deveopment cost of the ease and, as such,
formng a part of the ntangbe deveopment cost sub|ect to the opton
provded by secton 29.23(m)-16 of Reguatons 111. In harmony
wth ths poston of the ureau, t s hed that ony the tme con-
sumed n a survey made for the ocaton of the we tsef, as contrasted
wth a survey made for the acquston of nformaton bearng on the
productvty of a ease, can be consdered as part of the deveopment
perod.
The tme eapsng from the commencement of drng to the com-
peton of a we s undoubtedy to be ncuded n the deveopment
perod, but where such drng s foowed by a ong perod of pro-
ducton ony, there appears to be no sound reason for ncudng such
a perod even though t s foowed by a ater drng program.
s an e ampe, a essee mght have dred a we n a shaow sand n
1935 and have beeved that the property was fuy deveoped unt
1940 when a deeper sand was dscovered by an ad|onng operator. s
a resut of ths dscovery, the essee dred a we to the deeper sand
n 1940. In that case, t woud be manfesty unreasonabe to consder
the ntervenng fve years as a perod of deveopment. On the other
hand, a essee mght dr an nta we and then fnd hmsef short
of funds or matera wth whch to compete hs drng program wth
respect to other wes. The deay n drng a second we s not so
pany an nterrupton n the deveopment perod, but the prncpe s
beeved to be the same. It s, therefore, hed that the deveopment
perod shoud be measured by the actua tme consumed from the n-
ta steps taken n the ocaton of the frst we to the fna competon
of that we, pus the smar perods consumed n drng other wes,
f any, on the same ease or tract.
shoud refer to ts number and to the symbos ndcated: Coectors of
nterna revenue, C:Co nterna revenue agents n charge, IT:
: NR heads of fed dvsons of the Technca Staff, TS: RM.
Wm. T. Sherwood,
ctng Commssoner.
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97
722.
S CTION 722. G N R L R LI CONSTRUCTI
R G S P RIOD N T INCOM .
Reguatons 112, Secton 35.722-1: Genera 1946-16-123G6
rue. Mra. 6035
Organzaton change.
Washngton 25, D. C, uy 10,1946.
Offcers and mpoyees, ureau of Interna Revenue, and Others
Concerned:
There s estabshed as a fed group n the ureau of Interna Reve-
nue an cess Profts Ta Counc wth responsbty for fna ureau
acton on ssues arsng under secton 722 of the Interna Revenue
Code.
There w be organzed n each fed dvson of the Income Ta
Unt a commttee to be charged wth responsbty, under the tech-
nca supervson of the cess Profts Ta Counc and under the
admnstratve contro of the nterna revenue agent n charge, of
competng fed consderaton of secton 722 ssues.
Washngton and fed dvsons of the ureau w, n the mean-
whe, contnue consderaton of and negotatons for settement of
cases nvovng appcatons for reef under secton 722.
The symbos PC w be assgned to the cess Profts Ta Counc.
oseph D. Nunan, r.,
Commssoner.
Reguatons 112, Secton 35.722-1: Genera 1940-17-1237
rue. Mm. 6044
cess Profts Ta Counc and procedure reatng to appcatons
for reef under secton 722 of the Interna Revenue Code.
Washngton 25, D. C, uy 31,19 6.
eads of ed Dvsons of the Technca Staff, and Others
Concerned:
1. cess Profts Ta Counc. Mmeograph 6035 above estab-
shed as a fed group n the ureau of Interna Revenue the cess
Profts Ta Counc.
2. Secton 722 ed Commttee. There s hereby estabshed
n each fed dvson of the Income Ta Unt a commttee to be known
as the Secton 722 ed Commttee.
3. ursdcton of the cess Profts Ta Counc. Sub|ect to
the authorty of the Commssoner of Interna Revenue, fna |urs-
dcton wthn the ureau of Interna Revenue of a ssues arsng
under the provsons of secton 722 of the Interna Revenue Code s
hereby vested n the cess Profts Ta Counc. The cess Profts
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722.
9
Ta Counc (herenafter referred to as the Counc ) w have no
|ursdcton over any ssues arsng under any other provson of the
nterna revenue aws (herenafter referred to as standard ssues ).
In vew of the dstnctve character of the ssues under secton 722 of
the Code, the procedures heren set forth provde for consderaton of
those ssues separate and apart from the consderaton of ssues ars-
ng under other provsons of aw.
4. unctons of the Secton 722 ed Commttee. Wth re-
spect to each cam, t w be the responsbty of the Secton 722
ed Commttee (herenafter referred to as the commttee ) to
recommend to the Counc the amount of the constructve average base
perod net ncome aowabe under secton 722 of the Code. Such
recommendaton w be sub|ect to approva by the Counc. The
recommendaton of the commttee w be set forth n a report de-
voted e cusvey to the secton 722 ssues.
The commttee w be headed by a charman and w functon
under the technca drecton of the Counc but under the adnns-
tratve supervson of the nterna revenue agent n charge.
Secton 722 cams w be assgned, wth the advce of the charman
of the commttee, to e amnng offcers specazng n secton 722
matters. The fed e amnaton of the cam w be made under the
technca supervson of a commttee member. The competed report
of the e amnng offcer, after approva by the commttee member
havng supervson of the e amnaton, w be submtted to the char-
man of the commttee for revew. When approved by the charman,
ths report w become the report of the commttee and a copy w be
transmtted to the ta payer under cover of a speca 30-day etter.
orma conferences wth the ta payer w be conducted by the char-
man of the commttee or by a commttee member desgnated by hm.
The commttee member havng supervson w be present at forma
conferences n an advsory capacty. The nterna revenue agent n
charge may arrange for a |ont conference deang wth the standard
ssues and the secton 722 ssues f he beeves such a |ont conference
s advsabe. In a cases, however, separate conference reports w be
prepared.
cept as herenafter provded, the Technca Staff w have no
|ursdcton over secton 722 ssues n any case pror to ssuance of
not ce under secton 732 of the Code.
5. Revew bt cess Profts Ta Counc of Commttee Recom-
mendatons. The recommendaton of the commttee for fna dspos-
ton of secton 722 ssues w be sub|ect to revew by the Counc
whether or not the ta payer agrees wth such recommendaton. In
any case n whch the ta payer does not agree wth the commttee rec-
ommendaton, or n any case n whch a commttee recommendaton
agreed to by the ta payer s not accepted after revew by the Counc,
the ta payer w be afforded an opportunty for a hearng before the
Counc.
Snce the ta payer w be requred to deveop ts secton 722 cam
fuy n the fed, the Counc generay w consder ony the secton
722 record made n the fed. If addtona evdence or facts are sub-
mtted to the Counc by the ta payer n support of ts cam, the case
may be returned to the fed for further consderaton n the ght of
such addtona facts or evdence.
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99
722.
Revew by and hearngs before the Counc w be n accordance
wth such procedures as the Counc may prescrbe.
6. Separate Report on Secton 722 Cam. The report of the e am-
nng agent on the secton 722 ssues n any case w contan a compre-
hensve statement of the fndngs and recommendatons, anayss of
ssues, evdence and facts, aw and argument, and concusons recom-
mended for approva. The scope of ths report and the amount of
deta necessary are, of course, matters of |udgment. Ths report, when
approved by the charman of the commttee, w be transmtted to the
nterna revenue agent n charge under cover of a etter of transmtta.
copy of the report w be furnshed to the ta payer. The etter of
transmtta to the nterna revenue agent n charge w contan a sum-
mary of the fndngs and recommendatons of the e amnng offcer,
as approved by the commttee, and any nformaton (such as data on
comparabe enterprses) the pubc dscosure of whch s prohbted by
aw or reguaton.
7. Secton 722 Record. Snce there s to be a separaton of the
standard ssues from the secton 722 ssues, t w be the responsbty
of the commttee to assembe, apart from the reguar case.fe, a record
on the secton 722 ssues adequate for the purposes of the Counc. The
secton 722 record w ncude:
Ta payer s cams for the benefts of secton 722 of the Code
fed on orm 991 or orm 43, together wth amendments thereto.
Data fed subsequenty n support of cams.
Necessary matera such as returns for the base perod years .
(or photostats thereof) fed by the ta payer, economc reports,
data on comparatves, etc.
amnng offcer s separate report on secton 722 ssues.
protests, brefs, or other communcatons fed by the ta -
payer pertanng to secton 722 ssues.
Conference reports on secton 722 ssues.
. Certfcaton of Secton 722 Record to the Counc. fter
competon of consderaton of secton 722 ssues by the commttee,
the charman of the commttee, through the nterna revenue agent n
charge, w certfy the secton 722 record to the Counc. Such cer-
tfcaton w consst of a etter of transmtta n dupcate addressed
to the charman of the Counc whch w ncude a concse summary
of the mportant ssues and the commttee s concusons.
9. Procedure Pror to Issuance of Secton 732 Notce. Cases n-
vovng secton 722 ssues w fa wthn the foowng cassfcatons:
(a) Cases agreed as to standard ssues and secton 722 ssues,
(b) Cases agreed as to standard ssues and nonagreed or n process
as to secton 722 ssues, and
(c) Cases nonagreed or n process as to standard ssues and agreed,
or nonagreed or n process, as to secton 722 ssues.
(o) cases agreed as to standard ssues and S CTION 722 ISSU S.
The secton 722 record w be certfed to the Counc for ts consder-
aton. The resut of the fndngs of the commttee w be ncorporated
n the revenue agent s report (or suppementa report or conference
report) on the standard ssues, whch, together wth proper agreement
forms, w be transmtted to the ureau for post revew of .the stand-
ard ssues. The audt revew dvson w, after revew of the
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5 722.
100
standard ssues, hod the case n suspense unt t receves advce from
the Counc as to acton on the secton 722 ssues. The audt revew
dvson w, f the agreement as to the standard ssues s approved
and the Counc approves the secton 722 agreement, be responsbe for
the admnstratve dsposton of the case and w prepare and
transmt secton 732 notces, where approprate, to the nterna revenue
agent n charge for ssuance.
If, after such consderaton by the Counc, and after the ta payer
has been afforded an opportunty for a hearng, the recommendaton
of the commttee s ether modfed or re|ected, the report of the
Counc as to ts fndngs w be furnshed to the audt revew d-
vson, whch dvson w transmt the entre case fe wth any
recommendaton regardng standard ad|ustments to the nterna
revenue agent n charge. The nterna revenue agent n charge w
prepare a statement whch w ncude the ta consequences of the
decson of the Counc and the recommendaton of the audt revew
dvson. Such statement w e transmtted to the ta payer by
etter n whch the ta payer w be granted 15 days wthn whch to
fe an agreement. If, n response to that etter, the ta payer takes the
poston that t s no onger bound by any prevous agreement re-
spectng the standard ssues and desres further consderaton of those
ssues n vew of the decson of the Counc on the secton 722 ssues,
the case fe shoud, upon request of the ta payer, be referred to the
Staff dvson for consderaton. In the event the ta payer fes an
approprate agreement to the ta resut shown n the 15-day etter,
or fas to respond to that etter, any requred statutory notces w
be prepared and ssued by the nterna revenue agent n charge.
(6) C S S GR D S TO ST ND RD ISSU S ND NON GR D OR IN PROC SS
S TO S CTION 722 ISSU S.
In cases where the ta payer consents to the mmedate assessment
of the ta , or accepts as correct the proposed overassessment resutng
from the standard ad|ustments, but s n dsagreement on secton 72
ssues or ts cam s n process, the case fe w be forwarded by the
nterna revenue agent n charge to the ureau for post revew of the
standard ssues. Upon competon, the secton 722 record w be cer-
tfed to the Counc for ts consderaton. oowng post-revew
approva of the report, the audt revew dvson w cose the case
under e stng procedures. fter takng the requred admnstratve
acton, the case fe w be returned to the nterna revenue agent n
charge who w hod the case n suspense unt advsed of acton by
the Counc on secton 722 ssues. Upon recept of such advce, the
nterna revenue agent n charge w ssue a statement refectng the
standard ad|ustments whch w ncude the ta consequences of the
decson of the Counc. Such statement w be transmtted to the
ta payer by etter n whch the ta payer w be granted 15 days wthn
whch to fe an agreement. Upon the recept of an agreement to the
ta resut, or upon the e praton of the 15-day perod, any requred
statutory notces w be ssued by the nterna revenue agentm charge-
In cases where the ta payer agrees to a standard ssues but does
not consent to the mmedate assessment of the ta , the nterna revenue
agent n charge w submt the case coverng standard ssues to the
ureau for pre-revew, contanng a ta computatons wthout regard
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101 722.
to secton 722. When the secton 722 record s competed, t w be
certfed to the Counc. Upon competon of pre-revew of the stand-
ard ssues, the audt revew dvson w return the case to the
nterna revenue agent n charge, who w hod the case unt he
receves advce as to Counc acton on the secton 722 ssues. Upon
recept of such advce, a statement and etter w be sent to the ta -
payer, as ndcated n the precedng paragraph, pror to the ssuance
of any requred statutory notces. If, n response to that etter, the
ta payer takes the poston that t s no onger bound by any prevous
agreement respectng the standard ssues and desres further consd-
eraton of those ssues n vew of the decson of the Counc on the
secton 722 ssues, the case fe w, upon request of the ta payer, be
referred to the Staff dvson for consderaton.
(0) C S S NON GR D OR IN PROC SS S TO ST ND RD ISSU S ND GR D,
OR NON GR D OR IN PROC SS, S TO S CTION 722 ISSU S.
In cases of ths character, the secton 722 record, upon competon,
w be certfed to the Counc for ts consderaton. Wth respect to
the standard ssues, the usua report, protest, and conference procedure
w be appcabe, and, upon request of the ta payer, the case w be
transmtted to the Technca Staff. The Technca Staff has the
authorty under Com.-Mm. Co. No. 4960, R. . No. 1014, T. S. No.
57, to concude ts consderaton of the standard ssues and drect assess-
ment of agreed defcences, the ssuance of any requred statutory no-
tces under secton 272 for unagreed defcences, or the schedung of
certfcates of overassessment based upon determnaton of ta abty
wthout regard to the provsons of secton 722. Upon competon of
ts acton, tne Staff dvson w return the case to the nterna revenue
agent n charge for dsposton and ssuance of any requred statutory
notces. If, pror to concuson of ts consderaton of the standard
ssues, the Staff dvson receves the decson of the Counc, t w
ncorporate such decson n any acton memorandum prepared there-
after. Decsons of the Counc w be transmtted to the Staff dv-
son through the offce of the nterna revenue agent n charge.
Generay, f the ta payer does not request that the case be trans-
ferred to a Staff dvson, the nterna revenue agent n charge w hod
the case n a suspense fe pendng recept of the decson of the Counc
on the secton 722 ssues. The nterna revenue agent n charge w
then prepare a statement of ta abty refectng the decson of the
Counc on secton 722 ssues. Such statement w be transmtted to
the ta payer by a etter n whch the ta payer w bo granted 15 days
wthn whch to fe an agreement. Upon recept of the agreement,
or upon e praton of the 15-day perod, the requred statutory notces
w be ssued uness the ta payer, wthn such perod, requests consd-
eraton of the standard ssues by the Technca Staff.
G N R L.
In any case cosed (on the bass of agreement, defauted statutory
notce, or fna order of The Ta Court) wthout regard to the secton
722 ssues, t w be the responsbty of the nterna revenue agent
n charge, after recept of the decson of the Counc on secton 722
ssues, to prepare a statement of ta abty refectng the decson
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722.
102
of the Counc and to ssue any requred statutory notces under the
provsons of secton 272 or secton 732.
If n any case a statutory notce under secton 272 has been ssued
and the case s pendng before The Ta Court, notce under secton 732
w be ssued forthwth n the event of tota dsaowance and as soon
as practcabe n other cases.
10. Pre-90-Day Cases and Docketed Cases Currenty efore the
Technca Staff. If a case nvovng secton 722 ssues s, on the
date of ssuance of ths mmeograph, before the Technca Staff for
consderaton n pre-90-day or n docketed status and such consdera-
ton, n the opnon of the head of the Staff dvson, has been sub-
stantay competed, or f a settement s reasonaby ndcated, the
Staff dvson w proceed to a dsposton of the secton 722 ssues
and w then transmt the case wth ts recommendatons to the Counc
for revew.
In every other case, Technca Staff consderaton of secton 722
ssues w be dscontnued, and the case w be transmtted to the
nterna revenue agent n charge. The atter w assgn the case to
the commttee whch w thereupon separate the secton 722 ssues
from the standard ssues, f any, and return the case, n so far as t
nvoves standard ssues, to the |ursdcton of the Technca Staff.
The commttee procedure w be as foows:
If the case s n pre-90-day status, the commttee w consder the
secton 722 ssues and dspose of them generay n accordance wth
the procedures herenbefore prescrbed wth respect to fed e amna-
ton, conference, report, preparaton of the secton 722 record, and
certfcaton to the Counc for revew.
If the case s n docketed status, the commttee w afford the ta -
payer an opportunty to submt addtona nformaton n support of
ts cam. The commttee w cause such addtona fed nvestga-
ton to be made as may be proper and afford the ta payer an oppor-
tunty for a conference. The commttee, through the nterna revenue
agent n charge, w then transmt the fe, together wth ts fndngs
and recommendatons and any agreement secured from the ta payer,
to the Counc. fter consderaton of the secton 722 ssues by the
Counc, t w return the fe to the Technca Staff wth ts recom-
mendaton for the dsposton of the secton 722 ssues before The Ta
Court.
Nothng heren contaned sha be construed to effect a wthdrawa
or modfcaton of any notce heretofore ssued under secton 272 or
secton 732 of the Interna evenue Code.
11. ursdcton of the Technca Staff. The Technca Staff
w retan |ursdcton under the procedure prescrbed by Com.-Mm.
Co. No. 4960, . . No. 1014, T. S. No. 57, of a cases nvovng
secton 722 of the Code whch are n docketed status or n whch a
statutory notce s ssued. Snce, under procedures heretofore pre-
scrbed, every such case w have been consdered by the Counc, t
w be the pocy of the Technca Staff not to dsturb the decson of
the Counc e cept n unusua crcumstances and then ony wth the
concurrence of the Counc.
12. Chef Counse s Revew of Secton 722 Issues. In any case
sub|ect to revew by the Chef Counse, he w accept as fna, for the
purposes of hs revew and any report to the ont Commttee on In-
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103
722.
terna Revenue Ta aton, the decson as to secton 722 ssues contaned
n reports approved by the Counc.
13. Ta n eopabdy. Nothng contaned heren sha be construed
to precude the takng of approprate acton where the ta s n
|eopardy.
14. Pror Instructons Superseded. The nstructons contaned n
ths mmeograph supersede pror nstructons to the e tent that such
pror nstructons are nconsstent herewth.
15. Correspondence. Correspondence from nterna revenue agents
n charge n regard to the procedure descrbed heren shoud refer to
the number of ths mmeograph and to the symbos IT: . Corre-
spondence from heads of fed dvsons of the Technca Staff shoud
refer to the number of ths mmeograph and to the symbos
C-TS: RM. Correspondence from counse for fed dvsons of the
Technca Staff shoud refer to the number of ths mmeograph and
to the symbos GC: R G. other correspondence n regard to ths
mmeograph shoud refer to ts number and the symbos PC.
oseph D. Nunan, r.,
C ommssoner.
pproved uy 30,1946.
Reguatons 112, Secton 35.722-1: Genera rue. 1946-19-12402
Mm.6061
cess Profts Ta Counc rungs and memoranda.
Washngton 25, D. C, ugust 29,1946.
Coectors of Inferna Revenue, Interna Revenue gents n Charge,
eads of ed Dvsons of the Technca Staff, and Others
Concerned:
1. Mm. 6035 page 97, ths uetn estabshed the cess Profts
Ta Counc as a fed group n the ureau of Interna Revenue, and
Mm. 6044 page 97, ths uetn prescrbed procedure reatng to ap-
pcatons for reef under secton 722 of the Interna Revenue Code.
2. In order to carry out the purposes and functons of the cess
Profts Ta Counc, certan rungs and memoranda reatng to sec-
ton 722 of the Code and ssued by the Counc over the sgnature of
the charman of the Counc w be pubshed n the Interna Revenue
uetn. These rungs and memoranda w be numbered and des-
gnated by the symbos . P. C, and they w consttute an e cep-
ton to the genera rue stated on the tte page of the uetn that a
pubshed rungs and decsons have receved the consderaton and
approva of the Chef Counse for the ureau of Interna Revenue.
3. rungs and memoranda on ssues arsng under secton 722
of the Code and ssued by the cess Profts Ta Counc over the
sgnature of the charman of the Counc w be bndng upon nterna
revenue agents n charge, heads of fed dvsons of the Technca
Staff, and counse for fed dvsons of the Technca Staff.
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104
4. Correspondence from the foowng regardng ths mmeograph
shoud refer to ts number and to the symbos ndcated: Interna
revenue agents n charge, IT: heads of fed dvsons of the Tech-
nca Stan, TS: RM counse for fed dvsons of the Technca
Staff, GC: R G. other correspondence regardng ths mmeo-
graph shoud refer to ts number and the symbos PC.
oseph D. Nunan, r.,
Commssoner.
Reguatons 112, Secton 35.722-5: ppca- 1946-17-12379
ton for reef under secton 722. T. D. 5530
( so Secon 30.722-5, Reguatons 109.)
TITL 20 INT RN L R NU . C PT R I, SU C PT R , P RT 0 ND
P RT 35.
mendments made by Treasury Decson 54 3, approved Novem-
ber 5, 1945 C. . 1045, 277 .
Washngton 25, D. C.
The amendments made by Treasury Decson 54 3 C. . 1945,277
to Reguatons 109 and 112 sha become effectve on anuary 5,1946,
60 days after the date Treasury Decson 54 3 was fed wth the
Dvson of the edera Regster.
secton 02 of the Interna Revenue Code (53 Stat., 32 26 U. S. C, 62)
as made appcabe by secton 729(a) of the Interna Revenue Code
(54 Stat., 9 9 26 U. S. C, 729(a) and 722(d) of the Interna Revenue
Code (57 Stat, 601 26 U. S. C., 722(d)).)
oseph D. Nunan, r.,
pproved ugust ,1946.
. . oey, r.,
C SS PRO ITS T COUNCDL.
1946-19-12371
.P.C.1
ORG NIZ TION ND PROC DUR .
The cess Profts Ta Counc conssts of 15 members apponted
by the Commssoner of Interna Revenue, who has desgnated one
member as charman. The Counc w be asssted by a staff of at-
torneys, accountants, and economsts and w supervse the technca
actvtes of the secton 722 commttees n the 39 fed dvsons of the
Income Ta Unt.
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105
Msc.
The charman of the Counc, as ts admnstratve head, w drect
ts operatons. The Counc w be responsbe for the decsons made
n a cases comng under ts |ursdcton, as we as for the genera
pocy to be foowed n the admnstraton of secton 722.
The staff w consst of technca advsors, revewers, and con-
ferees. The technca advsors w coordnate the actvtes of the
other staff members and w perform ason work wth other offces
of the ureau. The revewers w be prmary responsbe for cases
agreed to n the fed, whereas the conferees w be charged wth the
consderaton of cases comng before the Counc n whch secton 722
ssues are n dspute. The secton 722 fed commttees w be re-
sponsbe for fed e amnatons and fed conferences n a cases n-
vovng secton 722 ssues.
T C IRM N.
The charman s n charge of admnstraton he w assgn cases
to the other Counc members for dsposton and w e ercse super-
vson over determnatons of the technca personne of the Counc.
T C SS PRO ITS T COUNCIL.
The Counc s responsbe for the deveopment of poces govern-
ng the settement of cases nvovng ssues under secton 722 of the
Interna Revenue Code. It s aso responsbe for Counc decsons
n matters whch come before the Counc under approprate proce-
dures. It w supervse the operatons of ts staff, ncudng opera-
tons of the_ technca offce, conference group, and revew group, and
the technca operatons of the secton 722 fed commttees. Cases
w be assgned to ndvdua members for supervson. The degree
of authorty to be deegated to the staff members w be estabshed by
the Counc.
T C NIC L O IC .
Ths offce s comprsed of technca advsors desgnated by the
charman to consut wth and assst the conference and revew groups.
The responsbty for coordnatng the appcaton of the basc prn-
cpes and matters of pocy determned by the Counc s paced n
ths offce. The technca advsors are at a tmes avaabe to the
conferees and revewers for the purpose of appyng prncpes and
nterpretng matters of pocy and procedure determned by the Coun-
c. The technca advsors are aso charged wth the responsbty of
preparng rungs, studes, technca etters, and performng research
work for the Counc members. Ths offce, under the drecton of the
Counc, w supervse and assst the fed commttees. Cases may be
assgned to technca advsors for conference purposes. Ths offce
w perform ason servce wth other ureau groups and the staff
of the Counc. The charman w appont from tme to tme a Counc
member to supervse the technca offce and deegate ts functons
among the members of ts staff.
CON R NC GROUP.
Ths group s comprsed of conferees who revew nonagreed cases
and under drecton of the Counc conduct conferences wth ta payers
72 29 47
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106
and ther representatves. The advce and assstance of the tecnca
offce w be avaabe to conferees. ach conferee w receve case
assgnments, and t w be hs ndvdua responsbty to revew com-
petey such cases on ther merts and under the drecton of a Counc
member prepare them for conference consderaton. No conference
w be set unt the conferee has had ampe tme to prepare the case
for conference consderaton and the Counc member s satsfed that
the conferee s thoroughy famar wth a the ssues present n the
case. The conferee w prepare a etter to the ta payer nformng the
ta payer that a conference w be afforded t. Conference, f desred,
w be set at a tme acceptabe to the ta payer and the Counc. If no
conference s desred, Counc decson w be rendered on the record
before t. Upon authorzaton by the approprate Counc member,
the conferee may hod a conference wth the ta payer wthout the
attendance of the Counc member. wrtten record of each confer-
ence must be made.
When economc advce or research s deemed necessary n any case,
the conferee, after consutaton wth the Counc member, w route a
request for the desred data through the technca offce to the usness
and Industra Research Dvson of the Income Ta Unt. e w
foow a smar procedure when he requres nformaton from any
other ureau group. The conferee shoud fee free to ca for nforma-
ton from the Income Ta Unt, the Statstca Dvson, or any other
group whch may be n possesson of nformaton deemed to be vauabe
n the determnaton of a case. ureau economsts w attend any
conference where, n the opnon of the Counc member, such attend-
ance s necessary or desrabe.
Whe the conferee w functon wt the advce and assstance
of the technca offce as to basc prncpes and matters of pocy
estabshed by the Counc, the utmate determnaton of the proper
amount of constructve average base perod net ncome s the respons-
bty of the conferee and the Counc member or pane charged
wth supervson of the case.
Upon concuson of the consderaton of a case, a conference report
w be wrtten and sgned by the conferee. The report w be ntaed
by the technca advsor f he s n agreement wth the appcaton of
matters of basc prncpes and pocy. Upon approva by the Counc
member (or pane of Counc members or the fu Counc, as the case
may be), ths report becomes the decson of the Counc 10 days after
t s receved by the charman, uness, n the case of an approva by a
snge Counc member or pane of Counc members, the charman,
wthn that perod, submts the case to a pane or to the fu Counc.
If the Counc member (or pane) dsagrees wth the concusons of
the conferee, the Counc member (or pane) w draft a separate
report ncorporatng theren the decson recommended. The techn-
ca advsor w prepare a statement to be paced n the case fe where
the report appears to be n confct wth basc prncpes and poces
estabshed by the Counc.
The conferee w prepare for the approva of the member, pane,
or fu Counc, as the case may be, a etter to the ta payer settng
forth the determnaton n the case and the reasons therefor.
greement to the decson of the Counc shoud be secured from the
ta payer wherever possbe. Wherever agreement s secured pror to
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107
Msc.
proper Counc approva, care shoud be taken to advse the ta payer
that the agreement s sub|ect to Counc approva. Whe tme s of
the essence of ths undertakng and conferences shoud be e pedted,
nevertheess t s recognzed that n many cases more than one con-
ference may be necessary. Computatons whch are nherent n de-
csons of the type requred n probems presented by secton 722 shoud
be made as e pedtousy as possbe and ta payers shoud be gven
every opportunty to survey, revew, and agree to such computatons
to the end that compete understandng may e st between the Counc
and the ta payer.
Counc members are e pected, whenever crcumstances permt, to
attend n person conferences on cases assgned to them, and a speca
effort shoud be made to compy wth requests made by ta payers for
persona attendance by a Counc member. Conferences w be hed
n Washngton e cept that, where the nterests of the ta payer and
the Government w be best served, they may be set for hearng
esewhere.
R I W GROUP.
Ths group revews a agreed cases receved from the fed dv-
sons. The advce and assstance of the technca offce w be ava-
abe to revewers. ach revewer s under the supervson of the Coun-
c member responsbe for the dsposton of a specfc case. ach re-
vewer w receve case assgnments and t w be hs responsbty
to revew competey such cases on ther merts. If the revewer, after
fu consderaton of the case, agrees wth the recommendatons and the
bass therefor as set forth n the report, he w endorse hs approva
on the Revewed and pproved stamp form whch s set forth
beow. If the revewer agrees wth the recommendatons set forth n
the report, but s of the opnon that the bass for such recommenda-
tons shoud be restated or ampfed, he w prepare a revewer s
memorandum. In a cases n whch the revewer dsagrees wth the
recommendatons set forth n the report, and n a other cases n
whch a Counc member so drects, a revewer s memorandum w
be prepared.
The Revewed and pproved stamp, whch the revewer w m-
press on the face of the certfcaton from the fed n a approved
cases n whch he agrees wth the recommendatons and the bass
therefor as set forth n the report, w be n the foowng form:
Revewed and pproved
cess Profts Ta Counc
Memorandum attached (yes no)
Date
Revewer
Date
Technca dvsor
Date
Counc Member
The report w be ntaed by the technca advsor f he s n agree-
ment wth the appcaton of matters of basc prncpes and poces
estabshed by the Counc. If the report appears to be n confct wth
such basc prncpes and poces, the technca advsor w prepare a
statement to be paced n the case fe.
Counc decsons wth respect to agreed cases from fed dvsons
w be sub|ect to the provsons set forth under the headng Counc
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10
pprova e cept that no agreed case w be re|ected by a pane of ess
than three members of the Counc even though the dfference between
the actua e ,ess profts ta credt and the constructve average base
perod net ncome aowed by the fed dvson sha be ess than
75,000.
In the event that an agreed case from a fed dvson s re|ected by
the Counc, the revewer w prepare a etter to the ta payer fuy
settng forth the reasons why the agreement s not acceptabe, and
nformng the ta payer that a conference w be afforded f request
therefor s made wthn 30 days of the date of such etter. (Copy of
such etter w be furnshed to the fed dvson.) If request for a
conference s receved as above provded, arrangements therefor w
be made n due course by the Counc member n charge of the case
n accordance wth the provsons hereof under the headng Confer-
ence Group. The conference w be conducted wth such staff per-
sonne as s approprate.
It may be found that the commttee has submtted a report whch
s ncompete n matera respects. In such case a etter w be ad-
dressed to the nterna revenue agent n charge ndcatng what may
be necessary to compete the case fe as a bass for decson. Generay,
t s not contempated that the case w be returned to the |ursdcton
of the commttee. If, however, upon the recept of the addtona data,
t s the opnon of the Counc member that f the commttee had con-
sdered the addtona matera t woud have reached a dfferent con-
cuson, the entre case may be returned to the commttee for further
consderaton and opportunty to reach an agreement wth the ta -
payer n the fed. The same procedure may be foowed, n the ds-
creton of the Counc member, n the ght of any new nterpretaton
or change n the aw or reguatons, or other deveopments whch may
ndcate the kehood of settement n the fed.
Coordnaton of cases w be accompshed through the functonng
of the technca offce. Whe the revewer w functon wth the ad-
vce and assstance of the technca offce as to basc prncpes and mat-
ters of pocy, the utmate determnaton of the proper amount of
constructve average base perod net ncome s the responsbty of
the revewer and the Counc member who s charged wth supervson
of the case.
S CTION 722 I LD COMMITT .
Wth respect to each cam, t w be the responsbty of the com-
mttee to recommend to the Counc the amount of the constructve
average base perod net ncome aowabe under secton 722. Such
ecommendaton w be sub|ect to approva by the Counc. The
recommendaton of the commttee w be set forth n a report devoted
e cusvey to the secton 722 ssues.
The commttee w be headed by a charman and w functon under
the technca drecton of the Counc but under the admnstratve
supervson of the nterna revenue agent n charge.
Secton 722 cams w be assgned, wth the advce of the charman
of the commttee, to e amnng offcers specazng n secton 722
matters. The fed e amnaton of the cam w be made under the
technca supervson of a commttee member. The competed report
of the e amnng offcer, after approva by the commttee member
havng supervson of the e amnaton, w be submtted to the char-
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109
Msc.
man of the commttee for revew. orma conferences wth the ta -
payer w be conducted by the charman of the commttee or by a
commttee member desgnated by hm. Wherever the commttee and
the ta payer are n accord as to the correct amount of the constructve
average base perod net ncome, an agreement to that effect sgned
by the ta payer shoud be secured.
CON R NC ND PR CTIC R UIR M NTS.
Conference and practce procedures generay w be n accord wth
the requrements set forth n the pamphet Conference and Practce
Requrements ureau of Interna evenue.
COUNCIL PPRO L.
Counc approva w be shown by sgnature on the stamp, on the
revewer s memorandum, on the conference report under the word
pproved, or n the mnutes of the Counc. Decsons w become
Counc decsons 10 days after approva (uness submtted by the
charman to a pane or the fu Counc as heretofore provded under
the headng Conference Group ) n the foowng manner:
Decsons nvovng a dfference between the actua e cess profts ta
credt and the constructve average base perod net ncome aowed
by the Counc of not more than 75,000 w be approved by one
member of the Counc.
Decsons nvovng a dfference between the actua e cess profts
ta credt and the constructve average base perod net ncome aowed
by the Counc amountng to more than 75,000 and not more than
500,000 w be approved by a pane of three members of the Counc.
Decsons nvovng a dfference between the actua e cess profts ta
credt and the constructve average base perod net ncome aowed
by the Counc amountng to more than 500,000 w be approved by
the fu Counc.
The charman may, n hs dscreton, assgn any case whch mght
otherwse be approved by a snge member to a pane of three or more
members or to the fu Counc for decson, and may, n hs dscreton,
assgn any case whch mght otherwse be approved by a pane of
three members to the fu Counc for decson.
ny case whch may be approved by one member of the Counc
w, upon request of the member to whom t s assgned, be referred
to a pane of three members for decson. ny case whch may be
approved by a pane of three members (ncudng any case referred to
such pane at the request of a snge member) w, upon request of
such pane, be referred to the fu Counc for decson. ny case
whch mght otherwse be approved by a snge member w be as-
sgned, upon the request of anv three members, to a pane of three or
more members, or to the fu Counc for decson, n accordance wth
the terms of such request, and any case whch mght otherwse be ap-
proved by a pane of three members w, upon the request of any
three members, be assgned to the fu Counc for decson.
P N LS O T COUNCIL.
Standng panes are not contempated. t the tme a case s as-
sgned, the charman of the Counc w name the pane and the char-
man thereof responsbe for decson n those cases where pane con-
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110
sderaton s requred. Pane assgnments w be made n vew of
the ndustry, ocaty, or probems present n the case, to the end that
the Counc members most famar wth the ndustry or probems
presented w be avaed of to the best advantage.
Chares D. ame,
Charman, cess Pro |ts Ta Counc.
1946-19-12404
. P. C.2
Procedure appcabe to the consderaton of secton 722 cams and
certfcaton of secton 722 fed commttee recommendatons to the
cess Profts Tu Counc.
1. Introducton. Commssoner s mmeograph, Mm. 6044 page
97, ths uetn , dated uy 31, 1946, vested fna |ursdcton wthn
the ureau of Interna Revenue of a ssues arsng under the prov-
sons of secton 722 of the Interna Revenue Code n the cess Profts
Ta Counc and estabshed n each fed dvson of the Income Ta
Unt a commttee to be known as the Secton 722 ed Commttee.
2. uthorty of Secton 722 ted Commttees. Technca super-
vson over fed e amnatons and fed conferences nvovng secton
722 ssues s, sub|ect to the drecton of the Counc, hereby deegated
to the severa secton 722 fed commttees.
3. Separaton of Issues. ffectve mmedatey, the commttee
w arrange for the segregaton of appcatons for reef under secton
722, together wth supportng data and reated documents, from that
porton of the case fe approprate to the consderaton of the ssues
defned n the above-mentoned Commssoner s mmeograph as
standard ssues. The standard ssues w be processed n accord-
ance wth e stng procedures. That porton of the case fe pertan-
ng to secton 722 ssues w, after approprate contro records have
been entered, be devered to the charman of the secton 722 fed
commttee for processng and dsposton n accordance wth the
provsons of the above-mentoned Commssoner s mmeograph and
as set forth beow.
4. Procedure To e Observed bt Commttee. Upon recept of the
secton 722 cams and accompanyng documents they w be assgned
by the charman to the ndvdua members of the commttee for pre-
mnary study and actve contnung supervson of the necessary
fed e amnatons.
The respectve commttee members to whom supervsory case as-
sgnments have been made w make a premnary study of the cams
assgned to them and determne the e tent to whch such cams are
compete and mertorous. Ths premnary study shoud dscose
cams of three cassfcatons: (a) Those cams whch appear to have
no mert whatsoever (b) those cams whch are n skeeton form or
on whch the data furnshed are obvousy ncompete and nsuffcent
to determne whether the cams have mert and (c) those cams
whch are prma face mertorous or suffcenty compete to |ustfy
mmedate assgnment for e amnaton.
(a) Where t appears that a cam has tte or no mert, the com-
mttee member w prepare a etter for the sgnature of the nterna
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revenue agent n charge, addressed to the ta payer, n whch the ta -
payer s representatves w be nvted to appear tor a dscusson of
the cam. s the resut of ths premnary dscusson t shoud be
dscosed whether the ta payer w agree to wthdraw ts cam or
whether the ta payer desres to further support and pursue ts cam.
(b) In those cases where the ta payer has fed nothng more than
a skeeton cam or where the data furnshed are obvousy ncompete,
a etter smar to that referred to n (a) above w be prepared and
maed to the ta payer. The ensung dscusson shoud dscose (1)
whether the ta payer wshes to proceed wth ts cam, (2) the grounds
upon whch the ta payer rees, and (3) the type and e tent of the
addtona nformaton necessary to compete the cam. reasonabe
perod of tme n whch to submt addtona nformaton w be af-
forded where necessary. It s contempated that where practcabe
the e amnng offcer to whom the case w be assgned w attend the
dscusson. It s desrabe n every nstance that the cam be perfected
and competed to the fuest e tent before the case s assgned to an
e amnng offcer for fed e amnaton.
(c) Where the cam s suffcenty compete to |ustfy assgnment
for fed e amnaton, such assgnment shoud foow as soon as cr-
cumstances w permt. Where the cam s n process of e amnaton,
the cam and reated data shoud be returned mmedatey to the
e amnng offcer for competon.
t any tme, ether before or after the e amnaton has begun, the
commttee may, n ts dscreton, hod nforma conferences wth the
ta payer s representatves.
s soon as practcabe after recept of an assgnment the e amnng
offcer w make a study of the appcaton and dscuss the case wth
the commttee member havng supervson before contactng the ta -
payer or ts representatve. If the appcaton s st ncompete, the
ta payer w be afforded a further reasonabe opportunty to deveop
and submt addtona nformaton. The e tent of the commttee
member s partcpaton n the e amnaton and preparaton of the
report w depend upon ts compe ty, sze, and nature, and upon the
requrements of the e amnng offcer.
The burden of proof s upon the ta payer to estabsh the essenta
eements of ts cam. It may not by mere fng of a cam shft the
onus of estabshng such essentas to the Government. owever, n
approprate cases where the ta payer has e erted every reasonabe
effort to substantate ts cam there may be occasons on whch the
commttee may propery cooperate by drectng attenton to addtona
sources of matera or methods of approach whch mght e pedte
the dsposton of the cam. The advsabty of deveopng such ad-
dtona matera or empoyng a dfferent approach must be deter-
mned entrey by the ta payer, and ths fact shoud be ponted out
to the ta payer.
When the e amnng offcer has competed hs fed e amnaton,
he sha prepare a report and recommendatons as outned n secton
5 foowng. The competed report w be approved by the commttee
member havng supervson of the e amnaton and submtted to the
commttee charman for revew. The charman w revew the report
personay or, n hs dscreton, assgn t to another commttee member
for revew.
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112
When the commttee s poston has been estabshed and before the
premnary notce transmttng a copy of the report to the ta payer
s reeased, a premnary conference w be hed wth the ta payer
where desrabe and practcabe. t such conference the ta payer
w be advsed oray n approprate deta of the commttee s recom-
mendatons and the reasons therefor, as set forth n the e amnng
offcer s report. The 722 commttee member havng supervson and
the e amnng offcer w generay be present at the premnary con-
ference and a memorandum of such conference w be prepared for the
case record.
s prescrbed n the above-mentoned Commssoner s mmeograph,
the charman or other commttee member desgnated by hm w con-
duct forma fed conferences on secton 722 ssues n accordance wth
estabshed conference procedure. In each nstance a conference re-
port w be prepared by the member conductng the conference to con-
form so far as practcabe wth the sampe form attached.
Cose cooperaton between the commttee members w be man-
taned on a cases. Changes n orgna determnatons as the resut
of forma conferences shoud represent the agreed determnaton of
the commttee. Where there are dfferences whch can not be resoved,
the decson of the commttee charman w preva. Where the char-
man s decson resuts n the re|ecton of an agreement, the ta payer
sha have the prvege of another conference to be conducted by the
charman.
In any case n whch the recommendatons or the reasons therefor
certfed to the Counc are not agreed to by a commttee member or
members or by the e amnng offcer, a dssentng memorandum w
be prepared and sgned, whch w become a part of the case record
certfed to the Counc.
In those nstances where the determnaton resuts n ony a parta
aowance of the cam, the commttee w adopt such parta aow-
ance as ts recommendaton whether or not such parta aowance s
acceptabe to the ta payer.
recommendatons of the secton 722 fed commttee w be cert-
fed to the cess Profts Ta Counc, by the charman, wth the ap-
prova of the nterna revenue agent n charge.
5. Separate Report on Secton 722 Cam. The report of the e -
amnng agent on the secton 722 ssues n any case w contan a com-
prehensve statement of the fndngs and recommendatons, anayss
of ssues, evdence and facts, aw and argument, and concusons recom-
mended for approva. The scope of ths report and the amount of
deta necessary are, of course, matters of |udgment. Ths report,
when approved by the charman of the commttee, w be transmtted
to the nterna revenue agent n charge under cover of a etter of trans-
mtta. copy of the report w be furnshed to the ta payer. The
etter of transmtta to the nterna revenue agent n charge w con-
tan a summary of the fndngs and recommendatons of the e amnng
offcer, as approved by the commttee, and any nformaton (such as
data on comparabe enterprses) the pubc dscosure of whch s pro-
hbted by aw or reguaton.
The substance and arrangement of the report proper w conform
generay wth the descrpton outned beow:
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Msc.
The body of the report shoud contan suffcent nformaton to de-
termne whether, and to what e tent, the data n the cam substantate
the ta payer s contenton that t has estabshed the e stence of quafy-
ng factors, that because of such factors ts actua average base perod
net ncome s an nadequate standard of norma earnngs, and the far
and |ust amount representng norma earnngs. The scope and ar-
rangement of the report w dffer as the crcumstances of the case and
the |udgment of the commttee may ndcate. The foowng outne
shoud therefore be consdered as a genera gude to be observed so
far as t s practcabe n each case rather than as an nfe be pattern.
or the purpose of ths dscusson, the report may be dvded nto
three parts:
(a) Summary and msceaneous data
b) ackground and hstory
c) nayss of cam.
(a) Summary and msceaneous data. The frst page of the report
shoud show the ta payer s name and address, ts ndustry, prncpa
products, and the operatons performed or servces rendered n con-
necton therewth the pace and date of the report and a summary
n coumnar form of the ta abe years nvoved, gvng the contro
numbers of the cams, the dates the orgna cams were fed, the
amount of average base perod net ncome used (or aowed f ava-
abe) on the ta payer s 1121 returns for the vears n queston (where
nvested capta credt was used, ths fgure shoud be substtuted and
marked wth an astersk), the constructve average base perod net
ncome camed by the ta payer and the amount thereof recommended
for aowance. Ths nformaton shoud be foowed by a statement
wth respect to any dscusson of the concusons recommended wth
the ta payer s representatves, ther names, and whether or not they
agree wth the e amnng offcer s recommendatons.
(b) ackground and hstory. The report shoud then contnue
wth the background data necessary for an understandng of the cam.
The nature and e tent of the ta payer s busness shoud be stated
whether t s a manufacturer, whoesaer, retaer, etc. ts prncpa
products or types of artces sod the number, genera sze, and geo-
graphca ocaton of ts factores, warehouses, stores, etc. the types
of manufacturng operatons performed and of the servces rendered:
whether t s reatvey arge or sma wth respect to ts ndustry and
the names and addresses of ts prncpa compettors, f known and
other nformaton pertnent to the nature of the operatons.
summary of the ta payer s hstory shoud be gven, ncudng
date of ncorporaton, orgna capta, substanta changes n ts cap-
ta structure, and partcuary whether, and to what e tent, t has
e panded or changed the character or scope of ts operatons or the
products or artces sod, wth approprate dates.
(c) nayss of cam. In genera, the ssues w arse on the
bass of ta payer s contentons, and the e amnng agent s e pected
to nvestgate such contentons to determne whether and to what
e tent the ta payer has estabshed the essenta eements of ts
cam. Ths part of the agent s report w, therefore, ncude anay-
ss of factua data presented by the ta payer and apprasa of ts
concusons. Shoud the e amnng offcer deveop addtona n-
formaton and data reatve to the ssues presented by the cam, he
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114
shoud present such nformaton and data n the report n such man-
ner as w avod confuson thereof wth data submtted by the ta -
payer.
The presentaton of the anayss of the ta payer s cam w ord-
nary foow the form outned by the headngs as here ndcated:
(I) stabshment of egbty.
(a) uafyng factors
(b) Infuence of quafyng factors on base perod profts
722(b)) or on the e cess proft credt based on nvested capta
722(c))
(c) Inadequacy of average base perod net ncome as a stand-
ard of norma earnngs (722(b)) or of the e cess profts credt
based on nvested capta as a standard for determnng e cess
rofts (722(c)).
) stabshment of constructve average base perod net
ncome.
In many cases , headng (I) (o) may be covered merey by reference
to the dscusson contaned under the headng (II), but n any event
a demonstraton of the nadequacy of actua average base perod net
ncome as a standard of norma earnngs or of the e cess proft credt
based on nvested capta as a standard for determnng e cess proft
(722(c)) s requred.
ach of the foregong headngs shoud be treated n the foowng
manner to the e tent necessary to compete a comprehensve anayss
of the cam:
(1) Summary of ta payer s facts
(2) Summary of ta payer s concusons
(3) Crtca anayss of ta payer s facts and presentaton of
addtona facts deveoped n the fed
(4) Crtca anayss of ta payer s concusons
(5) The e amnng offcer s concusons and recommendatons.
Ponts (1) and (2) enumerated above w be contaned n the ta -
payer s appcaton for reef and n suppementa nformaton whch
t has presented. It s not ntended that the report shoud contan a
repetton of mere detas whch are ceary set forth n an ordery
cam. n ntegent summary of each ssue as presented by the ta -
payer shoud be made, wth approprate references to the ta payer s
schedues and detaed statements. Care shoud be taken that such
summares ncude ony statements made by the ta payer n ts cam as
orgnay submtted or suppemented n wrtng. If addtona facts
or arguments were presented oray by the ta payer s representatves,
the ta payer w be afforded a reasonabe opportunty to suppement
ts cam by a wrtten statement of such facts and arguments. ny
facts or arguments whch were deveoped ndependenty by the e am-
nng offcer shoud be ceary dstngushed from the ta payer s cam,
and suppements thereto.
The crtca anayss of the cam and concusons enumerated above
as ponts (3), (4), and (5) shoud e press the e amnng offcers
fndngs wth respect to the ta payer s contentons, facts and concu-
sons, rebutta evdence deveoped, and the e amnng offcer s argu-
ments and concusons. Care shoud be taken that concusons are
not stated as facts, or confused wth facts. The factua presentaton
shoud show whether the facts aeged by the ta payer are actua facts,
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115
Msc.
reasonabe estmates, or con|ectures. It s recognzed that the eva-
uaton of secton 722 cams w requre the e ercse of ntegent
|udgment. In consequence, the transmtta etter shoud ncude a
detaed dscusson coverng the e tent, manner, and bass of such
e ercse of |udgment n the fed.
The report shoud be suffcenty comprehensve to support the con-
cuson reached by the e amnng offcer as to the adequacy or nade-
quacy of the ta payer s cam. Where detaed facts have been deve-
oped n separate documents or e hbts, references thereto shoud be
ncorporated n the report so as to ndcate ceary where ths support-
ng matera may be found. If a detenunaton may be made on two
or more ssues, the report shoud contan a suffcent anayss of a
ssues to satsfy the requrements of the Counc. fu and compete
report must be submtted even though the ta payer has agreed to the
proposed aowance.
6. Certfcaton of Secton 722 Record to the Counc. Certf-
caton of the secton 722 fed commttee recommendatons to the -
cess Profts Ta Counc provded for by the above-mentoned Com-
mssoner s mmeograph, Mm. 6044, w be prepared to conform wth
the sampe attached and submtted n trpcate.
7. greement by Ta payer to Constructve verage ase Perod
Net Income. In every case n whch the ta payer agrees to the
amount of constructve average base perod net ncome recommended
by the commttee, such agreement shoud be evdenced by a propery
e ecuted agreement orm . P. C. 1 (sampe attached), whch w
be made a part of the secton 722 case record certfed to the Counc.
. Protests to be ed Wth gent n Charge. protests
must be fed wth the nterna revenue agent n charge havng |urs-
dcton of the case.
9. Interreated Issues. In those cases n whch the determna-
ton of the secton 722 ssues s nterreated wth or dependent upon
determnatons nvovng ssues under other sectons of the Code, such
as secton 721, for the same ta abe year, the secton 722 record cert-
fed to the Counc w, to the e tent practcabe, ncude a statement
of the facts and concusons reatng to such other ssues.
Chares D. ame,
Charman, cess Profts Ta Counc.
ugust 14, 1946.
(Not to be supped from Washngton.)
( amnng Offcer s Report.)
etter of transmtta.
Secton 722 Report.
Pace .
Date
Intebna, Revenue gent n Chabqe, amnng offcer .
ddress Tme spent on e amnaton .
In re: (Ta payer s name.)
( ddress.)
Industry
Prncpa products
Operatons performed -.
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117
Msc.
3
Constructve average base perod net ncome-
Year ended
PNI used on
return or aowed.
Camed by
ta payer.
Recommended n
orgna . . .
Commttee
determnaton.
Where Invested capta credt was used on return or aowed, (dve amount and mark wth astersk.
greement (Secured.) (Not secured.) ( uafed.) (Unquafed.)
ddtona hearngs hed
ddtona evdence to be submtted by (date)
ass of appcaton for reef:
summary statement of the quafyng factors contended for by the ta payer
together wth the reated subsecton of secton 722 under whch quafcaton s
sought.
Issues nvoved:
succnct statement of each ssue rased n the protest and/or made the sub|ect
of dscusson durng the conference wth approprate ctaton of the subsecton
of secton 722, the secton of the reguatons, or porton of the secton 722 buetn
reed on by the ta payer as authorty for ts poston.
Dscusson of the case by ssues:
Issue (1):
Specfc statement of reevant facts.
Ta payer s contentons.
Law and argument, wth approprate references and supportng schedues
and e hbts.
Decson.
Issue (2):
(Same as above.)
Genera dscusson and decson.
(Sgned) ,
Member of Secton 722 Commttee.
Date:
pproved:
Charman, Secton 722 Commttee.
Date:
Certfcaton of ed Determnaton to the cess Pbofts Ta Counc
(n Trpcate).
Dvson.
Date:
Charman, cess Profts Ta Counc,
ureau of Interna Revenue,
Washngton 25, D. C.
In re:
Industry
Prncpa products __.
Operatons performed
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120
If you do not agree to the determnaton (s proposed heren, you may fe a
protest, e ecuted In trpcate under oath, wth ths offce wthn 30 days from
the date of ths etter, statng the grounds for your e ceptons. ny protest so
fed w have carefu consderaton. If you so request, an opportunty for a
conference n ths offce w be granted you pror to the certfcaton to the -
cess Profts Ta Counc of recommendatons wth respect to your appcatons for
reef. Ths etter s not a fna notce of determnaton under secton 732
Shoud no response to ths etter be receved wthn the 30-day perod, the
secton 722 record w be transmtted to the cess Profts Ta Counc for
consderaton, and you w be advsed of the Counc s determnaton (s) n due
course.
Your prompt acknowedgment of the recept of ths etter and reated papers
upon the encosed form w be apprecated.
ery truy yours,
Interna Revenue gent n Charge.
ncosures.
(15-day etter advsng ta payer of ta consequence of Counc decson and
nvtng agreement.)
(Name and address of ta payer.)
Gentemen:
Your appcaton(s) for reef fed under the provsons of secton 722 of the
Interna Revenue Code for the ta abe year(s) ended
has (have) been consdered and a determnaton of constructve average base
perod net ncome pursuant to the provsons of such secton has been made by
the cess Profts Ta Counc.
s a consequence of the determnaton of constructve average base perod
net Income under secton 722, your ncome and e cess profts ta abty for
the years desgnated has been redetermned as set forth n deta n the attached
statement.
cton n ths connecton w be suspended for a perod of 15 days from the
date of ths etter, durng whch you may record your agreement to the defcences
n ta or overassessments set forth n the attached statement by e ecutng ard
returnng to ths offce the encosed form of agreement.
Upon recept of the propery e ecuted agreement or upon the e praton of
the 15-day perod, dsposton of the case w be effected n accordance wth
secton 272 and secton 732 of the Interna Revenue Code.
ery truy yours,
Interna Revenue gent n Charge.
ncosures.
orm PC-1
TR SURY D P RTM NT
Interna Revbnck Sebvc
ugust 1940
greement to mount ok Constructve verage ase Perod Net Income
Determned Undeb Secton 722, Interna Revenue Code.
ppcatons for reef pursuant to the provsons of secton 722 of the Interna
Revenue Code, havng been fed by the ta payer and consdered by the Com-
mssoner, the ta payer
(Name.)
( ddresa.)
for the purpose of computng the e cess profts credt hereby consents and agrees
to the determnaton of constructve average base perod net ncome n accord-
ance wth the provsons of secton 722 of the Interna Revenue Code for the e -
cess profts ta ta abe years and n the respectve amounts as foows:
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121 Msc.
v. - .,. , ,1 , Constructve average base
Taabc year ended perod et ucuuY,.
y
(Tte) ___
Date .
(Ta payer.)
( ddress.)
1946-24-12447
. P. C. 3
uetn on Secton 722 of the Interna Revenue Code.
The uetn on Secton-722 of the Interna evenue Code, ssued
under date of November, 1944, represented the current trend of off-
ca opnon at the tme of ts ssuance. The buetn was the resut of
the concentrated effort e tendng over a perod of neary a year of
ureau staff members specazng n ths fed. It consttutes a vo-
ume of e pert technca knowedge deang wth probems arsng n
the admnstraton of secton 722. The cess Profts Ta Counc
recognzes the mportant vaue of enuncatng the prncpes and
gatherng the matera contaned n ths buetn, and t has no present
ntenton of attemptng the aborous task of a compete rewrtng of
the pubcaton. owever, wth the passage of tme and the ganng of
e perence, t foows that the trend of offca opnon may change.
s the cess Profts Ta Counc s opnon on matters contaned n
the buetn becomes crystazed, ts pocy w be made known gen-
eray through the medum of . P. C. memoranda and n other appro-
prate forms. Where the matera contaned n the . P. C. memo-
randa s at varance wth that set forth n the buetn, t shoud be
regarded as a modfcaton of the poston orgnay estabshed. The
. P. C. memoranda, therefore, supersede any buetn statements whch
are nconsstent wth them.
The fact that any provsons of the buetn have not been made
the sub|ect of an . P. C. memorandum does not necessary sgnfy
that the cess Profts Ta Counc subscrbes to such provsons.
In some cases these provsons may be under actve consderaton by
the Counc n others, consderaton may have been postponed pend-
ng further e perence, court decsons, or other deveopments. s a
practca matter, the buetn w contnue to serve as a gude n
the admnstraton of secton 722 n so far as t s not nconsstent wth
nbmges n pocy announced by the Counc.
Chares D. ame,
November 14, 1946.
72 29 47 0
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122
1946-24-1244
.P. C.4
ppcaton of secton 722(b) (5) to ta payers havng base perods
contanng more or ess than 4 months.
Secton 722 of the Interna Revenue Code provdes, n part, as fo-
ows:
(b) Ta payers Tsno verage arnngs Method. The ta computed under
ths subchapter (wthout the beneft of ths secton) sha be consdered to be
e cessve and dscrmnatory n the case of a ta payer entted to use the e cess
profts credt based on ncome pursuant to secton 713, f ts average base perod
net ncome s an nadequate standard of norma earnngs because

(5) of any other factor affectng the ta payer s busness whch may rea-
sonaby be consdered as resutng n an nadequate standard of norma earn-
ngs durng the base perod and the appcaton of ths secton to the ta payer
woud not be nconsstent wth the prncpes underyng the provsons of
ths subsecton, and wth the condtons and mtatons enumerated theren.
In determnng the e cess profts credt based upon ncome, a ta -
payer may be requred by the provsons of secton 713(b) (1) ( ) to
empoy a base perod or more or ess than 4 months. Where the
base perod s shorter or onger than 4 months, t w, of necessty,
ncude at east one ta abe year of ess than 12 months, usuay resut-
ng from a change n accountng perod.
n nadequacy of average base perod net ncome as a standard of
norma earnngs can not be caused by the mere fact that a ta payer
s requred to empoy a base perod of more or ess than 4 months.
n nadequacy, however, mght be caused by such requrement when
couped wth some dstortng crcumstance, such as a marked seasona
varaton n ncome. In such a case, the change of accountng perod
(or other crcumstance gvng rse to the short ta abe year) w
be consdered a factor affectng the ta payer s busness wthn the
meanng of secton 722(b) (5).
Chares D. ame,
November 14, 1946.
. 1946-24-12449
. P. C. 5
Two-year push-back rue.
The uetn on Secton 722 of the Interna Revenue Code, Part .
Subpart II, paragraph (3), commencng at page 6, dscusses the
purpose and appcaton of the 2-year push-back rue. In severa n-
stances, statements are made there to the effect that the push-back rue
s desgned to enabe the ta payer to overcome ts nta deveopment
dffcutes. It s camed that these statements have on occason been
nterpreted as mtng the appcaton of the push-back rue to that
part of the deveopment perod durng whch the ta payer was oper-
atng at a oss.
In the opnon of the cess Profts Ta Counc, such a restrctve
nterpretaton of the push-back rue woud be ncorrect. The frst
paragraph of (3) a ve referred to ceary ndcates the contrary:
Under the statute the constructve average base perod net ncome must
refect the norma operaton of the busness for the entre base perod. s a
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practca matter, ths requres that norma earnngs attrbutabe to norma oper-
atng condtons at the end of the base perod must frst be estabshed under
the push-back rue. Therefore, f the earnng eve attaned at the end of the
base perod s ess than the eve It woud have reached had the commencement
or change been made two years earer, the ta payer s gven an addtona
perod of two years wthn the framework of base perod condtons to estabsh
what the earnng eve at the end of the base perod woud have been after
such addtona perod. -
The ntenton s to permt ta payers where possbe under the 2-year
push-back procedure not ony to overcome the osses whch may be n-
curred n te nta deveopment of a new or changed busness, but
aso to estabsh wthn the 2-year mtaton the earnng eve of the
new or changed busness. ny wordng of the buetn n paragraph
(3) or esewhere nconsstent wth ths pocy s superseded by ths
memorandum.
Chares D. ame,
November 14, 1946.
1946-26-12463
. P. C. 6
NORM L RNINGS.
The statement whch foows s to be regarded as a generazed
statement of the prncpes underyng the concept of a far and |ust
amount representng norma earnngs to be used as a constructve
average base perod net ncome for the purposes of an e cess profts
ta based upon a comparson of norma earnngs and earnngs durng
the e cess profts ta perod.
n understandng of norma earnngs s so fundamenta n the
admnstraton of secton 722 that a restatement of the buetn treat-
ment under the headng ( ) Concept of Norma arnngs (pages
6,7) s deemed approprate. The restatement whch repaces the treat-
ment n the buetn under the above headng affrms some of the prov-
sons of the buetn, changes others, and to some e tent states affrma-
tvey vewponts whch coud be gathered ony by mpcaton from the
provsons of the buetn. ny provsons of the buetn nconsstent
wth the foowng statement, whether under the headng of Concept
of Norma arnngs or esewhere n the buetn, and whether
specfcay referred to or not, are revoked.
The queston of post-1939 events or condtons s not covered by ths
memorandum. Its omsson s not ntended as a change n the buetn
poston.
ttenton s partcuary drected to affrmatve statements or
changes n reaton to the foowng sub|ect matters:
(a) d|ustment of abnormates whether favorabe or unfavorabe
to the ta payer and whether or not arsng out of a quafyng factor.
(b) Consderaton to be gven to actua base perod earnngs.
(c) Determnaton of norma earnngs under secton 722 nde-
pendent of other sectons of the e cess profts ta aws.
(d) ffrmatve statement of ob|ectves n constructng norma
earnngs.
(e) Statement of e tent of deveopment contempated as an eement
of norma operatons.
(/) Statement n reaton to condtons nduced by war.
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124
In the ght of the foregong, the foowng statement represents
the current vews of the Counc wth respect to the genera prncpes
underyng the concept of norma earnngs. The statement may be
ampfed from tme to tme as contnung e perence may warrant
CONC PT OP NORM L RNINGS.
Ta payers quafyng under secton 722 are aowed an e cess profts
credt computed n accordance wth a method dstnct from ether the
average earnngs or nvested capta method. The computaton of the
credt n such cases nvoves a determnaton of norma earnngs, whch
determnaton s governed by the provsons of secton 722.
s used here, the term norma earnngs 1 refers to that standard
of earnngs, on an annua bass, whch the ta payer ordnary woud
have reazed from ts busness actvtes under usua operatng con-
dtons durng the base perod or such other perod as may be appro-
prate. It s synonymous wth the phrase constructve average base
perod net ncome. The amount of norma earnngs s the far and
|ust amount to be empoyed n eu of the average base perod net
ncome otherwse determned.
In cases where there are actua earnngs for any of the ta abe years
n the base perod, such earnngs w be consdered norma (. e.,
acceptabe eements to be empoyed n the process of determnng
norma earnngs) n the absence of factors requrng a contrary con-
cuson or of crcumstances requrng a reconstructon based upon fac-
tors other than actua earnngs. Thus, norma earnngs w fre-
quenty be the average of actua earnngs for the ta abe years n the
base perod, ad|usted to compensate for the effects of unusua and
pecuar events and temporary economc crcumstances.
In the event the ta payer nas e perenced a proft cyce dfferng
materay from the genera busness cyce or sporadc and ntermt-
tent perods of hgh profts nadequatey represented n the base
perod, actua earnngs w be ad|usted to the e tent necessary to
refect the average earnngs whch t reazed or woud have reazed
under usua operatng condtons over a representatve perod.
Wth respect to ta payers wthout suffcent e perence, because of
commencement or change n character of busness durng or mmed-
atey pror to the base perod or commencement of busness after the
base perod, norma earnngs w be ascertaned under base perod
condtons for the busness so commenced or changed and w be deter-
mned as neary as may be practcabe n the ght of the e perence of
ta payers of ke nature and character.
The utmate ob|ectve n constructng norma earnngs, stated
broady, may be reached by attrbutng to the ta payer depressed by
pecuar and unusua crcumstances the earnngs t woud hare had
under ordnary condtons durng the base perod n the absence of
In Monarch Cap Screw f Manufacturng Co. (5 T. C, 1220), The Ta Court stated:
The word norma s susceptbe of dfferent or varyng meanngs. In rea-
ton to ts conte t we thnk that the whoe phrase of an nadequate standard of norma
earnng refers to a standard or measure of earnngs whch fas beow that estabshed
over a reasonabe ength of tme and under norma condtons by the ta payer or by otor
ta payers engaged n the same or a smar busness under comparabe condtons. It s
such a standard as woud resut n an abnormay ow e cess profts credt. (See Senate
nance Commttee Report No. 1631, Seventy-seventh Congress, second sesson, pares 3
and 197 C. . 1942-2. 504 . Cted n Phadepha, Uermantown NorrUtotcn Rana
Co. (6 T. C, 794) and Mmson M Co. (7 T. C, 125).)
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such depressng crcumstances to the ta payer whose busness was
depressed by condtons prevang n ts ndustry because of ts
varant cycca or sporadc characterstcs, the earnngs t had or
woud have had durng a perod whch, for ts busness, may be re-
garded as a far equvaent.to the base perod for busness generay
and to the ta payer whose average base perod net ncome was nade-
quate because t began busness or changed ts character durng or
mmedatey pror to the base perod, the earnngs t woud have had
durng the base perod n ts new or changed character.
In many nstances depressed earnngs attrbutabe to any of the
eements whch mght usuay form a proper bass for ad|ustment may
be offset, n whoe or n part, by ncreased earnngs stemmng from the
same or other factors wth the resut, that, consderng the base perod
as a whoe, any dstorton may be mnmzed or overcome.
Norma earnngs must necessary be reated to perods of tme and
to norma operatng condtons appcabe to such perods. Cond-
tons vary from year to year, and no one earnngs eve e stng wthn
a snge year may ordnary be taken as a reabe measure. ctua or
constructve condtons durng the entre base perod are matera
factors n determnng norma earnngs. Condtons durng a sub-
sttuted perod may be used when the base perod s not representatve
because of such factors as ndustry-wde varant cyce or sporadc
proft condtons.
arnngs durng an nta deveopment perod may not refect nor-
ma operatons. busness mght we e perence osses or subnorma
earnngs durng such perod whch woud not recur thereafter. In
cases nvovng commencement or change n character of a busness,
norma operatons assume the norma eve of deveopment reached
by the ta payer at the end of the base perod or the norma eve of
deveopment whch woud have been reached by the ta payer at the
end of the base perod under the push-back and commtment rues.
Norma earnngs must be estabshed wth respect to the partcuar
ta payer n the ght of ts own characterstcs and ts own poston n
the ndustry of whch t s a member, and may not be assumed to be
represented by an averagng of ndustry earnngs, or by the earnngs
of the most or east successfu busnesses n ts ndustry.
Whether events or crcumstances are to be consdered unusua and
pecuar must be eft for determnaton n each partcuar case. In
makng ths determnaton, the frequency and reguarty of the event
or crcumstance and ts reaton to the nature and e tent of the ta -
payer s operatons must be consdered. Thus n estabshng norma
earnngs, factors attrbutabe to condtons nduced by the war or
preparatons for the war w be consdered abnorma to the e tent,
f any, that such factors were not typca, n character or degree, of
the domestc economy durng the base perod. No factors resutng
from the outbreak of the war on September 1, 1939, w be regarded
as norma.
In usng base perod e perence n the determnaton of norma
earnngs, t s necessary to take account of abnormates . e., sub-
stanta and outstandng departures from the usua and ordnary n-
come and e pense that woud be e pected to characterze the profts
hstory of the ta payer durng such a perod. Thus approprate ad-
|ustment w be made for a such abnormates, whether favorabe
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1621.
C PT R 9. MPLOYM NT T S.
SU C PT R D. COLL CTION O INCOM T T SOURC ON
W G S.
S CTION 1621(a). D INITIONS: W G S.
Reguatons 116, Secton 405.101: Wages. 1946-15-12356
I. T. 3 09
INT RN L R NU COD .
mounts recovered by a returned servceman from hs empoyer,
pursuant to secton (e) of the Seectve Tranng and Servce
ct of 1940 ( 54 Stat., 5, 91), as compensaton for oss of wages
attrbutabe to the empoyer s faure to restore hm to hs former
poston and to the empoyer s dschargng hm from another (n-
feror) poston wthout cause wthn one year after restoraton to
hs former poston, consttute wages sub|ect to wthhodng of
ncome ta at the source under secton 1622 of the Interna Revenue
Code.
dvce s requested whether amounts recovered by a returned serv-
ceman from hs empoyer, pursuant to secton (e) of the Seectve
Tranng and Servce ct of 1940 (54 Stat., 5, 91), consttute wages
sub|ect to wthhodng of ncome ta at the source.
In the nstant case, a returned servceman apped to hs empoyer
for restoraton to hs former poston on uy , 1944, and hs appca-
ton was refused. e remaned unempoyed unt October , 1944,
when he was restored to hs former poston. e was demoted wthout
cause on December , 1944, and he was thereafter empoyed n an
nferor poston unt une , 1945, when he was dscharged wthout
cause. e nsttuted court acton aganst hs empoyer under secton
(e) of the Seectve Tranng and Servce ct of 1940 for oss of
wages attrbutabe to the empoyer s faure to restore hm to hs former
poston and to the empoyer s dschargng hm from another (n-
feror) poston wthout cause wthn one year after restoraton.
udgment was entered n favor of the returned servceman.
In the case of a quafed ndvdua who makes appcaton for
reempoyment n hs former poston wthn 40 days after he s reeved
from tranng and servce under the Seectve Tranng and Servce
ct of 1940, secton (b) ( ) of that ct provdes as foows:
( ) f.suc h poston was n the empoy of a prvate empoyer, such empoyer
sha restore such person to such poston or to a poston of ke senorty, status,
and pay uness the empoyer s crcumstances have so changed as to make t
mpossbe or unreasonabe to do so
Secton (c) of the ct provdes n part that any person who s
restored to a poston n accordance wth the provsons of paragraph
( ) of subsecton (b) sha not be dscharged from such poston
wthout cause wthn one year after such restoraton. Secton (e)
of the ct provdes n part as foows:
(e) In case any prvate empoyer fas or refuses to compy wth the prov-
sons of subsecton (b) or subsecton (c), the dstrct court of the Unted States
for the dstrct n whch such prvate empoyer mantans a pace of busness
sha have power, upon the tng of a moton, petton, or other approprate
peadng by the person entted to the benefts of such provsons, to specfcay
requre such empoyer to compy wth such provsons, and, as an ncdent thereto,
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129
1622.
2. On ebruary 25, 1946, the Supreme Court of the Unted States
hed n The Soca Securty oard v. oseph Nerotko (327 U. S., 35 )
that Natona Labor Reatons oard back pay awards shoud be
treated as wages under the Soca Securty ct. (See Mm. 6040,
page 155, ths uetn.) or the purpose of wthhodng ncome ta
at the source on wages the term wages means a remuneraton
(wth certan specfc e ceptons) for servces performed by an em-
poyee for hs empoyer. In genera, the defntons of the term
wages for the purposes of ncome ta wthhodng and soca
securty ta deductons are substantay the same.
3. The poston of the ureau that payments representng back
pay awards do not consttute wages wthn the meanng of secton
465(b) of the Code and secton 1621(a) of the Code s apparenty n
confct wth the reasonng adopted by the Supreme Court n the
Nerotko case wth respect to the meanng of the term wages.
ccordngy, t s now hed that Natona Labor Reatons oard back
pay awards consttute wages for the purpose of wthhodng vctory
ta and ncome ta at the source under the provsons of secton 466(a)
and secton 1622(a) of the Code. Mm. 5530, supra, s hereby modfed.
4. Under the authorty granted n secton 3791(b) of the Interna
Revenue Code, the rung contaned n the precedng paragraph w
be apped wthout retroactve effect to the e tent that empoyers w
not be requred to perform the dutes of wthhodng agents n respect
to Natona Labor Reatons oard back pay awards pad to empoyees
pror to the date of ths mmeograph and from whch the requred
amounts of ta have not aready been wthhed. The persona ncome
ta abty of empoyees s not affected by the authorzaton con-
taned n ths paragraph.
5. Correspondence reatng to ths mmeograph shoud refer to ts
number and the symbos IT: IM.
oseph D. Nunan, r.,
Commssoner.
pproved ugust 2 ,1946.
Reguatons 116, Secton 405.102: cusons from wages.
INT RN L R NU COD .
S CTION 1622. INCOM T COLL CT D
T SOURC .
Reguatons 116, Secton 405.201: Requrement of
wthhodng.
INT RN L R NU COD .
Natona Labor Reatons oard back pay awards. (See Mm.
6060, page 12 .)
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51, rt. 51-1. 134
. R NU CT O 193 .
SU TITL . G N R L PRO ISIONS.
D INITION.
rtce 22(a) 1: What ncuded n gross ncome.
R NU CT O 193 .
Proceeds of embezzement. (See G. C. M. 24945, page 27.)
P RT . R TURNS ND P YM NT O T .
rtce 51-1: Indvdua returns.
R NU CT O 193 .
Income from Caforna communty property durng admnstra-
ton of the estate of a deceased husband. G. C. M. 24292 (C. . 1944,
162) modfed. (See G. C. M. 2500 , page 49.)
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135 115, rt. 115-1.
INCOM T RULINGS. P RT IL
R NU CTS O 1937 ND 1936.
D INITION.
rtce 22(a)-1: What ncuded n gross ncome.
R NU CT OP 1936.
R NU CT O 1936.
Income from Caforna communty property durng admnstraton
of the estate of a deceased husband. G. C. M. 23 11 (C. . 1943,1026)
and G. C. M. 24292 (C. . 1944, 162) modfed. (See G. C. M. 2500 ,
page 49.)
SU TITL C SUPPL M NT L PRO ISIONS.
SUPPL M NT . COMPUT TION O N T INCOM .
S CTION 115. DISTRI UTIONS Y CORPOR TIONS.
rtce 115-1: Dvdends. 1946-20-12413
Ct. D. 167
INCOM T R NU CT O 1936 D CISION O COURT.
1. Dstrbutons by Corporatons Dvdends Ta abe to Stock-
hoders of Record on Date Payabe ven Though Stockhoder,
s on ccrua ass.
Dvdends decared n December, 1936, to stockhoders of record as
of dates durng that month, but payabe n 1937, are ncome to the
ta payer n the atter year even though t s on an accrua bass.
The treatment of dvdends shoud be sub|ect to a snge rue regard-
ess of the bookkeepng methods of the ta payer, n the absence of
Congressona enactment of a contrary rue.
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137
115, rt. 115-1.
Respondent contends, and the appeate court hed n the Tar Products
case, supra, that ths atter prncpe does not appy n the case of dvdends
because of a speca statutory defnton and appcabe departmenta reguaton.
The term 1 dvdend means any dstrbuton made by a corpora-
ton to ts sharehoders . (Secton 115 of the Revenue ct of 193G.)
rtce 115-1 of Treasury Reguatons 94, promugated under ths ct, provdes:
ta abe dstrbuton made by a corporaton to Its sharehoders sha be
ncuded n the gross ncome of the dstrbutees when the cash or other property
s unquafedy made sub|ect to ther demands.
Pettoner contends, and the oard of Ta ppeas hed In the Tar Products
case, that the anguage of the reguaton has reference ony to the doctrne of
constructve recept, hence s mted n Its appcabty to ta payers on the cash-
dsbursements bass. Ths contenton was carefuy consdered by the appeate
court n the Tar Products case, and It concuded that the anguage of the ct
and reguaton, dentca from 1921 on down, never had made any dstnctons
as to the tme when the dvdend became ncome accordng to the method of
bookkeepng used by the ta payer, and that no reason appeared why t shoud
be restrcted as contended by the Commssoner.
The court further went on to pont out reasons why the treatment of dvdends
shoud be sub|ect to a snge rue regardess of the bookkeepng methods of the
ta payer. It makes possbe the checkng of ta payer s returns aganst the
corporaton record of dsbursements. It w prevent varatons In the ta to
be pad n those cases where dvdends are pad n knd rather than n money
and the vaue of the property fuctuates. further reason for the snge rue
s suggested by Tyer In the artce referred to above (note 1). Under secton
115(a) of the ct, a dstrbuton, n order to be a ta abe dvdend rather than
a return of capta, must be pad out of earnngs and profts of the corporaton.
ut the amount of earnngs and profts avaabe to pay a dvdend has been
determned as of the tme of payment rather than the date of decaraton.
(Mason v. Routzahn, 275 U. S., 175 T. D. 4131, C. . II-1,194 (192 ) .) Thus t
mght occur that a dvdend decared, December 15,1944, payabe anuary 31, 1945,
to stockhoders of record December 31, 1944, mght be nonta abe to the accrua
bass stockhoder because a return of capta, f there were no earnngs n 1944
wth whch to pay the dvdend, athough t woud be ta abe to cash bass share-
hoders f there were 1945 earnngs suffcent to pay t. It mght aso be sub|ect
to doube ta aton f a transfer from an accrua bass stockhoder to a cash
bass one occurred between the record date and the date of payment.
of these reasons appear to us to be qute persuasve for the adopton of
the snge rue for the treatment of ta abty of corporate dvdends, athough,
as ponted out by the Thrd Crcut, none woud be concusve f Congress actuay
enacted a contrary rue. In the absence of such Congressona enactment, we
agree wth the reasonng of that court, and wth the acton of The Ta Court
n the case at bar n yedng to ts decson. We thnk the persuasveness of The
Ta Court s concuson here (Dobson v. Commssoner, 320 . S., 4 9 Ct. D. 1597,
C. . 1944, 56 Commssoner v. state of edford, 325 U. S., 2 3 Ct. D. 1641,
C. . 1945. 357 rschenbaum v. Commssoner, ed. (2d), ) s not sub-
verted by ts earer decson to the contrary.
Decson affrmed.
72 29 47 10
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S 61, rt. 61-1. 13
INCOM T RUL NGS. P RT III.
R NU CTS O 1935 ND 1934 OR PRIOR CTS.
D INITION.
rtce 22(a)-: What ncuded n gross ncome.
R NU CT O 1934 ND PRIOR R NU CTS.
S CTION 23(a). D DUCTIONS ROM GROSS
INCOM : P NS S.
rtce 23(a)-11: penses of farmers.
R NU CTS OP 191 ND 1921.
mounts e pended n deveopment of farms, orchards, and ranches.
I. T. 1610 (C. . II-, 5 (1923)) revoked. See Mm. 6030, page45.)
S CTION 23(1). D DUCTIONS ROM GROSS
INCOM : D PR CI TION.
rtce 23 (1) 5: Method of computng deprecaton
aowance.
R NU CT O 1926.
Use of decnng baance method. I. T. 2369 (C. . I-2,63 (1927))
modfed. (See I. T. 3 1 , page 42.)
R NU CTS O 192G, 192 , 1932. ND 1934.
Income from Caforna communty property durng admnstraton
of the estate of a deceased husband. G. C. M. 24292 (C. . 1944,162)
modfed. (See G. C. M. 2500 , page 49.)
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Regs. 106, 402.202.
140
(), 5(b), and 10 of such Internatona Organzatons Immuntes
ct, such reguatons are amended as foows:
R GUL TIONS 106.
Paragraph 1. Secton 402.101(a) s amended by strkng out the
ast sentence thereof, together wth the parentheses.
Par. 2. Immedatey precedng the capton Secton 3797 (a) and
(b) of the Interna Revenue Code as set forth precedng secton
402.201, the foowng s nserted:
S CTION 4(c) O T INT RN TION L ORG NIZ TIONS
IMMUNITI S CT.
(c) ffectve anuary 1, 1046, secton 1426(b), defnng the term
empoyment for the purposes of the edera Insurance Contrbutons
ct, s amended (1) by strkng out the word or at the end of para-
graph (14), (2) by strkng out the perod at the end of paragraph (15)
and nsertng n eu thereof a semcoon and the word or, and (3) by
nsertng at the end of the subsecton the foowng new paragraph:
(16) Servce performed n the empoy of an Internatona organ-
zaton.
Par. 3. Immedatey precedng secton 402.201, the foowng s
nserted:
S CTION 4() O T INT RN TION L ORG NIZ TIONS
IMMUNITI S CT.
() Secton 3797(a), reatng to defntons, s amended by addng at
(1 ) Internatona organzaton.- The term Internatona
organzaton means a pubc nternatona organzaton entted to
en|oy prveges, e emptons, and mmuntes as an nternatona
organzaton under the Internatona Organzatons Immuntes ct.
S CTION 10 OP PU LIC L W 291 (S NTY-NINT CONGR SS),
PPRO D D C M R 29, 1945.
Ths tte tte I may be cted as the Internatona Organzatons
Immuntes ct .
Par. 4. Immedatey precedng secton 402.202, the foowng s
nserted:
S CTION 5(b) O T INT RN TION L ORG NIZ TIONS
IMMUNITI S CT.
No ta sha be coected under the edera Insurance
Contrbutons ct wth respect to servces rendered pror to
anuary 1, 1946, whch are descrbed n paragraph (16) of sectons
1426(b) of the Interna Revenue Code, as amended
Par. 5. Secton 402.202 s amended by strkng out the ast sentence
of the second paragraph thereof and nsertng n eu thereof the
foowng:
Secton 5(b) of the Internatona Organzatons Immuntes ct provdes, n
effect, that no ta sha be coected under the edera Insurance Contrbutons
ct wth respect to servces rendered pror to anuary 1,1940, whch are descrbed
n paragraph (16) of secton 1426(b) of the edera Insurance Contrbutons ct
In force on and after anuary 1, 1946, reatng to servces n the empoy of an
nternatona organzaton. ( or provsons reatng to servces rendered after
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Regs. IOC, 402.202.1
142
The coecton of ta under the ct wth respect to certan servces rendered
pror to anuary 1, 1946. s prohbted athough such servces are not e cepted
by secton 1420(b) of the ct n force pror to such date. Secton o(b) of ne
Internatona Organzatons Immuntes ct provdes that no ta sha be co-
ected under the edera Insurance Contrbutons ct wth respect to servces
rendered pror to anuary 1, 1046, whch are descrbed n paragraph (161 of
secton 1420(b) of the edera Insurance Contrbutons ct n force on and afer
such date, reatng to servces n the empoy of an nternatona organzaton.
The e empton from ta aton provded under such secton 5(b) s sub|ect to
the provsons of secton 1 of the Internatona Organzatons Immuntes ct
(see provsons of such secton quoted mmedatey precedng secton 402.22Ga).
Notwthstandng any other provson of these reguatons, servces wth respect
to whch the coecton of ta s prohbted by such secton 5(b), as the appca-
ton of such secton may be modfed pursuant to such secton 1, sha be deemed
not to be ncuded wthn the term empoyment as used n these reguatons.
Par. 9. Immedatey after secton 402.226, the foowng s nserted:
S CTION 1426(b) (16) O T CT.
The term empoyment means any servce, of whatever
nature, performed after December 31, 1039, by an empoyee for the person
empoyng hm e cept
(16) Servce performed n the empoy of an nternatona or-
ganzaton. (Sec. 1426(b) (16), I. R. C, as added, effectve an. 1,
1946, by sec. 4(c), Internatona Organzatons Immuntes ct.)
S CTION 3797(a) (1 ) O T INT RN L R NU COD -
INT RN TION L ORG NIZ TION.
The term nternatona organzaton means a pubc nternatona
organzaton entted to en|oy prveges, e emptons, and mmuntes as
an nternatona organzaton under the Internatona Organzatons
Immuntes ct. (Sec. 3797(a) (1 ), I. R. C, as added by sec. 4(),
Internatona Organzatons Immuntes ct)
S CTION 1 O T INT RN TION L ORG NIZ TIONS
IMMUNITI S CT.
or the purposes of ths tte Internatona Organzatons Immuntes
ct, the term nternatona organzaton means a pubc nternatona
organzaton n whch the Unted States partcpates pursuant to any
treaty or under the authorty of any ct of Congress authorzng such
partcpaton or makng an appropraton for such partcpaton, and
whch sha have been desgnated by the Presdent through approprate
ecutve order as beng entted to en|oy the prveges, e emptons, and
mmuntes heren provded. The Presdent sha be authorzed, n the
ght of the functons performed by any such nternatona organzaton,
by approprate ecutve order to wthhod or wthdraw from any such
organzaton or ts offcers or empoyees any of the prveges, e emp-
tons, and mmuntes provded for n ths tte (ncudng the amend-
ments made by ths tte) or to condton or mt the en|oyment by any
such organzaton or ts offcers or empoyees of any such prvege,
e empton, or mmunty. The Presdent sha be authorzed, f n hs
|udgment such acton shoud be |ustfed by reason of the abuse by an
nternatona organzaton or ts offcers and empoyees of the prveges,
e emptons, and mmuntes heren provded or for any other reason, at
any tme to revoke the desgnaton of any nternatona organzaton
under ths secton, whereupon the nternatona organzaton n ques-
ton sha cease to be cassed as an nternatona organzaton for the
purposes of ths tte.
Sf.c. 402.226a. Internatona Organzatons. Sub|ect to the provsons of
secton 1 of the Internatona Organzatons Immuntes ct, servces performed
on or after anuary 1, 1946, n the empoy of an nternatona organzaton as
defned n secton 3797(a) (1 ) of the Interna Revenue Code are e cepted. or
provsons reatng to the crcumstances under whch servces rendered pror
to anuary 1, 1916, n the empoy of an nternatona organzaton are deemed
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Regs. 106, 402.20 .
14
obtaned workng n the offce wrtng and recevng orders and et-
ters concernng orders for chcks, makng out shppng tags and drec-
tons, answerng the teephone, keepng books, and n e ecutve and
supervsory capactes.
5. No petton for certorar has been fed for revew of the foregong
decson and the vews of the court have been accepted as estabshng
the controng prncpe to be apped n smar cases. ccordngy,
the ureau has adopted the poston that the words n connecton
wth the hatchng of poutry appy to a servces essenta to the op-
eraton of a hatchery. Servces of the nature descrbed n the above-
cted case performed after December 31,1939, consttute agrcutura
abor wthn the meanng of sectons 1426(h) (3) and 1607(1) (3) of
the edera Insurance Contrbutons ct and the edera Unempoy-
ment Ta ct, respectvey.
6. Inqures reatng to ths mmeograph shoud refer to the number
thereof and to the symbos mT: RR.
oseph D. Nun an, r.,
Commssoner.
Secton 1426: Defntons. 1946-20-12425
Reguatons 106, Secton 402.20 : grcu- Mm, 6056
tura abor.
( so Subchapter C ( edera Unempoyment Ta
ct), Secton 1607 Reguatons 107, Secton
403.20 .)
Status, for edera empoyment ta purposes, of servces per-
formed n connecton wth the gnnng of cotton.
S. S. T. 394 (C. . 1940-2, 253) revoked.
Washngton 25, D. C, ugust 15,19 f.
Coectors of Interna Revenue and Others Concerned:
(1) The purpose of ths mmeograph s to state the present poston
of the ureau wth respect to the status, for edera empoyment ta
purposes, of servces performed n connecton wth the gnnng of
cotton.
S R IC S P R ORM D PRIOR TO NU RY 1, 1940.
(2) S. S. T. 142 (C. . 1937-1,403), n whch t s hed that servces
performed by empoyees n connecton wth cotton gnnng and rce
mng do not consttute agrcutura abor wthn the meanng of
Ttes III and I of the Soca Securty ct, s controng for deter-
mnatons of the status of servces performed pror to anuary 1,1940.
S R IC S P R ORM D SU S U NT TO D C M R 31, 1939 .
(3) Secton 1426(b)(1) of the edera Insurance Contrbutons
ct provdes n part as foows:
The term empoyment means any servce e cept
(1) grcutura abor (as defned n subsecton (h) of ths secton).
Secton 1607(c) (1) of the edera Unempoyment Ta ct contans
a smar defnton wth a reference to subsecton (1) of that secton.
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Regs. 106, 402.227.
154
cream or other dary products, such as cottage cheese or butter, whch
do not requre e tensve processng or manufacturng operatons.
(G) The term agrcutura abor aso w ncude ncdenta
servces of empoyees engaged n the devery of dary products whch
are performed concurrenty wth ther devery dutes, such as the
coecton of accounts.
( ) The provsons of paragraphs (2) of sectons 1426(h) and
1607(1) of the edera Insurance Contrbutons ct and the edera
Unempoyment Ta ct, respectvey, w be apped n determnng
whether cerca servces performed after December 31, 1939, n the
empoy of dary farm operators consttute agrcutura abor. In
accordance wth the decsons n the above-cted cases, a cerca serv-
ces performed pror to anuary 1, 1940, n the empoy of dary farm
operators consttute empoyment.
9. Pursuant to the provsons of sectons 1426(c) and 1607(d) of
the edera Insurance Contrbutons ct and the edera Unempoy-
ment Ta ct, respectvey, f the servces performed after December
31, 1939, durng one-haf or more of any pay perod by an empoyee
for the person empoyng hm consttute empoyment, a the serv-
ces of such empoyee for such perod sha be deemed to be empoy-
ment but f the servces performed durng more than one-haf of any
such pay perod by an empoyee for the person empoyng hm do not
consttute empoyment, then none of the servces of such empoyee
for such pay perod sha be deemed to be empoyment. s used n
ths paragraph the term pay perod means a perod (of not more
than 31 consecutve days) for whch a payment of remuneraton s
ordnary made to the empoyee by the person empoyng hm.
10. Correspondence reatng to ths mmeograph shoud refer to ts
number and to the symbos mT: RR.
oseph D. Ntoan, r.,
Commssoner.
Secton 1426: Defntons.
Reguatons 106, Secton 402.213: Unted States
and nstrumentates thereof.
Martme workers, changes effected by the Soca Securty ct
mendments of 1946. (See Mm. 6070, page 15 .)
Reguatons 106, Secton 402.226a: Internatona
organzatons.
Se vces performed on or after anuary 1,1946, n the empoy of an
nternatona organzaton e cepted. (See T. D. 5519, page 139.)
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155
Regs. 106, 402.227.
Secton 1426: Defntons. 1946-17-123 1
Reguatons 106, Secton 402.227: Wages. Mm. 6040
( so Subchapter C ( edera Unempoyment Ta
ct), Secton 1607 Reguatons 107, Secton
403.227 aso Soca Securty ct, Sectons 11
and 907 Reguatons 91 and 90, rtces 14 and
207.)
Payments made to empoyees who are renstated and granted bark
pay for tme ost, pursuant to an order ssued by the Natona Labor
Reatons oard, consttute wages for purposes of the ta es
mposed by the edera empoyment ta statutes.
S. S. T. 359 (C. . 1939-1 (Part 1), 305) revoked.
Washngton 25, D. C, uy 25,1946.
1. In S. S. T. 359 (C. . 1939-1 (Part 1), 305) t was hed that
payments made to dscharged empoyees of the M Company upon ther
renstatement pursuant to an order of the Natona Labor Reatons
oard do not consttute wages wthn the meanng of Ttes III
and I of the Soca Securty ct.
2. On ebruary 25 1946, the Supreme Court of the Unted States
n the case of Soca Securty oard v. oseph Nerotko (66 Sup. Ct.,
637) affrmed the decson of the Unted States Crcut Court of
ppeas for the S th Crcut, hodng that back pay awards made
by an empoyer n compance wth an order of the Natona Labor
Reatons oard consttute wages for empoyment under the
Soca Securty ct, for whch the empoyee s entted to credt on
hs od-age and survvors nsurance account.
3. The opnon of the Supreme Court of the Unted States reads,
n part, as foows:
Under the Natona Labor Reatons ct an empoyee Is descrbed as any
ndvdua whose work has ceased because of any unfar abor
practce. Whe the egsatve hstory of the Soca Securty ct and
ts amendments or the anguage of the enactments themseves do not specfcay
dea wth whether or not back pay under the Labor ct Is to be treated as
wages under the Soca Securty ct, we thnk t pan that an ndvdua, who
s an empoyee under the Labor ct and who receves back pay for a perod of
tme durng whch he was wrongfuy separnted from hs |ob, s entted to have
that award of back pay treated as wages under the Soca Securty ct defntons
whch defne wages as remuneraton for empoyment and empoyment as any
servce performed by an empoyee for hs empoyer.
The Court, after referrng to the defnton of wages and
empoyment as contaned n Tte II of the Soca Securty ct and
pontng out that the ta ttes of the Soca Securty ct have dent-
ca defntons, concuded that the decson set forth n S. S. T. 359,
supra, s unsound.
4. Snce the edera empoyment ta statutes have defntons of
wages and empoyment smar to those contaned n Tte II of the
Soca Securty ct, the decson of the Supreme Court s controng
for edera empoyment ta purposes n determnng the status of
back pay awarded pursuant to an order of the Natona Labor Rea-
tons oard. ccordngy, back pay awards made by an empoyer
n compance wth an order of the Natona Labor Reatons oard
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Regs. 106, 402.227.
156
consttute wages wthn the meanng of that term as defned n
the edera empoyment ta statutes. S. S. T. 359, supra, s revoked.
5. Under the authorty granted n secton 3791(b) of the Interna
Revenue Code, the above rung hodng back pay awards made by an
empoyer n compance wth an order of the Natona Labor Reatons
oard to be wages w be apped wthout retroactve effect to the
e tent that empoyers who furnsh the nformaton descrbed n para-
graph 6 of ths mmeograph w not be requred to pay (1) ta es
under the edera Insurance Contrbutons ct wth respect to back
pay awards pad pror to pr 1, 1946, or (2) ta under the edera
Unempoyment Ta ct wth respect to such awards pad pror to
anuary 1,1946. ny such ta es whch have been pad, however., w
not be refunded.
6. s a condton to the reef granted n paragraph 5, supra, t s
necessary for the empoyer to fe wth the coector of nterna revenue
for hs dstrct a statement, n the form herenafter ndcated, for each
caendar quarter n whch he made a back payment pursuant to an
order of the Natona Labor Reatons oard. The statement for each
quarter must dscose the name, address, and dentfcaton number of
the empoyer, the date on whch the quarter ended, the account number
and name of each empoyee to whom a back payment was made n the
quarter, the amount of back pay pad to the empoyee n the quarter,
the ncusve dates of the perod for whch such back pay was pad
to the empoyee, and the tota amount of a back payments made by
the empoyer durng the quarter. The empoyer s not requred to
prepare such a statement, however, wth respect to back pay pad
pror to anuary 1,1942.
7. The foowng s an e ampe of the form descrbed n paragraph
6:
mpoyer s Statement of ack Pat Pad to mpoyees Undeb the
Natona Labor Reatons ct.
C Manufacturng Company,
S3 ast 23rd Street,
New York, New York.
00 0000000
uarter n
whch pad 6-30-44.
mpoyee s account
number.
Name of empoyee
(typo or prnt).
Tota amount
of back pay-
ment.
Perod for whch back payment s
000 00 0000
ohn Doe
100. 00
500. 00
une 13, 1943, through pr. 1 ,
1944.
000 00 0001
Rchard Roe
uv 15, 1943, through May 10.
1944.
Tota back pay pad durng
600. 00
quarter.
. In preparng a return or suppementa return on orm SS-
under the edera Insurance Contrbutons ct for the quarter ended
une 30,1946, or any subsequent quarter, the empoyer shoud enter n
the frst ne of Schedue one sum representng the tota amount o
back pay pad by hm durng the quarter. In such ne of Schedue
the empoyer aso shoud enter the words See attached statement of
back pay pad under the Natona Labor Reatons ct. The sum
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157
Regs. 107, 4C3.20 .
entered n the frst ne of Schedue shoud be added to the amounts
of other -wages reported n Schedue as pad durng the quarter, and
the tota thereof shoud be entered n tem 2 of orm SS-a for pur-
poses of the computaton of the ta es. The statement referred to n
the frst ne of Schedue shoud be prepared n the manner descrbed
n paragraphs 6 and 7, supra, and shoud be attached to, and fed wth,
the return or suppementa return on orm SS-a.
9. Correspondence reatng to ths mmeograph shoud refer to the
number thereof and to the symbos mT: RR.
oseph D. Nun an, r.,
Commssoner.
pproved uy 24, 1946.
ctng Secretary of t e Treasury.
Reguatons 106, Secton 402.227: Wages.
Payments made by empoyers to empoyees under the ar Labor
Standards ct of 193 and the Wash- eaey Pubc Contracts ct.
(See Mm. 602 , page 130.)
C PT R 9, SU C PT R C D R L MPLOYM NT T CT.
Secton 1601: Refunds, credts, and abatements.
Reguatons 107, Secton 403.602: Refund or credt
of overpayments abatement of overassessments.
Cams for refund wth respect to servces rendered pror to anuary
1, 1946 n the empoy of an nternatona organzaton. (See T. D.
5519, page 139.)
Reguatons 107, Secton 403.202: mpoyment pror to
anuary 1, 1940.
Servces performed n the empoy of an nternatona organzaton
e cepted. (See T. D. 5519, page 139.)
Reguatons 107, Secton 403.203: mpoyment after
December 31, 1939.
Certan casses of servces performed n the empoy of an nterna-
tona organzaton e cepted. (See T. D. 5519, page 139.)
Reguatons 107, Secton 403.206: cepted servces
n genera.
Servces performed on and after anuary 1,1940, n the empoy of an
nternatona organzaton. (See T. D. 5519, page 139.)
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Regs. 107, 403.211 15
Reguatons 107, Secton 403.20 : grcutura abor.
Indvduas performng servces n connecton wth the operaton
of hatcheres. (See Mm. 6046, page 146.)
Indvduas engaged n the gnnng of cotton. (See Mm. 6056,
page 14 .)
Servces performed n the empoy of dary farm operators. (See
Mm. 606 , page 150.)
Secton 1607: Defntons. 1946-22-12436
Reguatons 107, Secton 403.211: Offcers Mm. 6070
and members of crews.
( so Subchapter ( edera Insurance Con-
trbutons ct), Secton 1426 Regua-
tons 106, Secton 402.213.)
Soca Securty ct mendments of 1946.
Washngton 2o, D. C, October 3, 19 f.
1. The purpose of ths mmeograph s to outne for the nformaton
of coectors of nterna revenue and other nterested persons the
changes effected n the edera Insurance Contrbutons ct (Sub-
chapter , Chapter 9, Interna Revenue Code, as amended), and the
edera Unempoyment Ta ct (Subchapter C, Chapter 9, Interna
Revenue Code, as amended), by the Soca Securty ct mendments
of 1946, approved ugust 10, 1946 (Pubc Law 719, Seventy-nnth
Congress, second sesson page 2 7, ths uetn.
2. The mmeograph s dvded nto three man parts. Part I
e pans the amendments to the edera Unempoyment Ta ct
reatng to martme workers. Part II e pans the changes made n
the edera Insurance Contrbutons ct. Part III e pans add-
tona changes made n the edera Unempoyment Ta ct.
3. Ths e panaton of the changes made by the amendments s for
nformatona purposes ony and does not commt the ureau of
Interna Revenue to any nterpretaton of the aw n advance of the
promugaton of forma amendments to Reguatons 106 and 107
(Parts 402 and 403, Tte 26, Code of edera Reguatons, Cum. Sup.,
respectvey). Such amendments to the reguatons are n the course
of preparaton and w be made avaabe at the earest practcabe
date.
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Regs. 107, 403.211.
160
6-month perod begnnng uy 1, 1946. It s necessary for the em-
poyer n such a case to keep a separate record under each ct for the
purpose of appyng the 3,000 mtaton wth respect to the year 1946.
7. ampe under the edera Unempoyment Ta ct. In pre-
parng hs return on orm 940 under the edera Unempoyment Ta
ct for the caendar year 1946, the empoyer of a martme worker
must ncude the tota amount of remuneraton pad by hm to the
worker durng the year, regardess of the perod of servces for whch
the remuneraton s pad. ssumng that none of the workers servces
performed pror to uy 1,1946, consttuted empoyment as defned
n the edera Unempoyment Ta ct, the empoyer w enter the
foowng deductons on orm 940: a) the amount of remuneraton
pad by nm durng the year for servces performed by the worker
pror to uy 1,1946 and (b) any amount of remuneraton pad durng
the year 1946 by hm to the worker, for servces performed wthn
the perod uy 1, 1946, through December 31, 1946, whch e ceeds
the frst 3,000 pad by hm to the worker for servces performed
wthn such 6-month perod. The net amount, after makng these
deductons on orm 940, w represent the wages of the worker whch
are sub|ect to ta under the edera Unempoyment Ta ct. It s
to be noted that the ta under the edera Unempoyment Ta ct s
measured by the wages pad durng the entre caendar year wth
respect to empoyment performed at any tme after 193 . -
though martme servces performed before uy 1,1946, n the empoy
of a person who quafes as an empoyer of eght or more at some tme
durng 1946 do not consttute empoyment under such ct, other
servces n the empoy of such person performed before such date
(whether or not performed n 1946) may consttute empoyment
under such ct, and the remuneraton for such other servces may con-
sttute wages to be ncuded n the measure of the ta for 1946.
or e ampe, there s ncuded n the measure of the ta for 1946 of a
person who throughout 1946 had one shore empoyee and seven mar-
tme empoyees the wages of the shore empoyee pad at any tme
between anuary 1,1946, and December 31,1946, both dates ncusve.
P RT II.
edera Insurance Contrbutons ct.
. Rates of ta . Sectons 1400 and 1410 of the edera Insurance
Contrbutons ct were amended to contnue the ta rates at 1 per cent
on the empoyee and 1 per cent on the empoyer wth respect to wages
pad durng the caendar year 1947.
9. 3,000 mtaton on wages. The 3,000 mtaton on wages s
unchanged wth respect to wages pad pror to anuary 1, 1947. -Sec-
ton 1426(a)(1) of the edera Insurance Contrbutons ct s
amended to provde, wth respect to amounts pad on or after an-
uary 1, 1947, that the term wages does not ncude that part of
the remuneraton whch, after remuneraton equa to 3,000 wth
respect to empoyment after 1936 has been pad to an ndvdua by M
empoyer durng any caendar year after 1946, s pad to such nd-
vdua by such empoyer durng such caendar year. Thus, n the
caendar year 1947 and n each subsequent caendar year the ta es
mposed by the edera Insurance Contrbutons ct w appy to
the frst 3,000 of wages pad by the empoyer to the empoyee n the
caendar year, wth respect to empoyment at any tme after 1936.
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Regs. 90, rt. 207. 162
T S UND R SOCI L S CURITY CT.
TITL III. T S WIT R SP CT TO MPLOYM NT.
Reguatons 91, rtce 6: grcutura abor.
Mm. 60 G, page 150.)
Reguatons 91, rtce 14: Wages.
ack pay awards made to renstated empoyees by order of the
Natona Labor Reatons oard. (See Mm. 6040, page 155.)
TITL I . T ON MPLOY RS O IG T OR MOR .
Reguatons 90, rtce 206(1): grcutura abor.
Mm. 60 6, page 150.)
Reguatons 90, rtce 207: Wages.
ack pay awards made to renstated empoyees by order of the
(See Mm. 6040, page 155.)
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Regs. 105, 1.24. 164
29, 1945) and by nsertng n eu thereof (as amended by Pubc
Law 393 (Seventy-nnth Congress), approved May 29, 1946).
(C) y strkng out uy 1, 1946 wherever t appears and by
nsertng n eu thereof uy 1, 1947.
secton 3791 of the Interna Revenue Code (53 Stat., 467, 26 U. S. C,
1940 ed., 3791) and Pubc Law 393 (Seventy-nnth Congress), ap-
proved May 29, 1946.)
oseph D. Nuna , r.,
pproved uy 2, 1946.
oseph . O Conne , r.,
( ed wth the Dvson of the- edera Regster uy 3, 1946, 4.29 p. m.)
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165 Regs. 10 , 6.2.
GI T T .
INT RN L R NU COD .
Reguatons 10 , Secton 6.2: Transfers 1946-15-1235
reached. T. D. 5524
TITL 26 INT RN L R NU . C PT R I. SU C PT R , P RT 6 GI T
T UND R C PT R 4 O INT RN L R NU COD , S M ND D.
Reguatons 10 amended to conform to Pubc Law 393 (Seventy-
nnth Congress page 266, ths uetn , reatng to reease of powers
of appontment.
Washngton 25, D. C.
edera Reguatons, Cum. Sup. to Pubc Law 393 (Seventy-nnth
Congress), approved May 29,1946 page 266, ths uetn , such regu-
atons are amended as foows:
Paragraph 1. There s nserted mmedatey after Pubc Law 95
(Seventy-nnth Congress), whch was nserted by Treasury Decson
5471, approved ugust 14, 1945 C. . 1945, 414 , and precedng sec-
ton 6.1, the foowng:
PU LIC L W 393 (S NTY-NINT CONGR SS),
PPRO D M Y 29, 1946.
Resoved by the Senate and ouse of Representatves, of the Unted
States of merca n Congress assembed, That secton 452(c)
of the Revenue ct of 1942 s amended to read as foows:
(c) Reease efore uy 1, 1947.
(1) reease of a power to appont before uy 1, 1947, sha
not be deemed a transfer of property by the ndvdua possessng
such power.
(2) Ths subsecton sha appy to a caendar years pror to
1947 and to that part of the caendar year 1947 pror to uy 1,
1947.
Par. 2. Secton 6.2( ), as amended by Treasury Decson 5366,
approved May 5, 1944 C. . 1944, 5 3 , Treasury Decson 5437, ap-
proved ebruary 3,1945 C. . 1945,413 , and Treasury Decson 5471,
approved ugust 14, 1945 C. . 1945, 414 , s further amended as
foows:
( ) y strkng out uy 1, 1946 wherever t appears and by
nsertng n eu thereof uy 1, 1947.
( ) y strkng out as amended by Pubc Law 95 (Seventy-nnth
Congress), approved une 29, 1945 wherever t appears and by n-
sertng n eu thereof as amended by Pubc Law 393 (Seventy-nnth
Congress), approved May 29,1946.
sectons 1000(c), 1029, and 3791 of the Interna Revenue Code (56
Stat., 952,53 Stat., 157,467 26 U. S. C, 1940 ed., 1000(c), 1029, 3791),
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Regs. 10 , 6. . 166
and Pubc Law 393 (Seventy-nnth Congress), approved May 29,
1946.)
oseph D. Nunan, r.,
pproved uy 2, 1946.
( ed wth the Dvson of the edera Regster uy 3, 1946, 4.29 p. m.)
S CTION 1002. TR NS R OR L SS T N D U T ND ULL CONSID R TION.
Reguatons 10 , Secton 6. : Transfers for 1946-16-12367
a consderaton n money or money s worth. . T. 19
( so Secton 12(b).)
Transfers of property pursuant to an agreement Incdent to d-
vorce or ega separaton are not made for an adequate and fu
consderaton n money or money s worth to the e tent that they
are made n consderaton of a renqushment or promsed ren-
qushment of dower, curtesy, or of a statutory estate created n
eu of dower or curtesy, or other marta rghts n the transferor s
property or estate to the e tent that the transfers are made n
satsfacton of support rghts the transfers are hed to be for an
adequate and fu consderaton. The vaue of renqushed sup-
port rghts sha be ascertaned on the bass of the facts and cr-
cumstances of each ndvdua case.
dvce has been requested concernng the appcaton of the gft
ta to transfers made pursuant to an agreement of the partes ncdent
to a proceedng for dvorce or ega separaton.
Secton 1002 of the Interna Revenue Code provdes as foows:
Where property s transferred for ess than an adequate and fu consdera-
ton n money or money s worth, then the amount by whch the vaue of the
property e ceeded the vaue of the consderaton sha, for the purpose of the
ta mposed by ths chapter, be deemed a gft, and sha be ncuded n com-
putng the amount of gfts made durng the caendar year.
Secton 6. of Reguatons 10 provdes as foows:
Transfers reached by the statute are not confned to those ony whch, beng
wthout a vauabe consderaton, accord wth the common aw concept of gfts,
but embrace as we saes, e changes, and other dspostons of property for a
consderaton n money or money s worth to the e tent that the vaue of the
property transferred by the donor e ceeds the vaue of . the consderaton gven
therefor. owever, a sae, e change, or other transfer of property made n
the ordnary course of busness (a transacton whch s bona fde, at arm s
ength, and free from any donatve ntent), w be consdered as made for an
adequate and fu consderaton n money or money s worth. consderaton
not reducbe to a money vaue, as ove and affecton, promse of marrage, eta,
s to be whoy dsregarded, and the entre vaue of the property transferred
consttutes the amount of the gft.
In Commssoner v. Wemyss (1945) (324 U. S., 303), the Supreme
Court uphed the decson of The Ta Court to the effect that an
antenupta transfer of stock to a prospectve brde, a wdow, was
sub|ect to the gft ta where made pursuant to an agreement to
compensate her for the oss of trust ncome that she woud suffer
on remarrage. The Supreme Court approved the reasonng of The
Ta Court (a) that marrage was not a consderaton reducbe to
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167
Regs. 10 , 6. ,
a money vaue, and (b) that the controng test s the recept by
the donor of money or money s worth, and not the oss of ncome or
other rghts by the donee. Mr. ustce rankfurter stated:
ad Congress ta ed gfts smpcter, It woud be approprate to assume
that the term was used n ts cooqua sense, and a search for donatve
ntent woud be ndcated. ut Congress ntended to use the term gfts
n ts broadest and most comprehensve sense. ( . Rept. No. 70 , Seventy-
second Congress, frst sesson, page 27 S. Rept. No. 665, Seventy-second Con-
gress, frst sesson, page 39. Cf. Smth v. Shaughnessy, 31 U. S., 176
Robnctte v. everng, 31 U. S., 1 4.) Congress chose not to requre an as-
certanment of what too often s an eusve state of mnd. or purposes of the
gft ta t not ony dspensed wth the test of donatve ntent. It formuated
a much more workabe e terna test .
To renforce the evdent desre of Congress to ht a the protean arrangements
whch the wt of man can devse that are not busness transactons wthn the
meanng of ordnary speech, the Treasury reguatons make cear that no genune
busness transacton comes wthn the purport of the gft ta .

If we are to soate as an ndependenty revewabe queston of aw the vew
of The Ta Court that money consderaton must beneft the donor to reeve
a transfer by hm from beng a gft, we thnk The Ta Court was correct. (See
Commssoner v. rsto, 121 ed. (2d), 129.) To be sure, the Revenue ct of
1932 does not spe out a requrement of beneft to the transferor to afford re|ef
from the gft ta . The secton ta ng as gfts transfers that are not
made for adequate and fu money consderaton ams to reach those trans-
fers whch are wthdrawn from the donor s estate.
In Merr v. ahs (1945) (324 U. S., 30 ), the ta payer trans-
ferred 300,000 n trust for hs prospectve brde n consderaton of
her reease of a rghts n hs assets. The coector n support of hs
contenton that the transfer was a gft reed on the restrcton of the
phrase adequate and fu consderaton n money or money s worth
mposed by secton 12(b) reatng to the estate ta , whch provdes as
foows:
or the purposes of ths subchapter, renqushment of dower, curtesy, or of a
statutory estate created n eu of dower or curtesy, or of other marta rghts
n the decedent s property or estate, sha not be consdered to any e tent a
consderaton n money or money s worth.
The Supreme Court n hodng that the transfer was sub|ect to the
gft ta found that Congress ntended that the consderaton or
renqushment provson n the estate ta aw aso appes to the
gft ta , statng n part as foows:
The gudng ght s what was sad n state of Sanford v. Commssoner (30
U. S., 39, 44): The gft ta was suppementary to the estate ta . The two are
n par matera and must be construed together. The phrase on the meanng
of whch decson must argey turn that s, transfers for other than an ade-
quate and fu consderaton n money or money s worth came nto the gft
ta by way of estate ta provsons.

We beeve that there s every reason for gvng the same words n the gft ta
the same readng. ut to nterpret the same phrases In the two ta es
concernng the same sub|ect matter n dfferent ways where obvous reasons
do not compe dvergent treatment s to ntroduce another and needess com-
pe ty nto ths aready rksome stuaton. ere strong reasons urge dentca
constructon. To hod otherwse woud encourage ta avodance. (Comms-
soner v. rsto, supra, at 136 2 Pau, state and Gft Ta aton (1942), page
111 . .)
Some ndcaton of the Congressona ntent wth respect to the
above-quoted renqushment cause, whch was added to the In-
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169
Regs. 10 , 6. .
Wth respect to transfers made pursuant to ega separaton agree-
ments or dvorce decrees, t s the poston of the ureau that, for both
estate and gft ta purposes, a reease of support rghts may con-
to the e tent that a transfer does not e ceed the reasonabe vaue of
the support rghts of the wfe t s to be treated as made for an
adequate and fu consderaton n money or money s worth. The
queston whether the transfer s n e cess of reasonabe support
rghts s for the determnaton of the ureau. That porton of any
transfer whch s aocabe to the reease by the wfe of her property
or nhertance rghts s to be consdered as not made to any e tent
for an adequate and fu consderaton n money or money s worth.
The estabshment of a reasonabe aocaton s regarded as a proper
matter for admnstratve determnaton by the ureau n the absence
of a reasonabe aocaton or segregaton by the partes. In makng
ths determnaton the facts and crcumstances of each case w be
separatey consdered. ements to be consdered are the amount
of the husband s annua ncome, the e tent of hs assets, aso, the fe
e pectances of the partes and the probabty of the wfe s remar-
rage, amony amost unversay beng mted to such perods. n
agreement of the partes may provde for payments e tendng beyond
the perod of ther |ont ves. The requred aocaton n such a case
w nvove a determnaton of the queston whether the aggregate
amounts pad and payabe e ceed norma support rghts, whch ord-
nary woud termnate upon the death of the husband. The con-
tngency of the wfe s remarrage may be measured by actuara
standards. (Commssoner v. State Street Trust Co. (C. C. . 1,1942),
12 ed. (2d), 61 rotherhood v. Pnkston, 293 U. S., 96 (1934)
Commssoner v. Mar|ore D. Mares, ecutr (C. C. . 2), uy ,
1946,.affrmng state of P. M. Mares, 6 T. C, No. 74.)
Wth respect to the payment of the wfe s counse fees by the hus-
band, the ta abty as a gft of such payment s governed by whether
the obgaton s that of the husband or of the wfe. To the e tent
that the husband s under obgaton to pay the wfe s ega fees n
dvorce or ega separaton, the payments therefor are not ta abe as
gfts.
sttute a consderaton n money
72 29 47 12
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Regs. 44, 314.25, et . 170
M NU CTUR RS CIS T S.
INT RN L R NU COD .
Reguatons 44, Sectons 314.25 and 314.26: 1946-20-12415
Saes for e port Proof of e portaton. T. D. 5536
( so Reguatons 46, Sectons 316.25, 316.26
Reguatons 47, rtces 16 and 17 Regua-
tons , Secton 319.34.)
TITL 26 INT RN L R NU . C PT R I. SU C PT R . P RT 469-
T - R S L S TO OR IGN GO RNM NTS O RTICL S OR PORT.
Treasury Decson 5115 C. . 1942-1, 206 revoked.
Washngton, D. C.
Inasmuch as the emergency whch e sted at the tme of the promu-
gaton of Treasury Decson 5115 Part 469, Tte 26, Code of edera
Reguatons Cum. Sup. , approved ebruary 6, 1942 C. . 1942-1,
266 , outnng the procedure to be foowed wth respect to artces
wthn the scope of Chapters 25 and 29 of the Interna Revenue Code
sod by manufacturers or producers to foregn governments for e -
port, no onger e sts, such Treasury decson s hereby revoked as of
the end of September 30, 1946. On and after October 1, 1946, the
procedure outned n sectons 314.25 and 314.26 of Reguatons 44,
sectons 316.25 and 316.26 of Reguatons 46, artces 16 and 17 of
Reguatons 47, or secton 319.34 of Reguatons , whchever s
appcabe, sha be foowed wth respect to saes by manufacturers
and producers of the artces enumerated n Chapters 25 and 29 of
the Interna Revenue Code, when such artces are sod to foregn gov-
ernments for e port.
sectons 2705, 2732, and 3791 of the Interna Revenue Code (53 Stat.,
2 9, 294, 467 26U. S. C, 1940 ed., 2705, 2732, 3791).)
Wm. T. Sherwood,
pproved September 10, 1946.
( ed wth the Dvson of the edera Regster September 13, 1946, 9.02 a. m.)
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171 Regs. 42 (1942), 130.1, etc.
MISC LL N OUS CIS T S.
INT RN L R NU COD .
T S ON S D POSIT O S ND ON C RT IN TR NSPORT TION
ND COMMUNIC TIONS S R IC S.
Reguatons 42 (1942), Sectons 130.1, 130.44, 1946-14-12347
and 130.61.. T. D. 5521
TITL 2G INT RN L R NU . C PT R I, SU C PT R C. P RT 130.
T S ON S D POSIT O S ND ON C RT IN TR NSPORT TION ND
COMMUNIC TIONS S R IC S.
emptons under the Internatona Organzatons Immuntes
ct Reguatons 42 amended.
. . Washngton 25, D. C.
In order to conform Reguatons 42 (1942 edton) Part 130, Tte
26, Code of edera Reguatons, Cum. Sup. , reatng to the ta es
on safe depost bo es, transportaton of o by ppe ne, teephone,
teegraph, rado and cabe messages and servces, and transportaton
o persons under the provsons of the Interna Revenue Code, to
secton 1 and secton 4 (f), (g), and () of the Internatona Organza-
tons Immuntes ct (Tte I, Pubc Law 291, Seventy-nnth Con-
gress), approved December 29, 1945 C. . 1946-1, 323 , such regua-
tons are hereby amended as foows:
Paragraph 1. Immedatey precedng secton 130.1 there s nserted
the foowng:
(TITL I. PU LIC L W 291. S NTY-NINT CONGR SS,
PPRO D D C M R 29, 1945).

() Secton 3797(a), reatng to defntons, s amended by addng at
(1 ) Internatona organzaton. The term nternatona or-
ganzaton means a pubc nternatona organzaton entted to
en|oy prveges, e emptons, and mmuntes as an nternatona
organzaton under the Internatona Organzatons Immuntes ct.
S CTION 1. INT RN TION L ORG NIZ TIONS IMMUNITI S
CT (TITL I, PU LIC L W 291, S NTY-NINT CONGR SS,
PPRO D D C M R 29, 1945).
or the purposes of ths tte, the term Internatona organza-
ton means a pubc nternatona organzaton n whch the Unted
States partcpates pursuant to any treaty or under the authorty of
any ct of Congress authorzng such partcpaton or makng an
appropraton for such partcpaton, and whch sha have been des-
gnated by the Presdent through approprate ecutve order as beng
entted to en|oy the prveges, e emptons, and mmuntes heren
provded. The Presdent sha be authorzed, n the ght of the func-
tons performed by any such nternatona organzaton, by approprate
ecutve order to wthhod or wthdraw from any such organzaton
or ts offcers or empoyees any of the prveges, e emptons, and m-
muntes provded for n ths tte (ncudng the amendments made by
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173
Regs. 113 143.1, etc.
S C. 4. (PU LIC L W 291, S NTY-NINT CONGR SS.)

(g) Secton 34 9(f)(1), reatng to e empton from the ta on
transportaton of persons, s amended by nsertng mmedatey after the
words the Dstrct of Coumba a comma and the words or an nter-
natona organzaton .

Par. 6. Secton 130.61, as amended by Treasury Decson 5347, s
further amended by nsertng mmedatey foowng the thrd para-
graph thereof a new paragraph as foows:
y vrtue of the amendments of the Interna Revenue Code made by, and pro-
vsons of, Pubc Law 291, Seventy-nnth Congress (Internatona Organzatons
Immuntes ct), approved December 29, 1945, the ta es mposed by secton 3469,
as amended, do not appy to amounts pad for transportaton or factes fur-
nshed to an nternatona organzaton. (See secton 130.1(d).) When an
organzaton has been desgnated by the Presdent as entted to en|oy the
prveges, e emptons, and mmuntes conferred by the ct, or part thereof,
ncudng e empton from the ta , the e empton appes to amounts so pad on
and after December 29, 1945, uness the Presdent otherwse provdes. The
e empton s sub|ect to wthdrawa or revocaton by the Presdent. In case of
wthdrawa or revocaton, uness otherwse provded by the Presdent, the
e empton s nappcabe to payments on or after the date of ssuauce of the
order of wthdrawa or the date of revocaton.
sectons 3472 and 3791 of the Interna Revenue Code (53 Stat., 423,
467 26 U. S. C, 1940 ed., 3472, 3791) and sectons 1 and 4 (f) (g),
and () of the Internatona Organzatons Immuntes ct (Tte I,
Pubc Law 291, Seventy-nnth Congress).)
oseph D. Nunan, r.,
ctng Secretary of the Treasury,
( ed wth the Dvson of the edera Regster une 17, 1946, 1.29 p. m.)
T ON T TR NSPORT TION O PROP RTY.
Reguatons 113, Sectons 143.1, 143.25, 1946-14-1234
143.26. T. D. 5520
TITL 26 INT RN L R NU . C PT R I, SU C PT R C. P RT 143.
T WIT R SP CT TO T TR NSPORT TION O PROP RTY.
empton under the Internatona Organzatons Immuntes ct
Reguatons 113 amended.
Washngton 25, D. O.
In order to conform Reguatons 113 (1943 edton) Part 143, Tte
26, Code of edera Reguatons, Cum. Sup. , reatng to the ta on
the amount pad for transportaton of property, to sectons 1 and 4
(h) and () of the Internatona Organzatons Immuntes ct
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Regs. 4 (1934), rt. .
S C. 4. (PU LIC L W 291, S NTY-NINT CONGR SS.)

(h) Secton 3475(b) (1), reatng to e empton from the ta on trans-
portaton of property, s amended by nsertng mmedatey after the
words the Dstrct of Coumba a comma and the words or an nter-
natona organzaton .
Par. 4. Immedatey foowng secton 143.24, as added by Treasury
Decson 5354, approved pr 1, 1944 C. . 1944, 657 , there s n-
serted the foowng:
Sec. 143.25. Internatona Organzatons. Sub|ect to the provsons of sec-
ton 1 of the Internatona Organzatons Immuntes ct, approved December
29, 1945, the ta mposed by secton 3475 does not appy to amounts pad for the
transportaton of property to or from an nternatona organzaton. (See sec-
ton 143.1 (/t).) When such an organzaton has been desgnated by the Presdent
through approprate ecutve order as entted to en|oy the prveges, e emp-
tons, and mmuntes conferred by the ct, or part thereof, ncudng e empton
from the ta , the e empton appes to an amount so pad on or after December
29, 1945, uness the Presdent otherwse provdes. The e empton may be wth-
drawn or the desgnaton revoked, by the Presdent. Uness otherwse provded
by the Presdent, the e empton s nappcabe to amounts pad on or after the
date of ssuance of the order of wthdrawa or the date of revocaton. Where
the consgnor or consgnee shown by the shppng papers s an nternatona
organzaton entted to e empton from the ta , the papers may be accepted by
the carrer as proof of the e empt character of the shpment, and no e empton
certfcate s requred.
Par. 5. Secton 143.25 s renumbered 143.26, and sectons 143.20
to 143.24, ncusve, appearng theren s changed to sectons 143.20
to 143.25, ncusve.
sectons 3472 and 3791 of the Interna Revenue Code (53 Stat., 423,
467: 26 U. S. C, 1940 ed., 3472,3791) and sectons 1 and 4 (h) and ()
of the Internatona Organzatons Immuntes ct. (Tte I, Pubc
Law 291, Seventy-nnth Congress).)
oseph D. Nunan, r.,
( ed wth the Dvson of the edera Regster une 17,1946, 1.29 p. m.)
PROC SSING O COCONUT OIL.
S CTION 2470( )(2).
Reguatons 4 (1934), rtce 6: Rates of
ta .
1946-15-12359
Mm.6033
Contnuaton, under secton 505(b) of the Phppne Trade ct
of 1946 C. . 1946-1, 334 , of the suspenson of the provsons of
secton 2470(a) (2) of the Interna Revenue Code, whch mpose an
addtona ta of 2 cents per pound on the frst domestc processng
of coconut o.
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Regs. 4 , rt. 9.
176
Washngton 25, D. C, uy 2,19 f.
The ct approved September 16, 1942, as amended (56 Stat.. 752,
5 Stat., 647), suspended for the perod from September 17, 1942, to
and ncudng une 30, 1946, the provsons of secton 2470(a) (2) of
the Interna Revenue Code, whch secton mposes an addtona ta
of 2 cents per pound on the frst domestc processng of coconut o
or any combnaton contanng a substanta quantty of coconut o.
Secton 505(b) of the Phppne Trade ct of 1946 (Pubc Law
371, Seventy-nnth Congress, second sesson), approved pr 30,
1946 (C. . 1946-1, 334), provdes for further suspenson of such ta
whenever the Presdent, after consutaton wth the Presdent of the
Phppnes, fnds that adequate suppes of nether copra nor coconut
o, the product of the Phppnes, are ready avaabe for processng
n the Unted States. On une 2 ,1946, the Presdent so procamed.
ccordngy, the suspenson of the addtona ta of 2 cents per
pound mposed by secton 2470(a) (2) of the Code w not termnate
on une 30, 1946, but w contnue, pursuant to the terms of secton
505(b) of the Phppne Trade ct of 1946 unt the e praton of
30 days after the Presdent procams that, after consutaton wth
the Presdent of the Phppnes, he has found that adequate sup-
pes of copra or coconut o, the product of the Phppnes, are read-
y avaabe for processng n the Unted States.
Those processors who are fng returns on orm 932 shoud be
furnshed a copy of ths mmeograph, an addtona suppy of whch
w be forwarded for that purpose.
correspondence n reference to ths mmeograph shoud refer
to the number thereof and symbos MT: M.
oseph D. Nunan, r.,
Commssoner.
processng ta on certan os.
S CTION 602y2 (1934).
Reguatons 4 , rtce 9: Returns. 1946-17-123 2
Ct. D. 1677
PROC SSING T S R NU CT O 1934 decson of court.
1. Sut to n|on Coecton of Ta mounts qua to Ta
Deposted Wth Court Leoaty of Interest Coected.
Deposts made by the ta payer wth the cerk of the dstrct court,
pursuant to an order temporary restranng the coecton of ta on
the domestc processng of coconut o pendng a proceedng by the
ta payer to test the consttutonaty of such ta and requrng the
ta payer to depost monthy n the regstry of the court amounts
equa to the ta es, were not made as ta payments but as a means
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Regs. 4 , rt. 9.
17
Month.
Ta .
Due date.
December, 1935 _.
2 , 61 . 4
39, 40 . 0
39, 194. 93
42, 03 . 25
anuary 31, 1936.
ebruary 29, 1936.
March 31, 1936.
pr 30, 1936.
May 31, 1936.
une 30, 1936.
uy 31, 1936.
ugust 31, 1936.
September 30, 1936.
October 31, 1936.
November 30, 1936.
December 31, 1936.
anuary 31, 1937.
ebruary 2 , 1937.
March 31, 1937.
pr 30, 1937.
anuary, 1930
March, 1936
pr, 1936
47, 494. 49
May, 1936
35, 21 . 47
44, 5 5. 53
une, 1936
uv, 1936
4 , 02. 30
49, 32 . 4
September, 1936
51, 95 . 0
44, 55. 3
October, 1936
November, 1936
36, 02. 31
33, 603. 91
22, 076. 16
32, 355. 12
December, 1936.
anuary, 1937.
ebruary, 1937
March, 1937
52, 534. 12
None of these ta es was pad when due. On ebruary 11, 1936 11 days after
the December, 1935, ta ( 2 ,61 .4 ) became due and payabe ta payer brought
a sut n the Dstrct Court of the Unted States for the Southern Dstrct of
Caforna to en|on and restran the coector from coectng any ta then or
thereafter payabe by ta payer under secton 602 , on the ground that ths secton
was unconsttutona. Thereupon, on ebruary 11, 1936, te court ssued a tem-
porary restranng order restranng such coecton, wth the provso that ta -
payer shoud contnue to fe monthy returns and shoud gve securty n the
amount of 2 ,61 .4 , sad securty to be n the form of a casher s
check of the armers and Merchants Natona ank of Los ngees, n sad amount,
sad check to be made payabe to the order of R. S. Zmmerman, cerk of the Unted
States Dstrct Court, Southern Dstrct of Caforna, sad check to be deposted n
the regstry of the court by the sad cerk pendng the further order of ths court
and depost monthy amounts, hereafter, as may be dscosed by the sad
monthy returns.
The coector moved to dsmss the sut. The moton was granted, and a decree
dsmssng the sut was entered.3 Ta payer pettoned for an order aowng an
appea from that decree and, pendng such appea, en|onng the coector from
coectng any ta payabe by ta payer under secton 6021/.. Such an order was
granted on pr 14, 1936, wth the provso that, pendng ts appea, ta payer
shoud contnue to fe monthy returns and shoud depost n the regstry of
the dstrct court on or before the ast day of each month the amount of ta
dscosed by such monthy returns.
On May 3, 1937, whe ta payer s appea was pendng here, the Supreme Court
hed that secton 6021/| was consttutona.4 In vew of that hodng, t was
stpuated that ta payer s appea shoud be dsmssed. It was dsmssed on
May 25, 1937. Meanwhe ta payer had deposted wth the cerk of the dstrct
court the amounts specfed n the orders of ebruary 11, 1936, and pr 14,193t
amounts equa to the ta es (e cusve of nterest) payabe by ta payer for the
10 months mentoned above. These amounts aggregated 64 , 74.54.
On une ,1937, the dstrct court ordered ts cerk to dever the 64 , 74.54 to
the coector, to be apped aganst any ta then due from ta payer under secton
602 2. The order was comped wth. Thus, on une , 1937, the coector re-
ceved payment of the prncpa amount ( 64 , 74.54) of ta es payabe by ta -
payer for the 16 mouths mentoned above, but receved no payment of nterest
thereon. Such nterest, computed n accordance wth secton 602 , amounted
to 2 ,443.31.
On uy 7, 1937, the coector coected the 2 ,443.31 from ta payer. Its cam
for a refund havng been dened, ta payer brought a sut aganst the Unted States
Los ngees Snap Co. v. Rogan (D. C. S. D. Cat, 14 ed. Supp., 112).
Cncnnat Soap Co. . Unted States (301 . S., 30 ).
Los ngees Soap Co. v. Rogan (9 Cr., )0 ed. (2d). 1012).
There were 16 deposts one for each month. The frst depost (the one for Deeemwr.
1935) was on ehruary 13, 1930. ach subsequent depost was on or before the ast da|
of the month foowng that for whch It was made.
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179
Regs. 4 , rt. 9.
to recover the 2 ,443.31 as havng been egay coected. The Unted States
answered, |ury tra was waved, the case was tred by the court wthout a |ury,
an opnon was fed, fndngs of fact and concusons of aw were stated, and
|udgment was entered n favor of ta payer for 2 ,372.06. rom that |udgment
ths appea s prosecuted.
The tra court hed, n substance and effect, that the 16 deposts made by ta -
payer consttuted payments of ts ta es for the 16 months mentoned above.
Snce the December, 1935, ta ( 2 ,61 .4 ) became due on anuary 31, 1936, and
the December, 1935, depost was made on ebruary 13, 1936, the court hed that
ta payer owed no nterest on the December, 1935, ta e cept that accrung be-
tween anuary 31, 1936, and ebruary 13, 1936, whch, accordng to the court s
computaton, was 61.15.10 Snce deposts for the 15 subsequent months anuary,
1936, to March, 1937. ncusve were made on or before the due dates of the ta es
for those months, the court hed that ta payer owed no nterest on those ta es.
Therefore, of the 2 ,443.31 coected as nterest on uy 7, 1937, the court hed
that 2 ,3 2.16 ( 2 ,443.31 ess 01.15) was egay coected. Of ths amount,
the court found that 10.10 had been pad, refunded or credted to ta payer. It
therefore concuded that ta payer was entted to recover 2 ,372.06 ( 2 ,3 2.16
ess 10.10). ence the |udgment here ap eaed from.
The court erred n hodng that the deposts made by ta payer consttuted
payments of ts ta es. The deposts were made, not as ta payments, but as a
means of preventng the coector from e actng such payments. y that means,
ta payer procured and kept n force the orders of ebruary 11, 1936, and pr
14, 1936, and so prevented the coecton of ts ta es unt une , 1937. The
deposts were n the nature of a cash bond and carred no more sgnfcance than
woud the gvng of a surety bond. Such deposts are not payments.
Ta payer, n ts bref, speaks of havng made payments nto court pursuant to
the orders of ebruary 11, 1936, and pr 14, 1936. There were no such pay-
ments. The orders of ebruary 11, 1930, and pr 14, 1936, dd not requre ta -
payer to ntake any payment, nto court or otherwse. Instead, they requred t to
make deposts, and t dd so. No payment was made unt une , 1937.
Ta payer ponts out that when t made deposts pursuant to the orders of eb-
ruary 11, 93G, and pr 14, 1936, t ost the use of the amounts deposted |ust as
t woud have done had these amounts been pad to the coector. The fact re-
mans, ho-wever, that these amounts were not pad to the coector unt une ,
1937. Unt then, nether the Unted States nor the Phppne Isands had the
use thereo f.
Snce ts ta es for the 16 months mentoned above were not pad, n whoe or
n part, umt une , 1937, and ony the prncpa amount thereof ( 64 , 74.54)
was pad on that date, ta payer owed the nterest ( 2 ,443. 1) whch the coec-
tor coected on uy 7, 1937. There was and s no bass for hodng that ths
nterest, or any part thereof, was egay coected.
udgment reversed.
See secton 24(20) of the udca Code (2 U. S. C. ., secton 41(20)).
Los ngees Soap Co. v. Unted States (D. C. S. D. Ca., 56 ed. Supp., 260).
See footnote 6.
ctuay, the nterest accrung on the December, 1935, ta between anuary 1, 1936,
and ebruary 13, 1936, was 12 .2 .
n The record dscoses no bass for ths fndng.
a Rosenman v. Unted States (323 U. ., 65 ).
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Regs. 71 (1932), rt. 34. 1 0
ST MP T S.
INT RN L R NU COD .
S CTION 1 01. CORPOR T S CURITI S.
Reguatons 71 (1932), rtce 34: Saes or 1946-13-1233
transfers sub|ect to ta . Ct. D. 1675
DOCUM NT RY ST MP T S INT RN L R NU COD D CISION O
COURT.
Corporate Securtes Unsecured Promssory Notes Issue and
Transfer.
Unsecured promssory notes ssued by the ta payer company to
whch a trust company agreed to e tend credt on condton that
the ta payer s credtors turn In ther notes and accept n eu
thereof notes subordnated to the abty of ta payer to any hank
or trust company oanng money to t, and on the further condton
that the new notes when ssued be regstered wth the trust com-
pany, were sub|ect to the ta es mposed upon the ssue and transfer
of corporate securtes by sectons 1 01 and 34S1 of the Interna
Revenue Code. The ta payer s contenton as to nonta abty,
based upon the purpose of the regstraton, fas because the statute
makes no e cepton for any reason. Corporate securtes wth
Interest coupons or n regstered form are ta abe accordng to
the pan terms of the aw, and the court Is wthout power to read
nto the statute a provson whch does not e st.
Unted States Crcut Court of ppeas for the ghth Crcut.
Roya Loan Co., Roya Loan Co. of St. Lous, Guaranty nance. Co., fm .,
Guaranty nance Co. of Lousve, y., Inc., Mdwest Loan Co., Mdmtt
Loan Co. of Mobcry, and Charter nance Co., appeants, v. Unted Sates
of merca, appeee.
154 ed. (2d), 556.
ppea from the Dstrct Court of the Unted States for the astern Dstrct of Mssour
efore Sanborn, Woodrough, and Thomas, Crcut udges.
pr 9, 1946.
OPINION.
Thomas, Crcut udge, devered the opnon of the court
Ths s an acton by the Unted States aganst the defendants to recover
documentary stamp ta es aeged to be due the Government for the ssuance
and transfer of regstered promssory notes n 1940. udgment was entered
for the pantff and the defendants appea.
The facts n deta are reated n the opnon of the dstrct court reported n
Unted States v. Roya Loan Co. et a. (61 ed. Supp., 436). In bref, the
Roya Loan Co. s the parent corporaton and the other defendants are t
whoy owned subsdares. On anuary 16, 1940, the parent company had out-
standng ts promssory notes aggregatng 9 7,750. These notes were hed by
2 persons consstng of stockhoders of the company, members of ther fames,
and ther frends. Pror to that date the company had made appcaton to
the Msssspp aey Trust Co. for a ne of credt n the amount of 300,000-
The Trust company agreed to e tend the requested ne of credt on condto
that a the credtors woud turn n ther notes and accept n eu thereof notes
subordnated to the abty of the Loan company to any bank or trust companr
from whch the Loan company shoud borrow money, and provded that the
new notes when ssued woud be regstered wth the Msssspp aey Trust O
The condtons were agreed to and contracts, n whch the subsdares of the
Loan company |oned, were e ecuted provdng for the form of the new notes.
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Regs. 71 (1941), 113. 4. 1 2
ans., supra amton Nat. ank v. Unted States, 6 Cr., 99 ed. (2d), 570
Centra States Lfe Ins. Co. v. Sheehan, supra Unted State , v. mercan Trust
ankng Co., 6 Cr., 125 ed. (2d), 113 Pennsyvana Co. for Insurances, etc., v.
Rothenscs, supra.) The notes here In queston meet a the requrements of
nstruments known generay as corporate securtes, and they are ta abe under
the ct provded they are n regstered form wthn the meanng of secton 1 0L
The defendants o not contend that the notes under consderaton are not
prma face n regstered form. ny such cam woud be wthout foundaton.
The notes are a In the same form and each one contans the.provson that
Ths note sha not become or be vad for any purpose unt regstered by
the Msssspp aey Trust Company, and no transfer hereof sha be vad un-
ess endorsed by the regstered hoder hereof to a regstered transferee, and
a new note ssued contanng the same terms as the wthn note, and the new note
regstered by the sad Msssspp aey Trust Company.
nd each note Is endorsed wth a Regstrar s Certfcate readng
Ths Is to certfy that ths note has been duy regstered n the name of the
above hoder on the records of the undersgned.
Msssspp aey Trust Company,
y
Trust Offcer.
The contenton Is that the purpose of regstraton n ths nstance s unusua
that the notes are regstered to protect the credtor banks and trust companes
aganst voaton of the subordnaton cause requred by the contracts to be
ncuded n the notes. The cause referred to provdes that the notes and a
cams of the hoders thereof aganst the Roya Loan Company ether as an
endorser or guarantor s hereby subordnated to the cam of any ank o
Trust Company that may have e tended or may hereafter e tend credt to the
Roya Loan Company .
Concedng, as defendants must, that the notes are In regstered form, ther
contenton, based upon the purpose of the regstraton, fas because the statute
makes no e cepton for any reason. Corporate securtes wth nterest coupons
or n regstered form are ta abe accordng to the pan terms of the aw, and
the court Is wthout power to read nto the statute a provson whch does not
e st.
The |udgment s affrmed.
S CTION 34 2, S M ND D Y S CTION 1 O T R NU CT O
1939, S CTIONS 209 ND 210 O T R NU CT O 1940, ND
S CTIONS 505 ND 521(a)(24) O T R NU CT O 1941.-
CON Y NC S.
Reguatons 71 (1941), Secton 113. 4: Con- 1946-20-12414
veyances not sub|ect to ta . M. T. 24
Ta abty for stamp ta purposes of a transacton whereby rea
estate was transferred n trust, a ong-term ease mmedatey
granted thereon, and a subsequent reconveyance of the property
made n accordance wth the provsons of the ease.
S. T. 65 (C. . 1937-2, 52 ) revoked.
dvce s requested whether the conveyance of rea estate by the M
Company to the N ank, as trustee, and the subsequent reconveyance
of the rea estate to the M Company, the essee, under the foowng
crcumstances are sub|ect to the stamp ta mposed by secton 34 2 of
the Interna Revenue Code, as amended.
Certan rea estate was conveyed by the M Company to the N ank,
as trustee. The trustee made a decaraton of trust whch provded
that t hed ega tte to the property for the beneft of such persons as
may become partes thereto by the acceptance and hodng of and
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Regs. 9, rt. 1.
1 4
and s not sub|ect to the stamp ta mposed by secton 34 2 of the In-
terna Revenue Code. It foows that the subsequent reconveyance of
the reaty by the N ank to the M Company pursuant to the provsons
of the ease consttuted a reease of the mortgage and kewse s not
sub|ect to the stamp ta .
In vew of the foregong, S. T. 65 (C. . 1937-2, 52 ), n whch a
contrary concuson was reached, s revoked.
T S ON OL OM RG RIN , DULT R T D UTT R, TC.
S CTION 3340 S IPM NTS TO T UNIT D ST T S.
Reguatons 9, rtce 1: Phppne 1946-1 -12391
recepts. T. D. 5531
TITL 20 INT RN L R NU . C PT R I, SU C PT R C, P RT 310
T S ON OL OM RG RIN , DULT R T D UTT R, ND PROC SS O
R NO T D UTT R.
Importaton of oeomargarne from the Phppne Isands Regu-
atons 9 amended.
Washngton 25, D. C.
In order to conform Reguatons 9 (1936 edton) Part 310, Tte 26,
Code of edera Reguatons to secton 507(b) of the Phppne
Trade ct of 1946 (Pubc Law 371, Seventv-nnth Congress), ap-
proved pr 30, 1946 C. . 1946-1, 334 , such reguatons, but ony
as prescrbed and made appcabe to the Interna Revenue Code by
Treasury Decson 4 6. approved ebruary 11, 1939 C. . 1939-1
(Part 1), 396 Note, Tte 26, Code of edera Reguatons, Cum.
Sup., page 133 , are amended as foows:
Paragraph 1. There s nserted mmedatey precedng artce 1
the foowng:
S C. 3340. S IPM NTS TO T UNIT D ST T S. (INT RN L
R NU COD .)
(a) Ta Imposed n Unted States.
(1) mount. There sha be eved, coected, and pad, n the
Unted States, upon artces, goods, wares, or merchandse comng nto
the Unted States from the Phppne Isands a ta equa to the
nterna-revenue ta mposed n the Unted States upon the ke
artces, goods, wares, or merchandse of domestc manufacture.
(2) Payment. Such ta sha be pad by nterna revenue stamp
or stamps, to be provded by the Commssoner, and to be aff ed n
such manner and under suc reguatons as he, wth the approva of
the Secretary, sha prescrbe.
(b) empton rom Ta Imposed n the Phppne Isands. Such
artces, goods, wares, or merchandse shpped from sad sands to the
Unted States sha be e empt from the payment of any ta mposed by the
nterna revenue aws of the Phppne Isands.
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1S5 Regs. 9, rt. 1.
S C. 507. SP CI L CIS PRO ISIONS R L TING TO T
P ILIPPIN S R P L D. (P ILIPPIN TR D CT OP
1940, PU LIC L W 371, S NTY-NINT CONGR SS, P-
PRO D PRIL 30, 1946.)

(b) Sectons 3340. of the Interna Revenue Code, are re-
peaed, effectve uy 4, 1046.
Par. 2. rtce 1 secton 310. 1 of such Tte 26 s amended as
foows:
( ) y strkng out the word Oeomargarne at the begnnng
thereof and nsertng n eu of such word the foowng: Pror to
uv 4, 1946, oeomargarne.
( ) y addng thereto a paragraph readng as foows:
On and after uy 4, 1946. a oeomargarne comng nto the Unted States from
the Phppne Isands s ta abe at the rate of 15 cents per pound, n addton to
any customs duty mposed thereon, the same as oeomargarne mported from other
foregn countres.
secton 3791 of the Interna Revenue Code (53 Stat, 467 26 U. S. C,
3791).)
oseph D. Nunan, r.,
O. Ma Gardnek,
( ed wth the Dvson of the edera Regster ugust 23,104C, 11.17 a. m.)
72 29 47 13
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MISC LL N OUS RULINGS.
S CTION 3 O T INSON CT (4 ST T., 503. 505),
S M ND D.
1946-22-12433
I. T. 3 22
ppcaton of the proft-mtng provsons of the nson ct
(4 Stat., 503, at 505), as amended, wth respect to contracts for
nava vesses and rmy and Navy arcraft, foowng repea of the
e cess profts ta by secton 122(a) of the Revenue ct of 1945.
dvce s requested as to the appcaton of the proft-mtng pro-
vsons (secton 3) of the nson ct (4 Stat., 503, at 505), approved
March 27, 1934, as amended, n vew of repea of the e cess proft
ta by the Revenue ct of 1945.
The repea of the e cess profts ta by secton 122(a) of the Revenue
ct of 1945, effectve as to ta abe years begnnng after December
31, 1945. agan brngs nto effect the proft-mtng provsons of the
nson ct, as amended by the ct of une 25, 1930 (49 Stat., 1926).
and the ct of pr 3, 1939 (53 Stat., 555, at 560), wth respect to
e cess proft on contracts for nava vesses and arcraft and contracts
for rmy arcraft.
Secton 401 of the Second Revenue ct of 1940 provdes that the
proft-mtng provsons of the nson ct sha not appy to eon-
tracts or subcontracts for the constructon or manufacture of any
compete nava vesse or any rmy or Navy arcraft, or any porton
thereof, entered nto n any ta abe year to whch the e cess profts
ta provded n Subchapter of Chapter 2 of the Interna Revenue
Code s appcabe or woud be appcabe f the contractor or sub-
contractor, as the case may be, were a corporaton.
The e cess profts ta s not appcabe to ta abe years begnnng
after December 31, 1945, but s appcabe to ta abe years endng
December 31, 1945, and ta abe years begnnng n 1945 and endng
n 1946. The reappcaton of the nson ct to e cess proft on
contracts depends, therefore, on the ncome-ta ta abe year of the
partcuar contractor or subcontractor as foows:
(a) If the contractor or subcontractor makes and fes ts ncome
ta return on the caendar year bass, the nson ct appes to con-
tracts or subcontracts entered nto wth such person after December
31, 1945.
(b) If the contractor or subcontractor makes and fes ts ncome
ta return on the fsca year bass, the nson ct appes to contracts
or subcontracts entered nto wth such person after the cose of suck
person s ta abe year endng n 1946. or e ampe: The M Cor
poraton makes and fes ts ncome ta returns on the bass of a fsca
year endng une 30. Its ta abe year began uy 1, 1945. and ended
une 30, 1946. The e cess profts ta s appcabe to ths ta abe
year, as the year began before anuary 1, 1946. The nson ct,
(1 6)
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therefore, s not appcabe to contracts entered nto by the M Corpora-
ton pror to uy 1,1946, but s appcabe to contracts entered nto by
the corporaton on and after such date.
(c) The rues stated heren appy whether or not the contractor or
subcontractor s a corporaton. though the e cess profts ta was
appcabe ony to corporatons, the suspenson of the nson ct ap-
ped f the e cess profts ta woud be appcabe f the contractor or
.subcontractor, as the case may be, were a corporaton (secton 401,
Second Revenue ct of 1940, supra). ccordngy, f n the e ampe
gven n paragraph (b) the contractor were an ndvdua nstead of
the M Corporaton, the same rue woud appy and the nson ct
woud be appcabe to contracts entered nto by such ndvdua on
and after u 1,1946, but not before that date.
The reguatons n effect under the nson ct are Treasury De-
cson 4906 (C. . 1939-2, 404), reatng to e cess proft on contracts
and subcontracts for nava vesses and arcraft, and Treasury Decson
4909 (C. . 1939-2, 422), reatng to e cess proft on contracts or sub-
contracts for rmy arcraft.
R N GOTI TION CT.
1946-14-12349
Mm.6023
Renegotaton rebates.
Washngton 25, D. C, une 10,1946.
eads of ed Dvsons of the Technca Staff, and Others Con-
cerned:
1. Reference s made to secton 701 of the Revenue ct of 1943
C. . 1944, 756, 79 whch amends secton 403, as amended, of the
S th Suppementa Natona Defense ppropraton ct, 1942, re-
atng to renegotaton of war contracts and cted as the Renegota-
ton ct. In the case of a renegotaton whch s made pror to a
recomputaton of an amortzaton deducton pursuant to secton
124(d) of the Interna Revenue Code n connecton wth the deter-
mnaton of ta es mposed by Chapters 1, 2 , 2 , 2D, and 2 of the
Interna Revenue Code for the fsca year to whch the e cessve
profts determned by the renegotaton are attrbutabe, the Renego-
taton ct provdes that there sha be repad by the Unted States
(wthout nterest) to a contractor or subcontractor after such recom-
putaton the amount of a net renegotaton rebate, notwthstandng
any of the provsons of subsecton (c) (4) of the Renegotaton ct
to the contrary.
2. The refund of a net renegotaton rebate s ntended to restore
to the contractor the e cessve profts determned and emnated for
the renegotated year to the e tent of the gross renegotaton rebate
ess the edera ta beneft thereon. The terms gross renegotaton
rebate, edera ta beneft, and net renegotaton rebate are
defned n subsecton (a) (4) (D) of the Renegotaton ct as foows:
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1
(a) gross renegotaton rebate for a renegotated year sha be
an aocabe part of the addtona amortzaton deducton whch s
aowed for the renegotated year upon the recomputaton made pur-
suant to secton 124(d) of the Interna Revenue Code n connecton
wth the determnaton of the ta es for such year and whch s attrb-
utabe to contracts wth the Departments and subcontracts, e cept
that the amount of the gross renegotaton rebate sha not e ceed
the amount of e cessve profts emnated for the renegotated year
pursuant to the renegotaton.
(b) The edera ta beneft from the renegotaton for the renego-
tated year sha be the amount by whch the ta es for the renegot-
ated year under Chapters 1,2 , 2 , 2D, and 2 of the Interna Revenne
Code were decreased by reason of omttng from gross ncome (or
by reason of the appcaton of the provsons of secton 3 06(a) of the
Interna Revenue Code wth respect to) that porton of the e cessve
profts for the renegotated year whch s equa to the amount of the
gross renegotaton rebate.
(c) Net renegotaton rebate s The amount by whch the gross
renegotaton rebate for the renegotated year e ceeds the amount of
the contractor s or subcontractor edera ta beneft from the rene-
gotaton for such year.
3. Under the provsons of subsecton (a) (4) (D) of the Renego-
taton ct and reguatons prescrbed by the War Contracts Prce
d|ustment oard (herenafter referred to as the oard ), a
contractor may appy for a net renegotaton rebate wth respect to
e cessve profts determned and emnated for a renegotated year
by fng a cam wth the oard f, for such year, an addtona amort-
zaton deducton has been aowed pursuant to secton 124(d) of the
Code and the renegotaton was made pror to the recomputaton on
the bass of whch the addtona amortzaton deducton was aowed.
In vew of the fact that a gross renegotaton rebate s based on the
addtona amortzaton aowed pursuant to secton 124(d) of the
Code, a ta payer who desres to fe a cam wth the oard for a net
renegotaton rebate s requred, under reguatons prescrbed by the
oard, to attach to ts cam a statement by the offce of the Comms-
soner of Interna Revenue showng the tota amortzaton deducton
whch s aowed for the renegotated year.
4. request for copes of a statement showng the amortzaton de-
ducton aowed for a renegotated year shoud be addressed by the
ta payer to the nterna revenue agent n charge havng |ursdcton of
the ta payer s returns and shoud make reference to the fact that t s
desred to fe a cam under subsecton (a) (4) (D) of the Renegotaton
ct for a net renegotaton rebate wth respect to e cessve profts
emnated, as we as the fact that addtona amortzaton s aowabe
pursuant to secton 124(d) of the Code. Copes of such a statement
w be furnshed a ta payer upon request after there has been a re-
computaton of the amortzaton deducton n connecton wth a de-
termnaton 1 of ncome and e cess profts ta abty for the rene-
gotated year, gvng effect to an eecton under the provsons of sec-
ton 124(d) of the Code, to use the shortened amortzaton perod.
The statements w be furnshed by the nterna revenue agent n
1 n ad|ustment of ta es for a renegotated year as a resut of the fng by the ta r f
of an appcaton ( orm 1046 or orm 1140) for tentatve ad|ustment wth respect to
amortzaton deducton under secton 124(|) of the Code s not such a determnaton.
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charge or, f a fed dvson of the Technca Staff has taken |ursdc-
ton of the case, by the head of such dvson.
5. Upon determnaton by the oard of the amount of a gross re-
negotaton rebate, the oard w nform the nterna revenue agent
n charge or the head of the fed dvson of the Technca Staff, as
the case may be, of such determnaton and request the computaton
of the edera ta beneft thereon.
6. The edera ta beneft w be computed on the bass of the ta -
payer s ta abe ncome as ad|usted, and the amount thereof w be
furnshed the oard by the ureau after there has been a determnaton
of the ta abty for the renegotated year. The computaton of the
edera ta beneft s made by addng to ncome on whch the ast
determned ta abty s based (e cudng the e cessve profts) the
amount of the gross renegotaton rebate and determnng the ta es
that woud have been payabe f the amount of the gross renegotaton
rebate had not been ncuded n the e cessve profts omtted from the
return or emnated under the provsons of secton 3 06(a) of the
Code. The e cess of the ta es so computed over the ta es determned
before the ncuson n ncome of the amount of the gross renegotaton
rebate represents the edera ta beneft.
7. gross renegotaton rebate has the effect of reducng the amount
of the e cessve profts for the renegotated year, as determned by the
renegotaton. ccordngy, snce the e cessve profts were omtted
from the ncome reported.by the ta payer or, f reported, were em-
nated from gross ncome under the provsons of secton 3 06(a) of the
Code, ncome for a renegotated year (from whch the e cessve profts
as determned by the renegotaton have been so omtted or emnated)
w be ncreased by the amount of the gross renegotaton rebate de-
termned for such year. The edera ta beneft w not be assessed
as a defcency but w be deducted from the gross renegotaton rebate
n the determnaton of the net renegotaton rebate.
. Correspondence from the foowng regardng ths mmeograph
shoud refer to the number hereof and to the symbos ndcated: Co-
ectors of nterna revenue, C: Co nterna revenue agents n
charge, IT: heads of fed dvsons of the Technca Staff, TS:
RM.
oseph D. Nunan, r.,
Commssoner.
MISC LL N OUS.
1946-25-12454
D. C. 793
Reguatons Governng rmed orces Leave onds.1
1946. Department Crcuar No. 793. sca Servce. ureau of the Pubc Debt.
Offce of the Secretary,
Washngton, November 12,1946.
To Members and ormer Members of the rmed orces of the Unted
States and Others Concerned:
Under secton 6 of the rmed orces Leave ct of 1946 (heren-
after referred to as the ct),2 vng members and vng former
1 Secton 324.11 hereof reates to payment of rmed orces eave checks to survvors.
Pubc Law 704, Seventy-nntth Congress page 2 7, ths uetn .
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190
members of the rmed orces of the Unted States are entted to
receve, under the condtons set forth n the ct, bonds of the Unted
States n settement and compensaton of accumuated eave. Under
the terms of the ct these bonds are ssued under authorty and sub-
|ect to the provsons of the Second Lberty ond ct, as amended.
Pursuant to the authorty contaned n sad cts the foowng reg-
uatons are prescrbed to govern such bonds:
I. SU ST NTI R GUL TIONS.
524.1. Desgnaton. The bonds ssued for the above purpose are desgnated
rmed orces eave bonds.
324.2. IskI e and Inscrpton. rmed orces eave bonds are ssued by the
Secretary of the Treasury (herenafter referred to as the Secretary) actng
through the rmy, Navy, Marne Corps, and Coast Guard, whch are desgnated
as ssung agents. They are nscrbed ony n the names of vng members or
vng former members of the armed forces. In each case a snge bond n the
hghest approprate mutpe of 25 s Issued where the amount due s 50 or
more. The name and sera or servce number of the owner w be nscrbed
on the bond and at the. opton of the ssung agent the address may aso be
nscrbed. No e change w be permtted for bonds of ower denomnaton
for e ampe, f a bond for 275 s ssued to a partcuar owner he may not
e change that bond for a bond n the amount of 200 and a bond n the amount
of 75.
324.3. Date and Maturty of ond, and Interest. The ssue date of a bond
w be the frst day of the quarter-year perod ( anuary 1, pr 1, uy 1, or
October 1) ne t foowng the date of dscharge from the armed forces of the
former member whose name s to be nscrbed thereon, provded he was ds-
charged on or after anuary 1, 1943, and pror to September 1, 1946, or n case
a member of the armed forces was st on actve duty on September 1, 1946, hs
bond w be dated October 1. 1940. ach bond w mature fve years from ts
ssue date. In case of the death of the owner of any such bond payment ma|
be made pror to maturty upon proper appcaton, at the opton of such own-
er s sur vors, as defned n the ct (see 324.9 hereof). Interest w accrue at
the rate of 2 per cent per annum from the ssue date to the date of maturty
or to the ast day of the month n whch payment s made, whchever may be
earer. Interest w be pad ony wth the prncpa sum.
324.4. Transf and Pedse. The bonds are nontransferabe by sae, e -
change, assgnment, pedge, hypothecaton or otherwse, e cept that they aw
be assgned by the owner to the dmnstrator of eterans ffars for redemp-
ton by such dmnstrator, for the purpose of payng premums or the dffer-
ence n reserve n case of converson to nsurance on another pan or a pocy
oan made pror to uy 31, 1946, on a Unted States Government fe nsurance
pocy or a natona servce fe Insurance pocy under such reguatons as mar
be prescrbed by the dmnstrator of eterans ffars. Such assgnment may
not be used drecty or ndrecty as a means of securng n cash the proceeds
of such bond or any porton thereof pror to the date of ts maturty or the
maturty of such pocy by death, whchever s earer (see 324.6 hereof). No
cams by attempted transferees or by persons oanng money on the securty
of the bonds w be recognzed.
324.5. Cams of Credtors. y the terms of the ct the bonds are e empt
from cams of credtors, ncudng any cam of the Unted States, and sha not
be sub|ect to attachment, evy, or sezure by or under any ega or equtabe
process whatever. ccordngy, no cams of credtors, assgnees for the beneft
of credtors, trustees or recevers n bankruptcy or equty w be recognzed, and
no payment of the bonds to any such persons w be made, ether durng the
fetme of the person whose name s nscrbed on the bonds or after hs death
324.0. ssgnment to the dmnstrator of eterans ffars. ny regs-
tered owner of an rmed orces eave bond who desres to use hs bond n
payment of premums or other payments n connecton wth Unted States
Government fe nsurance or natona servce fe nsurance poces shoud ma
or dever hs bond to the offce of the eterans dmnstraton to whch he pay
hs premums. The bond shoud be accompaned by a competed orm 9-1625.
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193
II. PROC DUR .
3124.12. SURR ND R O ONDS T M TURITY Y R GIST R D OWN R, Regstered
owners desrng payment of ther bonds at maturty, after competng 1 e request
for payment n accordance wth the provsons of 324.7 hereof, shoud forward
to bonds to the approprate edera Reserve bank or to the Treasurer of the
Unted States, Washngton 25, D. C. The use of regstered ma s desrabe for
the protecton of the owner. edera Reserve banks as fsca agents of the
Unted States are authorzed to make payment of bonds so presented f n proper
form onds marked Dupcate ssued n eu of ost, stoen, destroyed,
mvtated, or defaced bonds must be submtted to the Treasury Department,
Dvson of Loans and Currency, Washngton 25, D. C, as edera Reserve banks
are not authorzed to pay such bonds.
324.13. Payment to Survvors. Survvors appyng for payment under secton
324.9 hereof shoud forward the bonds, accompaned by the appcatons on orm
PD 2066, to the approprate edera Reserve bank or to the Treasury Department,
Dvson of Loans and Currency, Washngton 25, D. C. Usuay payment w
be e pedted by the use of the edera Reserve banks. The form must be ac-
companed n each case by (1) a death certfcate for the regstered owner, (2)
an e panaton of any dscrepancy between the name as gven on the face of the
bond and the name as gven n the death certfcate, and (3) n case of an app-
caton by parents other than the own father and mother st vng together, a
sgned and sworn statement gvng the bass for the cam of parenta reatonshp
as defned n the ct (see 324.9 hereof). The rght s reserved to requre other
and further evdence n cases where such acton appears desrabe. edera
Reserve banks as fsca agents of the Unted States are authorzed to make
payment to survvors upon appcatons n accordance wth these reguatons, but
may submt any doubtfu or unusua cases to the Treasury Department, Dvson
of Loans and Currency, for fna decson.
324.14. Desgnaton of gents to Make Determnaton. The varous edera
Reserve banks as fsca agents of the Unted States, the sca ssstant Secretary
of the Treasury, the ssstant to the sca ssstant Secretary, the Comms-
soner and ssocate Commssoner of the Pubc Debt, and the Chef of the
Dvson of Loans and Currency are desgnated to make determnatons on behaf
of the Secretary as provded n the ct.
III. G N R L.
324.15. Ta aton. Under the ct a amounts pad or payabe under secton 6
n cash, bonds or both (e cept nterest n the case of bonds) sha be e empt
from ta aton.
324.16. ddress for Communcatons. nqures after ssue n connecton
wth the payment of or transactons n rmed orces eave bonds shoud be
addressed to the edera Reserve bank of the dstrct n whch the owner resdes,
or to the Treasury Department, Dvson of Loans and Currency, Washngton 25,
D. C, e cept that any nqures regardng the use of such bonds n connecton
wth Government fe nsurance or natona servce fe nsurance payments
shoud be addressed to the offce of the eterans dmnstraton to whch the
assured has been payng premums, or to the Drector of Insurance ccounts Serv-
ce, eterans dmnstraton, Washngton 25, D. C.
324.17. ddtona Reguatons. The Secretary of the Treasury may at any
tme, or from tme to tme, prescrbe addtona, suppementa, amendatory or
revsed rues and reguatons governng rmed orces eave bonds.
Pubcaton of notce and pubc procedure thereon wth respect
to these reguatons are found to be contrary to the pubc nterest for
the reason that such notce and pubc procedure woud e pose nter-
ested partes to undue deay n the e ercse of rghts provded by the
ct.
These reguatons w become effectve mmedatey, the requre-
ments of secton 4(c) of the dmnstratve Procedure ct (Pubc
Law 404, Seventy-nnth Congress) beng dspensed wth n order that
survvors entted may take prompt advantage of ther rghts under
the ct.
ohn W. Snyder,
Secretary of the Treasury.
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Msc.
son or mtgaton of such fne, penaty, or forfeture, the Secretary
of the Treasury, f he fnds that such fne, penaty, or for-
feture was ncurred wthout wfu neggence or wthout any n-
tenton on the part of the pettoner to defraud the revenue or to voate
the aw, or fnds the e stence of such mtgatng crcumstances as to
|ustfy the remsson or mtgaton of such fne, penaty, or forfeture,
may remt or mtgate the same upon such terms and condtons as
he deems reasonabe and |ust, or order dscontnuance of any prosecu-
ton reatng thereto. In order to enabe hm to ascertan the facts,
the Secretary of the Treasury may ssue a commsson to any customs
agent, coector, |udge of the Unted States Customs Court, or Unted
States commssoner, to take testmony upon such petton: .
The purpose to be served by the provsons of secton 3726 s, ob-
vousy, that of protectng the nterests of nnocent persons whose
property or any nterest theren s |eopardzed by a sezure and pro-
posed forfeture under the nterna-revenue aws. It appes to a
nterna-revenue statutes whch provde for such forfetures, but
partcuary to secton 3321, Interna Revenue Code (U. S. C, tte 26,
secton 3321).
The authorty so granted s not, however, n a regards coe tensve
wth the power conferred upon the Secretary of the Treasury by sec-
tons 613 and 61 of the Tarff ct. The requrements of subdv-
sons (1), (2), (3), and (4) of secton 613 reate to the dsposton
of the proceeds of the sae of forfeted property and not to an ap-
pcaton for the remsson or mtgaton of the forfeture. Proceeds
of the sae of property forfeted under the nterna-revenue aws
shoud, therefore, be covered nto the Treasury as provded by secton
3971, Interna Revenue Code. so by secton 61 of the Tarff ct
fnes and penates may be remtted or mtgated, whe secton 3726,
Interna Revenue Code, appes ony to forfetures. Otherwse, the
provsons of sectons 613 and 61 are nvoked for nterna-revenue
voatons.
Pursuant to the above sectons of aw, the foowng reguatons are
prescrbed for the fng and ad|udcaton of pettons under secton
3726, Interna Revenue Code:
Sec. 171.130. orm of the Petton. There s no set or standardzed form pro-
vded or Requred by the Department for use n fng a petton for remsson
or mtgaton under secton 3726, Interna Revenue Code. owever, It
s preferabe that the petton be typewrtten on ega sze paper and t s
necessary that the petton be e ecuted under oath, prepared n trpcate and
addressed to the Secretary of the Treasury, and that a copes of orgna docu-
ments submtted as e hbts n support of aegatons of the petton be cert-
fed as true and accurate copes of orgnas. ach copy of the petton must
contan a compete set of e hbts. The |urat to a petton must not be e ecuted
by an attorney enroed to practce before the Treasury Department who appears
as the attorney for. the pettoner and a petton sgned and sworn to by an
attorney enroed to practce before the Treasury Department who appears as
the attorney for the pettoner s not acceptabe.
Sec. 171.131. Contents of the Petton. (a) Descrpton of property. The
petton shoud gve such a descrpton of the property and such facts of the
sezure as w enabe the offcers of the coho Ta Unt ready to dentfy
the property.
(6) Statement regardng admnstratve forfeture or sae. If an e ecutve
proceedng for summary forfeture s pendng, the petton shoud state such
fact and f the property has been sod, the petton shoud aso state the
date and pace of sae.
(c) Statement regardng knowedge of sezure. In the event the petton s
fed for the restoraton of the proceeds derved from sae of the property pur-
suant to summary forfeture, t shoud aso contan, or be supported by, sats-
factory proof that the pettoner dd hot know of the sezure pror to the decara-
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supervsor w return n copes of t by etter to the pettoner for proper cor-
rectons, amendments, etc., or for the submsson of a new petton suppyng
the tetcences of the one returned, wthn a reasonabe tme n ether event.
Sec. 171.130. Investgaton of cceptabe Petton, and Report Thereon.
If the petton as orgnay fed s acceptabe, or has been made so by correc-
ton, etc., an nvestgaton of the merts of the petton w be made and a report
prepared thereon.
Sec. 171.137. Transmsson of Petton Wth Reports and Recommendaton
to Deputy Commssoner, coho Ta Unt, ureau of Interna Revenue.
On concuson of the nvestgaton of the merts of the petton, the dstrct su-
pervsor w forward to the Deputy Commssoner, coho Ta Unt, ureau
of Interna Revenue, the orgna copy of the petton, the orgna copy and one
carbon copy of the report of Investgaton, a egbe copy of the case report of
the sezure, and a copy of orm 226- , pprasement Lst. The transmtta
etter w gve a bref statement as to the sezure of the property, ts present
forfeture status, ts apprased vaua, and a summary of the facts and crcum-
stances bearng upon the merts of the petton. The dstrct supervsor w
aso state hs concusons and recommendaton as to the acton to be taken on
the petton. -
Sec. 171.13 . Deputy Commssoner. coho Ta Unt, to Submt Petton
and Record to Secretary of Treasury, Wth Recommendaton. The Deputy
Commssoner, coho Ta Unt, sha by transmtta memorandum of the aw
and facts, approved by the Chef Counse of the ureau of Interna Revenue,
submt to the Secretary of the Treasury the petton and record, wth recom-
mendaton.
Sec. 171.139. Types of na cton on the Petton by the Secretary of
the Treasury. na acton on any petton fed pursuant to these reguatons
sha resut ether n dena or aowance of the petton by the Secretary of the
Treasury. Pettons aowed by the Secretary fa generay nto the foowng
fve casses on the bass of the terms and condtons of aowance:
(a) The property tsef s returnabe to the pettoner upon payment by hm
of a costs and storage or
(6) The property s returnabe to the pettoner provded he pays the dffer-
ence between the recognzed en and the apprased vaue, pus a costs, and
storage otherwse the property s sod or acqured for offca use by a govern-
menta agency pursuant to forfeture and the pettoner fes cam wth the
Comptroer Genera of the Unted States for payment of hs recognzed en n
fu, or pro tanto, out of the proceeds of sae f the property was sod, or n fu
out of the proper appropraton of the recevng agency f the property was
acqured for offca use, ess a costs and storage n ether event or
(c) The property, f an automobe or truck, s returnabe to the pettoner
provded he pays the dfference between the amount of hs recognzed en and
the present apprased vaue, pus a costs and storage, sub|ect, however, to the
rght of the coho Ta Unt to pay the pettoner the amount of hs recognzed
en, ess a costs and storage, and to acqure the vehce for offca use or
(d) The property tsef s returnabe to the pettoner upon payment by hm
of a specfed sum n mtgaton, proposed by hm, accepted by the Department,
and made a condton of aowance, or by the Department on ts own ntatve
made a condton of aowance, n ether event the pettoner to pay a costs and
storage (pus the dfference between the recognzed en and the apprased vaue
when that condton s mposed) or
(e) The pettoner s en s recognzed n the amount as estabshed, to be pad,
ess a cost and storage charges, n fu, or pro tanto, out of the proceeds of sae
If the property was sod, or n fu out of the proper appropraton of the recevng
agency f the property was acqured for offca use, payment n ether event to
be through cam fed by the pettoner drect wth the Comptroer Genera of
the Unted States.
Sec. 171.140. Procedure When Petton Cognzabe by ttorney Genera.
If a petton s fed wth the Treasury Department n respect of property (a)
concernng whch proper and tmey cam and cost bond under secton 3724,
nterna Revenue Code, have aready been fed and accepted, thus necesstatng
reference of the sezure to the Unted States attorney for nsttuton of |udca
forfeture proceedngs or other dsposton, or (6) whch has been beed but
n respect of .whch decree of forfeture has not as yet been entered by the court,
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S L RY ST ILIZ TION.
1946-24-12450
T. D.5545
TITL 29 L OR. C PT R III, P RT 1002. ST ILIZ TION O S L RI S.
Secton 1002.103 amended wth respect to waver of rght to appy
for approva of unapproved saary ncreases.
Treasurt Department,
Washngton, D. C.
Secton 1002.103 of Treasury Decson 5506 C. . 1946-1, 303
Part 1002, Tte 29, Code of edera Reguatons , reatng to the
stabzaton of saares under the ct of October 2, 1942, as amended,
s hereby amended to read as foows:
Sec. 1002.103. Rght to Sees pprova fter Makng Increase. The makng
of a saary ncrease at any tme after ebruary 14, 1946, wthout obtanng pror
approva sha not be deemed to be a waver of the rght to appy for approva
thereafter. pprova sha be gven or wthhed on the same bass as f the
empoyer had apped for t before puttng the ncrease nto effect.
Ths Treasury decson s pubshed wthout pror genera notce
and s effectve upon ts fng wth the Dvson of the edera Regster,
the requrements of secton 4 of the dmnstratve Procedure ct,
approved une 11, 1946, beng nappcabe by vrtue of secton 2(a) 4
of that ct.
Wm. T. Sherwood,
pproved November 19, 1946.
( ed wth the Dvson of the edera Regster November 22, 1946, 11.23 a. m.)
1946-19-12405
T. D.5533
tte 29 abor. chapter v, part 1002.1. stabzaton of saares.
Washngton, D. C.
Secton 1002.10 of Treasury Decson 5506 C. . 1946-1, 303
Part 1002.1, Tte 29, Code of edera Reguatons , reatng to the
stabzaton of saares under the ct of October 2,1942, as amended,
s hereby amended to read as foows:
Sec. 1002.10 . Cost of Lvng Increases. In any case n whch t s found
that no appcabe pattern of saary ad|ustments was estabshed durng the
perod between ugust 1 , 1045, and ebruary 14, 1946, saary ncreases sha
be approved whch are found necessary to correct a maad|ustment whch woud
nterfere wth the effectve transton to a peacetme economy and whch are
necessary to make the average saary ncrease snce anuary 1, 1941, n the
saary rates of empoyees n an approprate unt equa the percentage ncrease
n the cost of vng between anuary, 1941, and September, 1045.
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200
s used n ths secton, the foowng terms sha have the meanngs assgned:
pproprate unt means a the personne of a partcuar empoyer whose
saares are under the |ursdcton of the Commssoner, and whose saares do
not e ceed 10,000 per annum.
ase perod means, ordnary, the frst payro perod ended wthn the
month of anuary, 1941. substtute base perod sha be used, however, t
the approprate unt was not n operaton n anuary, 1941, or f the anuary.
1941, base perod woud not be representatve of norma condtons. Where a
substtute base perod s used t shoud be the frst payro perod after anuary,
1941, durng whch substantay norma condtons e sted n the unt. The use
, of a substtute base perod must be supported by a showng through the sub-
msson of a reevant data that abnorma condtons e sted durng the anuary.
1941, base perod.
Saary means the rate of compensaton per annum reguary pad before
deductons of any knd, Incudng bonuses or other addtona compensaton
reguary pad. The term, however, does not ncude addtona compensaton
contngent upon added hours of work, shft dfferentas, or the ke.
verage base perod saary means the aggregate of the base perod saares,
as defned above, of a the empoyees n an approprate unt, dvded by the
number of such empoyees.
Genera saary Increase means, ordnary, an ncrease gven smutane-
ousy to 10 per cent or more of the empoyees n an approprate unt Indvdua
ncreases to empoyees gven on the bass of mert, promoton, recassfcaton,
or ength of servce shoud not be counted as genera ncreases, however, even
f such ndvdua ncreases were gven to a substanta porton of the empoyees
n the unt at one tme.
verage saary Increase means a genera saary ncrease dvded by the
number of-empoyees n the unt at the tme of the ncrease, rrespectve of the
number of empoyees who partcpated n the ncrease.
Ma mum maad|ustment aowance means (he average base perod saary
mutped by the appcabe percentage cost of vng ncrease.
or the purpose of ths secton t s deemed that the cost of vng between
anuary, 1941, and September, 1945, has ncreased 33 per cent. ccordngy,
the percentage cost of vng ncrease appcabe w ordnary be 33 per cent
Where a substtute base perod s used, however, the percentage cost of vng
ncrease to be used n determnng the ma mum maad|ustment aowance
w be that percentage determned from the foowng tabe:
Tabe.
Perod
anuary-March, 1941...
pr- une, 1941
uy-September, 1941
October-December, 1941
anuary-March, 1942
pr- une, 1942
uy-September, 1942...
anuarv-March, 1943.--
pr- une, 1943
uy-September, 1943
anuary-March, 1944
pr- une, 1944
uy-September, 1944
anuary-March, 1945
pr- une, 1945
uy-September, 1945
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The approvabe maad|ustment ncrease sha be computed as foows:
(1) The ma mum maad|ustment aowance sha be determned by mutpy,
ng the average base perod saary by the appcabe percentage cost of vng
ncrease.
(2) The tota per annumamount of payro ncrease represented by each genera,
ncrease granted snce the base perod sha be dvded by the tota number of
empoyees n the approprate unt at the tme the ncrease was granted (rrespec-
tve of whether the ncrease was granted to a empoyees) to determne each
average ncrease.
(3) The sum of a such average ncreases sha be deducted from the ma -
mum maad|ustment aowance to determne the average Increase approvabe
under ths secton.
(4) The ma mum per annum payro ncrease sha be determned by mutpy-
ng the average ncrease approvabe by the number of empoyees n the appro-
prate unt at the tme the appcaton s fed.
The foregong may be ustrated by the foowng e ampe: or the frst payro
perod endng n anuary, 1941, the average saary of the empoyees n the appro-
prate unt was 3,000 per annum. Therefore, the ma mum maad|ustment
aowance for ths unt woud be 3,000 mutped by thrty-three per cent (33 ),
or 990. On May 1,1942, the empoyer granted a genera ncrease to 75 empoyees,
representng a tota per annum payro ncrease of 20,000. On that date there
were 100 empoyees n the approprate unt. The average ncrease was 20,000
dvded by 100, or 200. On une 1, 1943, at whch tme there were 150 empoyees
n the approprate unt, the empoyer granted a genera ncrease to 100 empoyees,
representng a tota per annum payro ncrease of 32,000. The average ncrease
at that tme was 32,000 dvded by 150, or 213.33. The average ncrease aow-
abe under ths secton s 990 (the ma mum maad|ustment aowance) mnus
413.33 (the sum of the average ncreases), or 576.67. t the tme the appcaton
was fed there were 175 empoyees n the approprate unt. The average ncrease,
or 567.67, mutped by 175, equas 100,917.25, the tota payroU ncrease
aowabe.
n appcant for ncreases under ths secton sha submt a nformaton neces-
sary to a determnaton of the amount of the ncrease aowabe as outned n
the foregong e ampe. There sha aso be submtted, as a part of the appcaton,
a statement settng forth the method under whch the ncrease, f approved, w
be dstrbuted among empoyees n the approprate unt.
pan of dstrbuton whch woud resut n the creaton of nequtes between
empoyees n the approprate unt or between empoyees n that unt and other
empoyees of the partcuar empoyer w not be approved.
No ad|ustment made under ths secton sha be used as a bass for approva of
any other saary ncrease.
Wm. T. Sherwood,
pproved ugust 23, 1946.
( ed wth the Dvson of the edera Regster ugust 26, 1946, 4.42 p. m.)
72 29 47 14
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204
PRODUCTION ND R MO L O T R.
Sec. 1 2.3 0(d). Record of Remova. The propretor w report ether re-
moved from the premses on orm 1442 and the storekeeper-gauger on orms
1452- and 1452- , as ndcated by the coumns and ues aud the nstructons
on such forms.
R CO RY ND R MO L O C R ON DIO ID .
Sec. 1 2.391. Procedure. Carbon do de may be recovered from fermenters
and removed from the pant premses provded t s frst thoroughy washed or
scrubbed and purfed to remove the acoho therefrom. Where carbon do de
Is recovered, the washwater may be coected n a recevng tank and transferred
by ppe ne to a fe menter or to the beer we. Where the washwater s trans-
ferred to the fermenter, the transfer must be made pror to the testng of the
beer by the storekeeper-gauger at the tme of dstaton. Where the wash-
water s transferred to the beer we after the cacuated yed has been deter-
mned, the acohoc content, the number of gaons, and the cacuated yed
thereof w be determned by the storekeeper-gauger and nterned on orm
1452- . n approved ebuometer sha he used n determnng the acohoc
content of the washwater. The number of gaons w be nterned n Part
1 of orm 1442. If the washwater s not utzed n the manufacture of acoho,
t w be run nto the sewer or otherwse destroyed on the premses under the
supervson of the storekeeper-gauger. ntry of such dsposton w not be
made on orms 1442 and 1452 and .
sampes of acoho.
Sec. 1 2.30 . Offce Record. The storekeeper-gauger w keep an offce
record of the sampes taken, gvng the date, number, quantty n wne gaons,
and the proof. The storekeeper-gauger w aso report on orm 1452- the tota
number and the quantty n wne and proof gaons of sampes taken at the
pant durng the month.
DR WING O , G UGING, ND R MO L O LCO OL.
Sec. 1 2.405. Gaugng of coho. acoho drawn from recevng tanks
w be carefuy gauged by the propretor n the mmedate presence of the store-
keeper-gauger and reported on orm 1442. coho drawn nto barres, drums,
or smar packages sha be gauged n accordance wth the rues prescrbed n
the Gaugng Manua. coho to be transferred by ppe ne from recevng
tanks sha aso be gauged n accordance wth the rues prescrbed n the
Gaugng Manua the weght of the acoho w be determned by means of
weghng tanks, as provded n secton 1 2.407. The storekeeper-gauger w
verfy the gauge (proof, weght, and gaouage) of a acoho, as determned
by the propretor. ( Sec. 3103, I. R. C.)
osses of acoho.
Sec. 1 2.410. Losses n Recevng Tanks. Losses sustaned from recevng
tanks by theft or casuaty, or any other e traordnary or unusua osses, w
be determned at the tme the oss occurs, or s dscovered, and the oss w be
entered on orm 1442. Report of the oss w be made by the propretor to
the dstrct supervsor mmedatey. Cam for remsson of ta on a such
osses, regardess of the percentage of oss, w be made by the propretor.
Skc. 1 2.412. Records. Where acoho Is ost or destroyed on the ndustra
acoho pant premses, approprate entry and report of such oss or destructon
w be made by the storekeeper-gauger on orm 1452- , and by the propretor
on orm 1442.
OP R TIONS Y PROPRI TOR UND R DI R NT TR D N M S OR STYL S.
Sec. 1 2.437. Records. S-pnrate records on orms 1442 and 14S (f anyt
w not be requred for operatons under each trade name but the propretor
must note on such records the trade names or styes under whch he operated
durng the month and the dates of operatons under each. The storekeeper-
gauger w make a smar notaton on hs record, orm 1452- . Where acoho
s produced under a trade name, the propretor and the storekeeper-gauger
must show on ther records both the rea name of the actua producer and te
trade name under whch the acoho was produced.
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Regs. 3, 1 2.527.
20
appcaton to cover the use of the premses for that purpose from anuary 1,
1947, to anuary 31, 1 47, ncusve. The appcaton sha ncude a statement
of the equpment and the process to be used n producng such sugars and srups
and sha be accompaned by an approprate consent of surety, orm 1533,
e ecuted n accordance wth these reguatons.
Upon approva of such appcaton, the dstrct supervsor sha s-sue an
amended permt, orm 1433, to aow use of the premses n accordance wth
the suppementa appcaton. The propretor sha prepare each month and
attach to hs monthy report on orm 1442 a separate report showng a potatoes
and hgh mosture or damaged gran used day n the producton of sugars and
srups by pounds and the quantty n pounds of sugars and srups produced
and removed each day from the premses. Ths report sha be deemed a p:rt
of orm 1442. such materas receved on the premses shr be reported
n the reguar matera summares of orms 1442 and 1452-15 and upon ther
use under ths secton, sha be reported at a speca ne n the summares as
transferred for use n the producton of sugars and srups. contaners of
sugars and srups removed from the premses must be abeed to show the nature
of the contents and the name and address of the manufacturer. The operatons
authorzed heren sha be conducted n a manner consstent wth the provsons
of these reguatons. Ths secton sha cease to be n force and effect after
anuary 31,1947. ( secton 3126, Interna Revenue Code.)
oseph D. Nu an, r.,
pproved ugust 7,194G.
. . oey, r.,
( ed wth the Dvson of the edera Regster ugust S, 194 , 10.44 a. m.)
Reguatons 3, Secton 1 2.527: Stamps. 1940-20-1241
T. D. 553
TITL 20 INT RN L R NU . C PT R I, SU C PT R C, P RT 1S2.
INDUSTRI L LCO OL.
mendng Reguatons 3.
Washngton, D. C.
To Dstrct Supervsors and Others Concerned:
1. Pursuant to the provsons of sectons 3105, 3124(a) (0), 3176,
and 3301 of the Interna Revenue Code (U. S. C.. Tte 20, sectons
3105, 3124(a) (0), 3176, and 3301), Reguatons 3, Industra co-
ho (26 C R, Part 1S2), are hereby amended as foows:
rtce II. Operaton of Industra coho onded Warehouses.
2. Paragraphs (a) and (c) of secton 1 2.527 are amended to read
as foows:
Sec. 1 2.527. Stamps. (a) ff ng. Ta -pad, warehousng, and e port
stamps sha be securey aff ed to the Government head of packages or the sde
of cases wth a good adhesve, and, when aff ed to wooden packages or cases,
wth a tack or stape n each corner of the stamp.
(c) Coverng. fter the stamp has been canceed, t must be covered wth a
coatng of transparent sheac, acquer, or varnsh, to protect t agaust mosture,
The astersk ( ) at the end of sectons refers to sectons 3105, 3124(a)(6), and 3176
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209 Regs. 3, 1 2.527.
ateraton, and remova. Warehousng stamps are not requred to be scaped
and therefore may be coated over wth a gue that does not dscoor the stamps
and affords protecton aganst mosture, ateraton, and remova equa to that
afforded by sheac, acquer, or varnsh. ( Sec. 3301, I. R. C.)
3. The words transfer or are hereby deeted from the ttes and
cuts, fgures 2, 5, and 7, of secton 1 2.52 .
4. Secton 1 2.555 s hereby revoked.
5. The ast two sentences of the frst paragraph of secton 1 2.561
whch read, transfer stamp must be aff ed to each package shpped
to a denaturng pant not ocated on the same premses, as requred by
secton 1 2.555. Transfer stamps need not be aff ed to packages
transferred to a denaturng pant on the same premses. are hereby
deeted.
Stewart erkshre,
pproved September 10,1946.
oseph . O Conne ,, r.,
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210
DISTILL D SPIRITS.
1946-14-12350
Ct D. 1676
LI UOR T S INT RN L R NU COD CRIMIN L COD .
oaton of Interna Revenue Laws Convcton Upon Sub-
stantve and Conspracy Counts 1 ea of Doube eopardy.
Pettoners were ndcted for voatons of the Interna Revenue
Code, the ndctment contanng hoth substantve and conspracy
counts. snge conspracy was charged and proved. Some of
the overt acts charged n the conspracy count were the same acts
charged n the substantve counts. ach of the substantve counts
found was commtted pursuant to the conspracy. at: The sub-
stantve offenses were not merged n the conspracy. The comms-
son of the substantve offenses and the conspracy to commt them
are separate and dstnct offenses, and the pea of doube |eopardy s
no defense to a convcton for both offenses. There was a contnuous
conspracy, and f an overt act can be supped by the act of one con-
sprator, the same or other acts n furtherance of the conspracy
are kewse attrbutabe to the others for the purpose of hodng them
responsbe for the substantve offense.
Supreme Court of the Unted States.
W. Dane Pnkerton and Water . Pnkerton, pettoners, v. The Unted Statet
of merca.
On wrt nf certorar to te Unted States Crcut Court of ppeas for the fth Crcut.
une 10, 1946.
opnon.
Mr. ustce Dougas devered the opnon of the Court.
Water and Dane Pnkerton are brothers who ve a short dstance from
each other on Dane s farm. They were ndcted for voatons of the Interna
Revenue Code. The ndctment contaned 10 substantve counts and 1 conspracy
count. The |ury found Water guty on nne of the substantve counts and on
the conspracy count. It found Dane guty on s of the substantve counts
and on the conspracy count. Water was fned 000 and sentenced generay on
the substantve counts to mprsonment for 30 months. On the conspracy count
he was gven a 2-year sentence to run concurrenty wth the other sentence.
Dane was fned 1,000 and sentenced generay on the substantve counts to
mprsonment for 30 months. On the conspracy count he was fned 500 and
gven a 2-year sentence to run concurrenty wth the other sentence. The |udg-
ments of convcton were affrmed by the crcut court of appeas.1 (151 ed.
(2d), 49 .) The case s here on a petton for a wrt of certorar whch we
granted, because one of the questons presented nvoved a confct between the
decson beow and Unted States v. Sa (116 ed. (2d), 745), decded by the
Crcut Court of ppeas for the Thrd Crcut.
snge conspracy was charged and proved. Some of the overt acts charged
n the conspracy count were the same acts charged In the substantve counts.
ach of the substantve offenses found was commtted pursuant to the con-
1 The court hed that two of the counts under whch Water was convcted and one of
the counts under whch Dane was convcted were barred by the statute of mtatons and
that as to them the demurrer shoud have been sustaned. ut each of the remanng sub-
stantve counts on whch the |ury had returned a verdct of gutv carred a ma mum
penaty of throe years mprsonment and a fne of 5,000. (Int. Rev. Code, secton SS2L
26 .U, S. C, secton 3321.) ence the genera sentence of ne and mprsonment mposed
on each under the substantve counts was vad. It Is setted aw. as stated n Caassen v.
Unted State (142 U. S., 140, 14f-147 , thnt n any crmna case a genera verdct and
udgment on an ndctment or Informaton contanng severa counts can not be reversed on
error, f any one of the counts s good and warrants the |udgment, because, n the absence
of anythng In the record to show the contrary, the presumpton of aw Is that the court
nwaraed sentence on the good count ony.
The same rue obtans n the case of concurrent sentences, (rabayash v. ntud
States, 320 U. S., 1, 5, and cases cted.)
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211
Msc.
spracy. Pettoners therefore contend that the substantve counts became
merged n the conspracy count, and that ony a snge sentence not e ceedng
the ma mum 2-year penaty provded by the conspracy statute (Crmna Code
secton 37, 1 U. S. C., secton ) coud be mposed. Or to state the matter
dfferenty, they contend that each of the substantve counts became a separate
conspracy count but snce ony a snge conspracy was charged and proved,
ony a snge sentence for conspracy coud be mposed. - They rey on raverman
v. Unted States (317 U. S., 49 Ct. D. 1565, C. . 1942-2, 319 ).
In the raverman case the ndctment charged no substantve offense. ach
of the severa counts charged a conspracy to voate a dfferent statute. ut
ony one conspracy was proved. We hed that a snge conspracy, charged under
the genera conspracy statute, however dverse ts ob|ects may be, voates
but a snge statute and no penaty greater than the ma mum provded for one
conspracy may be mposed. That case s not apposte here. or the offenses
charged and proved were not ony a conspracy but substantve offenses as we.
Nor can we accept the proposton that the substantve offenses were merged n
the conspracy. There are, of course, nstances where a conspracy charge may
not be added to the substantve charge. One s where the agreement of two
persons s necessary for the competon of the substantve crme and there s no
ngredent n the conspracy whch s not present n the competed crme. (See
Unted States v. atz, 271 U. S., 354, 356-356 Oebard v. Unted States, 2 7 U. S.,
112, 121-122.) nother s where the defnton of the substantve offense e -
cudes from punshment for conspracy one who vountary partcpates n an-
other s crme. Oebard v. Unted States, supra.) ut those e ceptons are of
a mted character. The common aw rue that the substantve offense, f a
feony, was merged n the conspracy,2 has tte vtaty n ths country.3 It has
been ong and consstenty recognzed by the Court that the commsson of the
substantve offense and a conspracy to commt t are separate and dstnct
offenses. The power of Congress to separate the two and to aff to each a
dfferent penaty s we estabshed. (Cune v. Unted States, 159 U. S., 590,
594-595.) convcton for the conspracy may be had though the substantve
offense was competed. (See eke v. Unted States, 227 U. S., 131, 144.) nd
the pea of doube |eopardy s no defense to a convcton for both offenses.
(Carter v. McCaghry, 1 . U. S., 3G5, 395.) It s ony an dentty of offenses
whch s fata. (See Oaveres v. Unted States, 220 U. S., 33 , 342. Cf. reeman
v. Unted States, 146 ed. (2d), 97 .) conspracy s a partnershp n crme.
(Unted States v. Socony-Yacuum O Co., 310 U. S., 150, 253.) It has ngredents,
as we as mpcatons, dstnct from the competon of the unawfu pro|ect.
s stated n Unted States v. Rabnoweh (23 U. S., 7 , ):
or two or more to confederate and combne together to commt or cause to be
commtted a breach of the crmna aws, s an offense of the gravest character,
sometmes qute outweghng, n n|ury to the pubc, the mere commsson of the
contempated crme. It nvoves deberate pottng to subvert the aws, educatng
and preparng the consprators for further and habtua crmna practces. nd
t s characterzed by secrecy, renderng t dffcut of detecton, requrng more
tme for ts dscovery, and addng to the mportance of punshng t when
dscovered.
nd see Sneed v. Unted States (2S ed., 911, 912-913 anghart v. Unted States,
14 ed. (2d), 521).
Moreover, t s not matera that overt acts charged n the conspracy counts
were aso charged and proved as substantve offenses. s stated n Sneed v.
Unted States, supra, page 913, If the overt act be the offense whch was the
ob|ect of the conspracy, and s aso punshed, there s not a doube punshment
of t. The agreement to do an unawfu act s even then dstnct from the dong
of the act.
See May s Law of Crmes (4th cd., 193 ), ecton 126 17 Corn. L. . (1931), 136
Peope v. Tavorma (257 N. Y., 4, 9-90).
The cases are coected In 37 . L. R., 77 , 75 . L. R., 1411.
The addton of n conspracy count may at tmes he abusve and un|ust. The Confer-
ence of Senor Crcut udges, reported n 1925:
We note the prevaent use of conspracy ndctments for convertng a ont msde-
meanor Into a feony : and we e press our convcton that both for ths purpose and for the
purpose or at east wth the effect of brngng n much mproper evdence, the conspracy
statute s beng much abused.
though In a partcuar case there may be no preconcert of pan, e ceptng that neces-
sary Inherent n mere |ont acton, t Is dffcut to e cude that stuaton from the estab-
shed defntons pf conspracy yet the theory whch permts us to ca the aborted pan a
greater offense than the competed crme supposes a serous and substantay contnued
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212
It s contended that there was nsuffcent evdence to mpcate Dane n the
conspracy. ut we thnk there was enough evdence for submsson of the ssue
to the |ury.
There s, however, no evdence to show that Dane partcpated drecty n the
commsson of the substantve offenses on whch hs convcton has been sustaned,
athough there was evdence to show that these substantve offenses were n fact
commtted by Water n furtherance of the unawfu agreement or conspracy
e stng between the brothers. The queston was submtted to the |ury on the
theory that each pettoner coud be found guty of the substantve offenses, f t
was found at the tme those offenses were commtted pettoners were partes to
an unawfu conspracy and the substantve offenses charged were n fact com-
mtted n furtherance of t.
Dane rees on Unted States v. Sa, supra. That case hed that partcpaton
n the conspracy was not tsef enough to sustan a convcton for the substantve
offense even though t was commtted n furtherance of the conspracy. The
court hed that, n addton to evdence that the offense was n fact commtted
n furtherance of the conspracy, evdence of drect partcpaton n the com-
msson of the substantve offense or other evdence from whch partcpaton
mght fary be nferred was necessary.
We take a dfferent vew. We have here a contnuous conspracy. There s
here no evdence of the affrmatve acton on the part of Dane whch s necessary
to estabsh hs wthdrawa from t. ( yde v. Unted States, 225 U. S., 347, 369.)
s stated n that case, avng |oned n an unawfu scheme, havng consttuted
agents for ts performance, scheme and agency to be contnuous unt fa
fruton be secured, unt he does some act to dsavow or defeat the purpose
he s n no stuaton to cam the deay of the aw. s the offense has not been
termnated or accompshed, he s st offendng. nd we thnk, conscousy
offendng, offendng as certany, as we have sad, as at the frst moment o hs
confederaton, and conscousy through every moment of ts e stence. ( ,
page 309.) nd so ong as the partnershp n crme contnues, the partners act
for each other n carryng t forward. It s setted that an overt act of one
partner may be the act of a wthout any new agreement specfcay drected to
that act. (Unted States v. s e, 21 U. S., 601, 60 .) Motve or ntent may be
proved by the acts or decaratons of some of the consprators n furtherance
of the common ob|ectve. (Wborg v. Unted States, 163 U. S., 632, 657-6.) .I
scheme to use the mas to defraud, whch s |oned n by more than one person,
Is a conspracy. (Cochran v. Unted States, 41 ed. (2d),, 193, 199-200.) Tet
a members are responsbe, though ony one dd the mang. (Cochran v.
Unted States, supra Mackett v. Unted States, 90 ed. (2d), 462, 464 aker v.
Unted States, 115 ed. (2d), 533, 540 ue v. Unted States, 13 ed. (2d),
351, 359.) The governng prncpe s the same when the substantve offense s
commtted by one of the consprators n furtherance of the unawfu pro|ect.
( ohnson v. Unted States, 62 ed. (2d), 32, 34.) The crmna ntent to do the
act s estabshed by the formaton of the conspracy. ach consprator nst-
gated the commsson of the crme. The unawfu agreement contempated
precsey what was done. It was formed for the purpose. The act done was
n e ecuton of the enterprse. The rue whch hods responsbe one who couuses,
procures, or commands another to commt a crme s founded on the same prn-
group scheme for cooperatve aw breakng. We observe so many conspracy prosecutons
whch do not have ths substanta base that we fear the creaton of a genera mpresson,
very harmfu to aw enforcement, that ths method of prosecuton R used arbtrary an
harshy. urther the rues of evdence n conspracy cases make them most dffcut to try
wthout pre|udce to an nnocent defendant. ( unua eport of the ttorney Genera for
1925, paues 5-ft.)
ut we do not fnd that practce refected In ths present case.
Ths queston does not arse as to Water. e was the drect actor n some of the sub-
stantve offenses on whch hs convcton rests. So the genera sentence and fne are sup-
portabe under any one of those. See note 1, supra.
The tra court charged: after you gentemen haTe consdered a the ev-
dence In ts case, f you are satsfed from the evdence beyond a reasonabe douht that
at the tme these partcuar substantve offenses were commtted, that s, the offenses
charged n the frst 10 counts of ths ndctment If you are satsfed from the evdence be-
yond a reasonabe doubt that the two defendants were n an unawfu conspracy, as I have
heretofore defned unawfu conspracy to you. then you woud have a rgnt, f yon found
that to be true to your satsfacton beyond a reasonabe doubt, to convct each of these
defendants on a these substantve counts, provded the acts referred to n the substantve
counts were acts n furtherance of the unawfu conspracy or ob|ect of the unawfu con-
spracy, whch you have found from the evdence e sted. Dane was not ndcted as n
ader or abettor (see Crmna Code, secton 332, 1 U. S. C, 550), uor was hs case sub-
mtted to the |ury on that theory.
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Regs. 4, rs. , etc.
214
Reguatons 4, rtces . I, III, 1946-17-123 6
I , , . I, I , T.D.5529
, I, LII.
TITL 20 INT RN L R NU . C PT R I. SU C PT R C, P RT 1 3.
PRODUCTION O DISTILL D SPIRITS.
mendng Reguatons 4.
Washngton, D. C.
1. Pursuant to the provsons of secton 3176 of the Interna Revenue
Code (U. S. C, tte 26, secton 3176), Reguatons 4, Producton of
Dsted Sprts (26 C R, Part 1 3), are hereby amended as fo-
ows:
rtce . Manufacture of Dsted Sprts.
2. Secton 1 3.211 s amended to read as foows: .
Sf.c. 1 3.214. Gaugng of Unfnshed Sprts. t dsteres where sprts, n
the course of dstaton, are run nto tanks n the dstery budng for tem-
porary depost preparatory to competng the dstaton thereof, and where 24-
hour supervson s mantaned by the storekeeper-ganger, a day gauge of such
sprts w not be requred. W here 24-hour supervson s not mantaned, the
storekeoper-gauger, pror to eavng the premses, w gauge (measure and proof)
the sprts retaned n each tank, make an offce record of the quantty and proof
of the sprts theren, and attach ocks n accordance wth secton 1 3.41 pro-
vded, that where such tanks are encosed n a room or budng equpped for
ockng n accordance wth secton 1 3.24, such room or budng w be ocked
n eu of gaugng the unfnshed sprts. Upon hs return to the premses the
storekeeper-g ger w gauge the sprts n the tanks prevousy gauged and
compare the quantty and proof wth the offce, record. ny matera dscrepancy
w be reported mmedatey to the dstrct supervsor. cept as provded n
rtce , unfnshed sprts may not be stored n such tanks but may be
deposted theren ony temporary n the course of dstaton. t the cose
of the month the storekeeper-ga.uger w make an accurate gauge of a un-
fnshed sprts on hand and report the tota quantty on orm 1502. Dstates
contanng one-haf of 1 per cent or more of adehydes d 1- per cent or more
of fuse o, coected for destructon or for remova for denaturaton, n accord-
ance wth the provsons of rtce I, w be ncuded In the report of nventory
of unfnshed sprts on orm 1592 unt such dstates are destroyed or removed
for denaturaton. (Sec. 317C, I. R. C.)
rtce I. Coecton and Remova of Dstates, Dsted Water,
use O, and Carbon Do de Gas rom Dstery.
3. Secton 1 3.245 s amended to read as foows:
Sec. 1 3.245. Storekeper-Ga-ger s Records. Dstates coected for destruc-
ton or for remova for denaturaton w be ncuded by the storekeeper-gauger
n the Inventory of unfnshed sprts reported on orm 1592 unt gauged and
destroyed or removed for denaturaton, whereupon approprate entres w be
made on such form coverng dsposton of such dstates. (Sees. 2910, 3176,
I. R. C.)
4. Secton 1S3.246 s amended to read as foows:
Sec. 1 3.246. Dtster s Recoups. Dstates coected for destructon or for
remova for denaturaton w be ncuded by the dster u the nventory of
unfnshed sprts reported on orm 159 unt gauged and destroyed or removed
for denaturaton, whereupon approprate entres w be made on such form
coverng the dsposton of such dstates. (Sees. 2916, 3176, I. R. C.)
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215
Regs. 4, rte. , etc.
Sec. 1 3.251. Supervson of Remova. dsted water when drawn Into
packages for remova, or when removed by ppe ne, must be Inspected by the
storekeeper-gauger and removed under hs mmedate supervson. The dster
w enter a removas of dsted water on orm 159 , as ndcated by tho
coumns and nes provded therefor and n accordance wth the nstructons on
the form. (Sec. 3176, I. R. C.)
6. Subparagraphs (g) and (h) of secton 1 3.254 are amended to
read as foows:
(g) Record of Remova. The storekeeper-gauger w prepare orm 1520
coverng removas of fuse o. Such removas w be entered on orms 1502
and 159 as ndcated by the coumns and nes and nstructons on the form.
(ft) Dsposton of Washwater. The water used for washng or purfyng
the o n the tanks may be conveyed drecty to the st, or t may be run nto
a tank, the beer we, or nto the sewer, or t may be otherwse destroyed on the
premses under the supervson of the storekeeper-gauger. If the washwater
s run nto the st, tank, or beer we, the quantty w not be entered on orm
1592 or 159 . If the washwater s run nto the sewer or otherwse destroyed,
the acohoc content and quantty w be reported on orm 1520 and ncuded n
the report of producton on orms 1592 and 159 . (Sec. 3176, I. R. C.)
Sec. 1 3.255. Procedure. Carbon do de may be recovered from fernenters
and removed from dstery premses, provded t s frst thoroughy washed or
scrubbed and purfed to remove the acoho therefrom. Where carbon do de s
recovered the washwater may be coected n a recevng tank and transferred
by ppe ne to a fermenter or to the beer we. Where the washwater s trans-
ferred to the fermenter, the transfer must be made pror to the testng of the
beer by the storekeeper-gauger at the tme of dstaton. Where the washwater
s transferred to the beer we after cacuated yed has been determned, the
acohoc content, the number of gaons, and the cacuated yed thereof, w be
determned by the storekeeper-gauger and nterned n Part 1 of orm 1592.
n approved ebuometer sha be used n determnng the acohoc content
of the washwater. The number of gaons w aso be nterned n Part 1 of
orm 159 . If the washwater s not utzed n the manufacture of dsted
sprts, t w be run nto the sewer or otherwse destroyed on the premses under
the supervson of the storekeeper-gauger. ntry of such dsposton w not be
made on orms 1592 and 159 . (Sec. 3176, I. R. G.)
rtce III. Sampes of Dsted Sprts.
. Secton 1 3.270 s amended to read as foows:
Sec. 1 3.270. Offce Record. The storekeeper-gauger w keep an offce record
of the sampes taken, gvng the date, number, quantty n wne and proof gaons,
and the proof. If the dster operates an nterna revenue bonded warehouse
on or contguous to the dstery premses, the same record may be used for
sampes taken from the warehouse n accordance wth governng reguatons.
The storekeeper-gauger w aso report the tota number and the quantty n
wne and proof gaons of sampes taken at the dstery durng the month
on orm 1592. (Sec. 3176, I. R C.)
rtce I . Ta -Payment, Remova, and Transfer of Dsted Sprts
rom Cstern Room.
Sec. 1 3.339. Storekeeper-Gauger s Records. The storekeeper-gauger w
enter a removas of dsted sprts from the dstery on orm 1592, as pro-
vded n rtce I . (Sees. 2 77, 3176,1. R. C.)
Sec. 1 3.340. Dster s Records. The dster sha enter on orm 159 a
removas of dsted sprts from the dstery, as ndcated by the headngs
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217
Regs. 4, rts. , etc.
wth rtce . The storekeeper-gauger w keep records and render
returns on orm 1592, n accordance wth the procedure prescrbed heren for the
keepng of records and renderng of reports on orm 159 by the dster. (Sees.
2 41 (a), 2 77, 3176, I. R. C.)
15. Secton 1 3.3 9 s amended to read as foows:
Sec. 1 3.3 9. Successon by ducary. Where a change n propretorshp s
brought about by operaton of aw, the admnstrator, e ecutor, recever, trustee,
assgnee, or other fducary may not contnue the busness unt the requred
quafyng documents have been fed and approved. In the case of such change,
the fducary sha make approprate notaton on orm 159 of hs successon,
and the date thereof, and the storekeeper-gauger w make a smar notaton
on orm 1592. (Sec. 3176, I. R. O.)
rtce I . Storekeeper-Gauger s Records and Reports.
16. Secton 1 3.395 s hereby revoked.
Sec. 1 3.396. Monthy Records. The storekeeper-gauger s monthy record on
rm 1592 w be fed as a permanent record n the Government offce, n bound
fes, and n monthy sequence. It w be kept avaabe for nspecton by vstng
nterna revenue offcers. (Sec. 3176,1. R. C.)
rtce . Dster s Records and Reports.
1 . Secton 1 3.402 s amended to read as foows:
Sec. 1 3.402. Record of Remova of uk Sprts, orm 159 . very pro-
pretor of a regstered dstery sha keep a day record on orm 159 of a
buk dsted sprts shpped from the dstery, ncudng mpure dstates re-
moved from the dstery premses for denaturaton. ntres sha be made as
ndcated by the headngs of the varous coumns and nes and n accordance
wth the nstructons prnted on the form. (Sees. 2 59, 3176, L R. C.)
Sec. 1 3.404. Tme of Makng ntres. Day entres sha be made on Record
52 and orm 52 , as ndcated by the headngs of the varous coumns and n
accordance wth the nstructons prnted on the forms, not ater than the cose of
busness of the day on whch the transactons occur: Provded, That where the
propretor of a ta -pad premses keeps a separate record, such as nvoces, of
the removas of dsted sprts, showng the remova data requred to be entered
on Record 52 or orm 52 , day entres of removas of sprts from the premses
may be made on the respectve record not ater than the cose of busness of
the foowng busness day, provded such separate record s approved by the
dstrct supervsor. (Sees. 2 57, 3176, I. R. C.)
Sec. 1 3.406. Reports. cept as otherwse provded heren, the propretor
sha fe, day, fu and compete transcrpts of Record 52 and orm 52 (Parts
1 and 2) on orms 52 , 52 , and 52 (Parts 1 and 2) wth the dstrct super-
vsor, by deverng or mang them to such offcer on the date the transactons
entered theren occurred: Provded, That n any case n whch the dstrct super-
vsor sha drect, the transcrpts sha be so fed wth the nvestgator n charge
nstead of wth the dstrct supervsor. The transcrpts sha bear the foowng
certfcaton sgned by the person or offcer authorzed to e ecute orm 33 or 52 :
I hereby certfy that these transcrpts, consstng of pages, ds-
cose a the transactons whch occurred durng the perod covered thereby,
and that each entry s correct.
If n any case the dstrct supervsor sha so authorze, the transcrpts, n eu
of beng fed day, may be fed wth hm on or before the 10th day of the month
succeedng the month n whch the transactons n dsted sprts occurred. In
72 29 47 15
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Regs. 4, rte. , etc. 21
such event, transactons w be entered on Record 52 and orm 52 n accordanw
wth the provsons of secton 1 3.404. Monthy summary reports on orm 33S
(where Record 52 s kept) and orm 52 (Part 3) sha be prepared n dupcate,
one copy of whch w be retaned on fe and the orgna forwarded to the
dstrct supervsor on or before the 10th day of the month succeedng the mouth
n whch the transactons n dsted sprts occurred. Records kept on Record
52 and orm 52 sha be preserved for a perod of four years, and durng suc
perod sha be avaabe durng busness hours for nspecton and the takng of
abstracts therefrom by the Commssoner or any nterna revenue offcer. (Sees-
2 57, 2 59, 3176, I. R. C.)
Sec. 1 3.407. orms to be Provded by Users. Record 52 and orms 52 , 52 .
52 . and 33 w be provded by users at ther own e pense but must be Id the
form prescrbed by the Commssoner: Provded, That wth the approva of th
Commssoner they may be modfed to adapt ther use to tabuatng or other
mechanca equpment: Provded further, That where the form s prnted d bonk
form, ncudng oose-eaf books, the nstructons may be prnted on the cover fr
the fyeaf of the book, nstead of on the ndvdua form. (Sec. 3176, I. R. C.)
rtce I. Dstrct Supervsor s ccount of Regstered Dstu||k
Sec. 1 3.40 . orm 1514 Suppementa. ach dstrct supervsor w render
a monthy account on orm 1514 Suppementa of operatons at regstered ds-
teres for each State wthn hs supervsory dstrct. The requred data w be
obtaned from orms 1592. ntres sha be made as ndcated by the headngs
of the varous coumns and nes, and n accordance wth the nstructons on the
form. orm 1514 Suppementa w be prepared n dupcate and one copy
thereof, wth one copy of each orm 1592 pertanng thereto, w be forwards
to the Commssoner not ater than the ast day of the month succeedng that for
whch rendered. The remanng copy w be retaned by the dstrct supervsor.
(Sec. 3170, I. R. C.)
rtce LI I. ountary Destructon of Sprts.
Seo. 1 3.452. Destructon. Sprts authorzed to be destroyed w be ganged
by the storekeeper-gauger and reported for that purpose on orm 1520, n trp-
cate. oowng such gauge, the sprts may be destroyed under the mmedate
supervson of the storekeeper-gauger by runnng the same nto the sewer or by
other sutabe means. The storekeeper-gauger w then certfy to such destrnctnc
on the orm 1520, return one copy of the form to the dster, retan one copy for
hs fes, and forward one copy to the dstrct supervsor. e w report wd
destructon on orm 1592 n the manner prescrbed by the form. (Sees. 2901.
3170, 3176, I. R. C.)
24. These reguatons sha take effect November 1,1946.
oseph D. Nustan, r.,
pproved ugust , 1946.
. . oey, r.,
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Regs. S.
220
Pursuant to the above provsons of aw and sectons 2 25 and 3176,
Interna Revenue Code (U. S. C, Tte 2G, sectons 2 00. 2 15. 2 25.
and 3176), Reguatons 5, Producton of randy (26 C R, Part 1 4),
s hereby amended, effectve May 1,1947, n the foowng respects:
1. The foowng subsectons are revoked:
Sectons 1 4.4(6), 1 4.4(c , 1 4.4(a)
2. The foowng sectons are amended:
Sectons 1 4.3, 1 4.60, 1 4.64, 1 4.65, 1 4.12 , 1 4.130, 1 4.132.
1 4.133, 1 4.13 (6), 1 4.139(6), 1 4.140(6), 1 4.142, 1 4.143, 1 4.14 ,
1 4.149, 1 4.150, 1 4.151, 1 4.152, 1 4.154, 1 4.156, 1 4.15 , 1S4.161,
1 4.163, 1 4.164,1 4.251 and
3. The foowng new sectons are added:
Sectons 1 4.67a, 1 4.67b, 1 4.67c, 1 4.67d, 1 4.67e, 1 4.67f, 1 4.67g,
1 4.134a, 1 4.134b, 1 4.141a, 1 4.155a, 1 4.159a, 1 4.161a, 1 4.162a.
The effect of these amendments s that frut dsters w be sub|ect
to a the provsons of sectons 2 00(e), 2 14, and 2 15(b), Interna
Revenue Code, on and after May 1, 194-7. Therefore, bonds fed by
frut dsters on orm 30 , effectve on and after May 1, 1947, w
not be approved uness
(1) The dster s the owner n fee, unencumbered by any
mortgage, |udgment, en, or other encumbrance, of the ot or
tract of and on whch the frut dstery s stuated or
. (2) The dster fes wth the dstrct supervsor, n con-
necton wth hs notce, orm 27 , the wrtten consent of the
owner of the fee, and of any mortgagee, |udgment-credtor, or
other person havng a en or other encumbrance thereon, and of
any pror essees, duy acknowedged, that the premses may be
used for the purpose of dstng sprts, sub|ect to the provsons
of aw, and e pressy stpuatng that the en of the Unted States
for ta es and penates sha have prorty over any rght, tte, or
nterest, whatsover of the person gvng the consent, and that n
the case of the forfeture of the premses or property, or any part
thereof, the tte to the same sha vest n the Unted States, ds-
charged from any such rght, tte, or nterest e cept that where
such consent can not be obtaned,
(3) The dster, wth the approva of the Commssoner, fes
wth the dstrct supervsor an ndemnty bond, n a pena sum
equa to the apprased vaue of the ot or tract of and on whch
the dstery s stuated, the dstery, the budngs, and the ds-
tng apparatus.
The amended and new sectons sha read as foows:
rtce III. Defntons.
Sec. 1 4.3. Defntons.

(a) Pror essee sha mean a essee whose ease has not termnated.

rtce I. uaufynq Documents.

Sec. 1 4.60. Descrpton of Pkemses. The ot or tract of and on whch the
dstery s stuated must be descrbed on orm 27 by courses and dstances,
In feet and nches, wth the partcuarty requred n conveyances of rea estate.
If the premses consst of two or more ots or parces, the condton of the tte
whch s not the same, tte entre premses sha be frst descrbed, foowed by a
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221
Regs. 5.
separate descrpton by courses and dstances, n feet and nches, of each such
ot or parce. The contnuty of the premses must be unbroken, e cept that the
premses may be dvded by a pubc street or hghway, f parts of the premses
so dvded abut on such street or hghway, drecty and mmedatey opposte each
other. The premses may be smary dvded by a raroad rght of way, f the
raroad s a common carrer. In such cases, each tract of and consttutng the
premses sha be descrbed separatey on the form. If a portdh of the premses
s owned n tee, unencumbered, by the dster, or a porton s owned by the ds-
ter but s encumbered, or a porton s not owned by the dster and he has pro-
cured consent, orm 1G02, from the owner and from any encumbrancer, pror,
essee, etc., the entre premses sha be descrbed frst, foowed by a separate
descrpton, by courses and dstances, n feet and nches, of the portons thereof
whch are encumbered and/or of the tract whch s now owned by the dster.
( Sees. 2 00(e) (1), 2 12,1. R. C.)

Sec. 1 4.64. Condton of Tte to Premses. The condton of tte to the
premses sha be shown on orm 27 . If the dster s the owner of the premses
n fee, unencumbered, t sha be so stated. If the dster s not the owner n fee,
unencumbered by any mortgage, |udgment, en, or other encumbrance of the ot
or tract of and on whch the dstery s stuated, the name and address of the
owner of the fee and of any mortgagee, |udgment-credtor, and of any person
havng a en or encumbrance, and of a pror essees thereon, sha be stated.
Where the wrtten consent of the owner of the fee and of any mortgagees, |udg-
ment-credtors, enors, encumbrancers, or essees, s fed, as provded n secton
1 4.67a, or where an ndemnty bond s fed n eu of such wrtten consent, as
provded n sectons 1 4.67d and 1 4.67e, such fact, together wth nformaton as
to the knd, date, and amount of the encumbrance and the baance due thereon,
sha be shown on the orm 27 n connecton wth the statement of the present
condton of the tte. If the premses are occuped under a ease, the name of the
owner, the name of the essor, the ength of the term, and the date of ts e pra-
ton, sha be stated. n cases where an ndemnty bond s fed, the date of the
Commssoner s approva of the fng of such bond sha aso be gven. ( Sees.
2 00(e) (1), 2 12, 2 15(b), I. R. C.)
Sec. 1 4.65. Condton of Tte to pparatus and qupment. The dster s
tte to, or nterest n, the dstng apparatus and equpment sha be shown on
orm 27 . If the dster s not the owner of such apparatus and equpment,
unencumbered by any mortgage, |udgment, en, or other encumbrance, the name
and address of the owner thereof and of any mortgagee, |udgment-credtor, enor
or encumbrancer, or condtona saes vendor, sha be stated. Where the wrtten
consent of the owner and of the mortgagees, |udgment-credtors, enors, or other
encumbrancers, or condtona saes vendors, s fed, as provded n secton
1 4.67a, or where an ndemnty bond s fed n eu of such wrtten consent,
as provded n sectons 1 4.67d and 1 4.67e, such fact, together wth nformaton
as to the knd, date, and amount of the encumbrance and the baance due thereon,
or, f the apparatus was purchased under a condtona saes contract, or other
form of tte retanng contract, the purchase prce and the baance due sha
be shown n connecton wth the statement of the dster s tte to, or nterest
n, the property. In cases where an ndemnty bond, orm 3- , s fed, the date
of the Commssoner s approva of the fng of such bond sha aso be gven.
( Sees. 2 00(e) (1), 2 12, 2 15(b), I. R. C.)

Sec. 1 4.67a. Consent, om 1602. Where the dster s not the owner n fee
of the ot or tract of and on whch the dstery s stuated, unencumbered by
any mortgage, |udgment, en, or other encumbrance, or s not the owner of
the dstng apparatus and equpment, unencumbered by any mortgage, |udg-
ment, en, or other encumbrance, he must fe the wrtten consent of the owner
and of any mortgagee, |udgment-credtor, enor, or other encumbrancer, cond-
tona saes vendor, or pror essee, that the premses or property may be used
for the purpose of dstng sprts, sub|ect to the provsons of aw, and e pressy
stpuatng that the en of the Unted States for ta es and penates sha have pr-
orty over any rght, tte, or nterest of the person gvng the consent, and that, n
the case of the forfeture of the premses or property, or any part thereof, the tte
to the same sha vest n the Unted States, dscharged from any such rght, tte
or nterest, e cept that, where such consent can not be obtaned, or where the ds-
tery was sod at a |udca or other sae n favor of the Unted States, and there
e sts a rght of redempton from such sae, the dster may fe n eu of such
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Regs. 5.)
222
consent, an ndemnty bond. orm 3- , as herenafter provded. Ths eonwnt
sha he e ecuted on orm 1(502, n trpcate, n accordance wth the nstruc-
tons prnted thereon, duy acknowedged before an offcer authorzed to take
acknowedgment of deeds, propery recorded, and submtted to the dstrct super-
vsor wth the notce, orm 21 , and made a part thereof. The acknowedg-
ment and certfcate of recordaton sha be e ecuted on a three copes of the
form. new consent w be requred for each year begnnng ou the 1st day
of May, uness the consent s gven for a defnte perod of tme e ceedng one
year, n whch event the consent shoud be gven n terms to e pre at the begn-
nng of an annua perod, May 1. If, after such consent s fed, the premses are
e tended and the dster s not the owner n fee, unencumbered of the addtona
premses, or addtona apparatus and equpment are nstaed and the dster or
the party who e ecuted the consent then n effect s not the owner thereof ut-
encumbered, a consent on orm 1002 must be fed for such addtona premses
or apparatus and equpment. new consent w aso be requred whenever
there s a change of propretorshp, ncudng a successon for a temporary perod
by a essee or fducary, uness the consent procured by the predecessor specfcay
covers operaton of the premses by hs successor or assgns. In the event of
faure of such consent, the dster w be no onger quafed, uness an n-
demnty bond on orm 3- s fed. ( Sec. 2 15(b), I. R. C.)
Sec. 1 4.67b. Permsson Requred foe ng ond. orm 3- . Where the
dster can not obtan the wrtten consent of the owner of the fee of the ds-
tery premses, and of any mortgagee. udgment-credtor, enor, pror essee, or
other nerson bavns an encumbrance thereon, or where he can not obtan such
consent of the owner of the apparatus and equpment, and of any mortgagee,
|udgment-credtor, condtona saes vendor, enor, pror essee, or other eocum-
brancer, and desres to fe an ndemnty bond. orm 3- , n eu of such consent,
he sha fe appcaton, n trpcate, wth the dstrct supervsor for permsson
so to do. ( Sec. 2 15(b), I. R.C.)
Sec. 1 4.67c. ppcaton. The appcaton sha contan (1) an accurate de-
scrpton of the ot or tract of and on whch the dst|ery s stuated, and of
the dstery, the budngs, and the dstng apparatus and equpment thereon:
(2) a fu and cear statement of the condton of the tte to the premses and
apparatus and equpment, ncudng the name and address of the owner and of
a mortgagees, |udgment-credtors, condtona saes vendors, pror essees, and
other persons havng ens or encumbrances thereon, the knd, date, and amount
of each encumbrance and the baance due thereon, and, n the case of apparatus
and equpment purchased under a condtona saes contract, or other form of
tte retanng contract, the purchase prce and the baance due: and (3) a fu
and cear statement of the reasons why the appcant can not obtan the prescrbed
wrtten consent. The dstrct supervsor and Commssoner w take acton on
such appcaton In accordance wth the provsons prescrbed n rtces II
and III. ( Sec. 2 15(b), I. R.C.)
Sec. 4.67d. ond, orm 3- . If the appcaton s approved by the Comms-
soner, the dster sha e ecute bond on orm 3- , n trpcate, n conformty
wth the provsons of rtce II, and fe the same wth the dstrct supervsor.
The pena sum of the bond sha be equa to the apprased vaue of the ot or
tract of and on whch the dstery s stuated, the dstery, the budngs, and
the dstng apparatus. If, after such bond s fed, the vaue of the dstery
premses, budngs, or dstng apparatus s ncreased by addtona and, bud-
ngs, or dstng apparatus, an addtona bond on such form to cover the ncrease
of vaue w be requred: Provded, That, If such ncrease In vaue s ess than
500, no addtona bond w be requred. In the event of a faure of bond on
orm 3- , the dster w be no onger quafed uness a new aud satsfactory
bond Is fed, or consent, as requred by secton 1 4.67a s obtaned, and approved
as requred by these reguatons. The apprasa sha be made n accordance
wth the provsons of secton 1 4.67f. ( Sec. 2 15(b), I. R. C.)
Sec. 1 4.67e. ond n Leu of Consent Whebe Dstery s Sod fob Umtep
Statbs. Where a dstery s 6oId at a |udca or other sae n favor of the
Unted States, the dster may gve bond on orm 3- n eu of the consent of the
person possessng the rght of redempton and of any mortgage, |udgment-credtor,
enor, pror essee, or other encumbrancer, and be aowed, upon compyng wth
a other provsons of aw and these reguatons, to operate the dstery durn
the e stence of the rght of redempton from such sae. dster desrng to
gve bond n such case sha fe appcaton, n trpcate, wth the dstrct super-
vsor for permsson so to do. The appcaton sha contan a fu and dear
statement of the condton of the tte, ncudng the name and address of the
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225
Regs. 5
a person other than the frut dster (uness the consent procured by the
frut dster names each grantee who s to operate the premses or hs succes-
sors or assgns), or f, snce operatons as n frut dstery were suspended,
there has been any change n the tte to the frut dstery premses or apparatus
or equpment, or f such premses, apparatus, or equpment has become en-
cumbered by any mortgage, |udgment, en, or other encumbrance, or -f there
has been nstaed new apparatus or equpment not owned by the frut dster
free of encumbrances. If such consent on orm 1602 can not be obtaned, an
ndemnty bond, orm 3- n eu thereof, must be ted, as provded n secton
1 4.67d.

Sec. 1S4.139. Where Operaton ok Warehouse s Contnued.

(b) Resumpton. Where operaton of the pant as a regstered dstery
or ndustra acoho pant has been suspended, and operaton thereof as a frut
dstery s to be resumed, the frut dster must compy wth sectons 1 4.13
(6) (3), (4a), (5), and (6), and n addton thereto, the foowng requre-
ments:

Seo. 1 4.140. Where onded Warehouse s Dscontnued or mnated rom
rut Dster Premses.

(6) Resumpton. Where operaton of the pant as a regstered dstery or
ndustra acoho pant has been suspended, and operaton thereof as a frut
dstery s to be resumed, the frut dster must compy wth sectons 1 4.13
(6) (3), (4a), (5), and (6), and n addton thereto, the foowng requrements:

rtce II. cton by Dstrct Supervsor.

Sec. 1 4.141a. Indemnty ond ppcaton. Where an appcaton for per-
msson to fe-nn ndemnty bond, orm 3- , n eu of the wrtten consent of the
owner of the dstery premses or apparatus or equpment, or of any mortgagee,
|udgment-credtor, enor, or other person havng an encumbrance thereon, or
condtona saes vendor, s submtted by the appcant and such appcaton con-
forms to the requrements of these reguatons, the dstrct supervsor w cause
an nvestgaton to be made of the facts upon whch the appcaton s based,
and w desgnate two or more competent persons to make an apprasa of the
vaue of the ot or tract of and on whch the dstery s stuated, the dstery,
the budngs, and npparatus and equpment. The apprasa sha be made as
provded n secton 1 4.67f. Upon recept and e amnaton of the apprasa and
nvestgaton reports, the dstrct supervsor w endorse hs recommendaton
on the appcaton and forward a copes thereof, together wth the orgna re-
port of the apprasa and a copy of the report of the nvestgaton, to the Com-
mssoner. Where the appcaton s approved by the Commssoner, the ds-
trct supervsor w, upon recept of the approved copes thereof from the Com-
mssoner, forward one copy to the appcant and retan one copy. If the app-
caton s dsapproved, the dstrct supervsor w, upon recept of the same from
the Commssoner, return a copes to the appcant wth advce as to the rea-
sons for dsapprova. ( Sec. 2 15(b), L R. C.)
Sec. 1S4.142. amnaton of Other uafyng Documents. The dstrct
supervsor w e amne the notce, pat, pans, bond, consent ( orm 1002), f
any, or ndemnty bond, orm 3- , n eu thereof, and other documents requred
by these reguatons of persons ntendng to quafy as dsters, to determne
whether they have been propery e ecuted, and whether they refect compance
wth the requrements of the aw and reguatons. Where any requred document
has not been fed, or where errors or dscrepances are found n those fed, or
where the documents fed do not refect compance wth these reguatons,
acton thereon w be hed n abeyance unt the omsson, or error, or dscrep-
ancy has been rectfed, and there has been fu compance wth a requrements.
Sec. 1 4.143. Inspecton of Premses. When the requred documents have
been fed n proper form, the dstrct supervsor w nssgn an nspector to
e amne the premses, budngs, apparatus, and equpment, and determne
whether they conform wth the descrpton thereof n the notce, pat, and pans,
and speca appcaton, f any, and whether tho constructon and measures of
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Regs. 5.
226
protecton afforded meet the requrements of the aw and reguatons. The
nspector w observe partcuary the manner In whch the rooms or bud-
ngs on the premses are separated from each other and from other
premses, means of communcaton, ngress and egress, adequacy of pro-
tecton afforded wndows, doors, and other openngs, constructon of apparatus
and equpment, and the sutabty of the Government offce and factes. The
nspector w aso make carefu nqury respectng the appcant s tte to. or
nterest n, the ot or tract of and, the dstery, and the apparatus and equp-
ment, n order to determne whether proper consents on orm 1602 of the owner
and of any mortgagees, |udgment-credtors, enors, other encumbrancers, con-
dtona saes vendors, or pror essees, have been procured and submtted by
the appcant. To ths end, the nspector w e amne the records n the offce
of the recorder of deeds or other offce where ttes and matters affectng ttes
are fed to verfy the statements of the appcant respectng ths tte to, or n-
terest n, the property. The nspector shoud requre the appcant to submt for
e amnaton nvoces, bs of sae, condtona saes contracts. eases, or other
commerca papers for verfcaton of the statements made on orm 27 respect-
ng hs tte to, or nterest n, the apparatus and equpment. Where the nspec-
ton dscoses mnor rreguartes n the quafyng documents or n the
constructon, the nspector w, at the tme of ther dscovery, drect the attenton
of the appcant to the same n order that the appcant may correct the defects
before competon of the nspecton. Upon competon of the nspecton, a report
thereof w be submtted to the dstrct supervsor.

S:c. 1 4.14 . pprova or at|fyno Documents. If the dstrct supervsor
fnds, upon competon of hs nvestgaton and e amnaton of the nspecton
report, that the person seekng to quafy as a frut dster s quafed to hoM
a permt and has comped n a respects wth the requrements of aw and these
reguatons, and If the notce, orm 27 , bond, orm 30 , and consent. orm
1002, or ndemnty bond. orm 3- , f any, fed n eu thereof, may propery be
approved, te w note hs recommendaton for approva on a copes of the notce,
dster s bond, and consent or ndemnty bond (f any), and hs approva on a
copes of the pat, pans, and other quafyng documents, and w forward a
copes of the notce, bond, consent or ndemnty bond (f any), pat, pans, and
other quafyng documents, together wth a copy of a nspecton reports, to the
Commssoner for fna acton. The orgna copy of the appcaton for permt w
be forwarded to the Commssoner wth such quafyng documents.
Sec. 1 4.149. Dsapprova of uafyng Documents. If the dstrct supervsor
fnds that the appcant has not comped n a respects wth the requrements
of the aw and reguatons, or that the stuaton of the premses s such as woud
enabe the appcant to defraud the Unted States, or that the appcaton for per-
mt, notce, or bond shoud be dsapproved, he w note hs recommendaton for
dsapprova on the notce, orm 27 , bond, orm 30 , and consent. orm 1602.
or ndemnty bond, orm 3- (f any), fed n eu of such consent, and w
forward to the Commssoner for fna acton such copes of the quafyng docu-
ments as are requred to be so forwarded by the precedng secton n the case of
recommendaton for approva, together wth a copy of a nspecton reports.
Where an appcaton or bond s recommended for dsapprova, the dstrct super-
vsor w furnsh the Commssoner wth a fu statement of the reasons therefor.
Sec. 1 4.150. Dsposton of uafyng Documents. Where notce. orm
27 , speca appcaton, orm 1(513 (f any), bond, orm 30 , and consent.
orm 1002 (f any), or ndemnty bond, orm 3- , fed n eu thereof, are
approved by the Commssoner, the dstrct supervsor w, upon recept of
approved copes of such documents from the Commssoner, as provded n
rtce III, forward one copy of notce. orm 27 , bond. orm 30 s,
and consent, orm 1602, or ndemnty bond. orm 3- (f any), pat, pans,
and other quafyng documents, and the orgna copy of the edera coho
dmnstraton ct permt, to the appcant, and w retan one copy of such
quafyng documents for the fe of the appcant n hs offce. The e tra copy
of the speca appcaton. orm 1013 (f any), receved from the Commssoner
w be paced by the dstrct supervsor n the fe of the rectfer. If the notce,
orm 27 , bond, orm 30 , speca appcaton, orm 1613 (f any), and eon-
sent, orm 1602, or ndemnty bond, orm 3- (f any), are dsapproved, the
dstrct supervsor w, upon recept from the Commssoner of the dsapproved
copes of such documents and other quafyng documents submtted therewth,
return a copes of the quafyng documents to the appcant wth advce as
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227
Regs. 5.
to the reasons for dsapprova. In the case of dsapprova of bonds, the dstrct
supervsor sha notfy the surety or suretes of such acton.
C NG S SU S U NT TO ST LIS M NT.
Sec. 1 4.151. Procedure ppcabe. The foregong provsons of ths artce
respectng the acton requred of dstrct supervsors n connecton wth the
orgna estabshment of dsteres w he foowed, to the e tent appcabe,
where there s a change n the ndvdua, frm, or corporate name, or n the
trade name or stye, where the premses are to be operated ntay under a
trade name or stye, or where there s a change n the propretorshp, ocaton,
premses, constructon, apparatus and equpment, or n the type of pant, or n
the tte to the dstery property, or where such property becomes sub|ect to a
mortgage, |udgment, en, or other encumbrance, or where operatons are per-
manenty dscontnued: Provded, That, where there s a change n the ndvd-
ua, frm, or corporate name of the dster, or where a dstery s to be agan
operated under a trade name or stye prevousy approved by the Commssoner,
the dstrct supervsor may authorze the commencement of operatons pror to
revew of the quafyng documents by the Commssoner. In such cases, the
dstrct supervsor w notfy the dster by etter and attach one copy of such
etter to the quafyng documents.
Sec. 1 4.152. Indemnty ond, orm 1617. Where changes to be made n ds-
tery budngs or former dstery budngs or dstery equpment are such
as to requre the fng of an ndemnty bond on orm 1(517, as provded n sec-
tons 1 4.130 and 1 4.133, the dstrct supervsor w, upon recept of a satsfac-
tory bond, note hs recommendaton for approva thereon and forward a copes
thereof to the Commssouer nccompaned by the orgna of the report sub-
mtted by the desgnated apprasers. If the bond s approved by the Comms-
soner, the dstrct supervsor w, upon recept of the approved copes thereof
from the Commssoner, forward one copy to the dster and retan one copy.

NNU L NOTIC S, CONS NTS ( ORM 1602) ND ONDS, CONS NTS O SUR TY, ND
DDITION L ND SUP RS DING ONDS.
Sec. 1 4.154. Procedure ppcabe. The procedure prescrbed heren for the
. approva and dsapprova of notces and bonds submtted n connecton wth the
estabshment of frut dsteres w, to the e tent appcabe, govern the
approva and dsapprova of annua notces, consents ( orm 1002) and bonds,
consents of surety, and addtona and supersedng bonds.
rtce III. cton by Commssoner.
ORIGIN L ST LIS M NT.

Sec. 1 4.155a. Indemnty ond ppcaton. When an appcaton for perms-
son to te an ndemnty bond, orm 3- , In eu of the wrtten consent of the
owner, mortgagee, |udgment-credtor, enor, encumbrancer, pror essee, cond-
tona saes vendor, etc., s receved from the dstrct supervsor, bearng hs rec-
ommendaton for approva or dsapprova, the Commssoner w e amne the
same n connecton wth the apprasa and Investgaton report. If the Comms-
soner fnds that, under the reguatons, an ndemnty bond may propery be
accepted n eu of such consent, and f he s satsfed that the vauaton paced
upon the property by the apprasers s far, he w note hs approva on a
copes of the appcaton, retan one copy and the apprasa and nvestgaton
reports submtted therewth, and return two copes to the dstrct supervsor.
If the appcaton s dsapproved, the Commssoner w note hs dsapprova
thereon, and return a copes to the dstrct supervsor wth a statement of the
reasons for dsapprova. ( : Sec. 2 15(b), I. R. C.)
Sec. 1 4.156. Other uafyng Documents. The Commssoner w aso
revew the notce, orm 27 , pat, pans, bond ( orm 30 /|). consent ( orm
1602), or ndemnty bond ( orm 3- ) (f any), and other quafyng documents,
ncudng appcaton for edera coho dmnstraton ct permt, upon ther
recept from the dstrct supervsor. If the Commssoner approves the con-
, structon and equpment of the dstery and the notce, pat, pans, bond
( orm 30 ), consent ( orm 1602), or ndemnty bond ( orm 3- ) (f any),
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229
Regs. 5
aso fe wth the dstrct supervsor an acknowedgment or other proof of servce
of such notce on the prncpa.
(a) tent of reease from abty. If such notce s not thereafter n wrtng
wthdrawn, the rghts of the prncpa, as supported by sad bond, sha be term-
nated on the date named In the notce, and the surety sha be reeved (1) n the
case of a frut dster s bond ( orm 0 ) from abty for sprts produced
whoy subsequent to the date named n the notce, (2) n the case of ndemnty
bonds, orm 3- , from abty for sprts produced at the frut dstery whoy
subsequent to such date, and (3) n the case of e port bonds ( orms 547, 54 , 657,
and 65 ), from abty for sprts wthdrawn for e port whoy subsequent to
such date. If the prncpa fas to fe a vad supersedng bond pror to the date
on whch the surety desres to be reeved from abty under the bond, the surety,
notwthstandng hs reease from abty as speced n condtons (1), (2), and
(3) above, sha contnue to reman abe under the bond for a sprts on baud
on sad date, unt the same has been awfuy dsposed of or a new bond has
been fed by the prncpa coverng the same. Suretes may be reeved from
abty on Indemnty bonds fed on orm 1617 ony (1) upon approva of a
supersedng bond, or (2) upon ta -payment or remova for a awfu ta -free
purpose of a sprts produced whe the property, coverng whch the ndemnty
bond was fed, formed a part of the dstery premses and equpment.
(6) Notce of reease from abty. (1) onds, orms 50 and 3- . In the
case of dster s bonds on orm 30 and Indemnty bonds on orm 3- , f the
dster fes a vad supersedng bond pror to the date named n the surety s
appcaton, the dstrct supervsor w ssue Notce of Reease on orm 1491,
u accordance wth sectons 1 4.162, 1 4.162a, and 1 4.163. If the dster fas
to fe such supersedng bond, the dstrct supervsor w, by etter, notfy the
surety of such fact and of hs contnued abty under the bond for brandy
produced under such bonds and st on hand n the dstery or n warehouse
on the date named n the surety s appcaton. The dstrct supervsor w aso at
such tme (1) notfy the dster that no more brandy may be produced unt
a vad supersedng bond s ted, and (2) nstruct the storekeeper-gauger to ock
the furnace doors or contro vaves n accordance wth secton 1 4.3 4.
(2) onds, orms 5. 7, 54 , 657, and 65 . In the case of e port bonds on orms
547, 54 , 657, and 65 , the dstrct supervsor w Issue Notce of Termnaton
on orm 1490, n accordance wth sectons 1S4.162 and 1 4.163.
(3) onds, orm 16 7. In the case of Indemnty bonds on orm 1617, f the
dster fes a vad supersedng bond, or ta -pays or removes for a awfu
ta -free purpose a sprts produced wb|e the property, coverng whch the
ndemnty bond was fed, formed a part of the dstery premses and equpment,
the dstrct supervsor w ssue Notce of Reease on orm 1491, n accordance
wth sectons 1 4.162,1 4.162a, and 1 4.163.
Sec. 1 4.161a. ppcaton fob Notce of Termnaton. Where the dster
has fed a proper supersedng bond n eu of a prevousy fed frut dster s
bond, or ndemnty bond ( orm 3- or orm 1617), or has dscontnued busness
n accordance wth the requrements of these reguatons, or (In the case of Indem-
nty bond on orm 1617) has ta -pad or removed for a awfu ta -free purpose
a sprts covered by the bond, and the prncpa or surety desres to secure notce
of termnaton of the bond for whch the prncpa no onger has any use, app-
caton therefor, n wrtng, w be made n dupcate where t Is desred to secure
the ssuance of notces of the termnaton of frut dster s bond ( orm 30 ) or
ndemnty bonds ( orm 3- or 1617).

Sec. 1 4.162a. cton on ppcaton fob Notce of Termnaton of Indemnty
onds. When an appcaton for notce of termnaton of an ndemnty bond,
orm 3 , as to future operatons of a frut dstery s fed wth the dstrct
supervsor n a case where a supersedng bend has been approved, or the prncpa
has dscontnued busness, as provded n secton 1 4.159a, the dstrct supervsor
w take acton n accordance wth the procedure prescrbed n secton 1 4.162,
respectng appcaton for termnaton of a dster s bond. Wben an appca-
ton for notce of termnaton of an ndemnty bond, orm 1617, coverng changes
1b budngs or equpment s fed wth the dstrct supervsor, he w make a com-
pete nqury to determne whether a sprts, the ta on whch consttuted the
en n reaton to whch the bond was gven, has been ta -pad or removed for a
awfu ta -free purpose, and w forward one copy of such appcaton to the
Commssoner wth hs recommendaton for approva or dsapprova, determned
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231
Regs. 5, 1 4.31, etc.
Reguatons 5, Sectons 1 4.31, 1 4.41, 1 4.12 , 1946-20-12420
1 4.132, 1 4.1 4, 1 4.1 5, 1 4.1 6, 1 4.1 7, T. D. 5540
1 4.231, 1 4.232, 1 4.239, 1 4.240, 1 4.419,
1 4.427.
TITL 20 INT RN L R NU . C PT R I. SU C PT R C, P RT 1 4.
PRODUCTION O R NDY.
mendng Reguatons 5.1
Washngton, D. C.
1. Pursuant to the provsons of sectons 2 12,2 10,2 19, 2 25,2 26,
2 41,2916,3170, and 3176 of the Interna Revenue Code (U. S. C, tte
26, sectons 2 12, 2 16, 2 19, 2 25. 2 26, 2 41, 2916. 3170, and 3170),
Reguatons 5, Producton of randy (1940) (26 C R, Part 1 4),
are hereby amended, effectve anuary 1,1947, by nsertng a new para-
graph at the end of sectons 1 4.31 and 1 4.141 and amendng sectons
1 4.12 , 1 4.132, 1 4.1 4, 1 4.1 5, 1 4.1 6, 1 4.1 7, 1 4.231, 1 4.232,
1 4.239( ), 1 4.240,1 4.419, and 1 4.427 as foows:
rtce III. ences or Was and Gates.
Seo. 1 4.31(b). Speca ppcaton. Where the dster desres to con-
struct or mantan a fence or wa of a greater heght than 5.feet around the
dstery, he sha fe wth the dstrct supervsor a speca appcaton therefor,
n trpcate, gvng a compete descrpton of the fence or wa, ncudng nfor-
maton as to materas, constructon, heght, and number of gates, and statng
the reasons for the constructon or mantenance of such fence or wa. The
dstrct supervsor w take acton on such speca appcaton n accordance
wth the procedure prescrbed n rtce II. ( Sees. 2 25, 2 26, 3170,
I. R. C)
rtce I . Requrements Governng Changes n Name, Propretorshp,
Contro, Locaton, Premses, and qupment.
Seo. 1 4.12 . Changes n Premses. Where the premses of a frut ds-
ter nre to be e tended or curtaed, the dster must fe wth the dstrct
supervsor an amended notce, orm 27and an amended pat of the premses
as e tended or curtaed. If the pans are affected by the e tenson or curta-
ment, they must aso be amended. If the dstery s wthn 600 feet of a
rectfyng pant the dster must aso fe a speca appcaton, orm 1613, and
pat. In accordance wth rtce . The addtona premses covered by an
e tenson may not be used for dstery purposes, and the porton of the premses
to be e cuded by a curtament may not be used for other than dstery pur-
poses, pror to the approva of the notce, pat and pans f requred, ed n
connecton therewth. ( Sees. 2 12, 2 16, 2 19, 3170, I. It. C.)
Seo. 1 4.132. Changes n qupment. Where changes nre to be made n
the dstng apparatus and equpment, the dster sha frst secure approva
thereof by the dstrct supervsor pursuant to appcaton, n trpcate, settng
forth sechcay the proposed changes: Provded, That, emergency repars
may be made under the supervson of the Government offcer where one s as-
sgned to the premses wthout pror approva of the dstrct supervsor. Where
such emergency repars are made, the dster sha te mmedatey a report
thereof, n trpcate, wth the dstrct supervsor. Changes covered by an ap-
proved appcaton w aso be nsde under the supervson of the Government
offcer. Upon competon of any change made under hs supervson, the Gov-
ernment offcer w submt a report, n trpcate, of the changes to the dstrct
supervsor. Upon approva of the report by the dstrct supervsor, the Govern-
Tho astersk ( ) at the end of sectons refers to secton 3170, Interna Revenue Code.
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233
Regs. , 1 4.31, etc.
form coverng the dsposton of such dstates. Dstates produced durng one
month may not be m ed wth those produced n the succeedng month wthout
pror ascertanment of the quantty on hand at the cose of the month. ( Sec.
2916, I. R. C.)
Sec. 1 4.232. Dstrct Supervsor s ccount. The dstrct supervsor w
report dstates contanng one-haf of 1 per cent or more of adehydes or 1
pe- cent or more of fuse o on orm 412, Dstrct Supervsor s ccount of
rut Dsteres, as ndcated by the headngs of the coumns and nes and n
accordance wth the nstructons prnted on the form. ( Sec. 2916, I. R. C.)
COLL CTION ND R MO L O US L OIL.
Sec. 1 4.239(h). Dsposton of Water sft for Washng use O. The
water used for washng or purfyng the o n the tanks may be conveyed drecty
to the st, or t may be run nto a tank or nto the sewer, or t may be otherwse
destroyed on the premses under the supervson of the storekeeper-gauger. If
the washwater s run nto the st or tank, the quantty w not be entered on
orm 15. If the washwater s run nto the sewer or otherwse destroyed, the
acohoc content and quantty w be reported on orm 1520 and ncuded n
the report of producton on orm 15.
recovery and remova of carbon do de.
Sec. 1 4.240. Procedure. Carbon do de may be recovered from fermenfers
and removed from the dstery premses, provded t s frst thoroughy washed or
scrubbed and purfed to remove the acoho therefrom. Where carbon do de
s recovered, the washwater may be coected n a tank and transferred by ppe ne
to a fermenter or to the dstng matera sump, or measurng tank. Where
the washwater s transferred to the fermenter or to the dstng matera meas-
urng tank the transfer must be made pror to the testng of the dstng matera
at the tme of dstaton. Where the washwater s transferred to the dstng
matera sump after the cacuated yed has been determned, the acohoc con-
tent, the number of gaons, and the cacuated yed thereof w be determned
and nterned n Part 1 of orm 15. n approved ebuometer sha be used n
determnng the acohoc content of the washwater. If the washwater s not
utzed n the manufacture of dsted sprts, t w be run nto the sewer or
otherwse destroyed on the premses under the supervson of the storekeeper-
ganger. ntry of such dsposton w not be made on orm 15.
rtce II. Dster s Records and Reports.
Sf.c. 1 4.419. ntry of randy Produced. The quantty of brandy reported
produced n a cases w be taken from the storekeeper-ganger s reports on orm
1520 and entered as of the date of gauge. ( Sec. 2 41,1. It. C.)
rtce III. Dstrct Supervsor s Monthy ccount of rut
Dsteres.
Sec. 1 4.427. orm 412. Dstrct supervsors n whose dstrcts frut dst-
eres are ocated w prepare a monthy account on orm 412, Dstrct Super-
vsor s ccount of rut Dsteres, of every frut dster s monthy return,
orm 15, receved by them for the month. The requred data for the account
w be obtaned from the dster s returns, after such returns have been audted.
The entres w be made as ndcated by the headngs of the coumns and nes
and n accordance wt the nstructons prnted on the form. orm 412 w be
prepared n dupcate and one copy thereof, accompaned by a copy of each ds-
ter s return summarzed theren, w be forwarded to the Commssoner not
ater than the ast day of the month succeedng that for whch rendered. The
remanng copy w be retaned by the dstrct supervsor.
Wm. T. Sherwood,
72 20 47 16
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Regs. 6, rts. , etc.
234
Reguatons 6, rtces , I, II, I , 1946-17-123 5
II, III. T. D. 552
TITL 2f INT RN L R NU . C PT R I, SU C PT R C. P RT 1 .
OTTLING O DISTILL D SPIRITS (OT R T N LCO OL) IN OND.
mendng Reguatons 6.
Washngton, D. C.
1. Pursuant to the provsons of sectons 2903, 2904, 2905, 2910, and
3176, Interna Revenue Code (U. S. C, Tte 26, sectons 2903. 2904,
2905, 2910, and 3176), Reguatons 6, ottng of Dsted Sprts
n ond (26 C R, Part 1 ), are amended as foows:
rtce . Constructon.
2. Secton 1 .10 s amended to read as foows:
Sec. 1 .10. port Storage. Where sprts are botted In bond for temporary
storage pendng e portaton free of ta , the eases need not be mantaned n a
separate room or budng but sha be kept separate and apart from a other
dsted sprts stored n the warehouse, n conformty wth the provsons of
Reguatons 10 (6 C R, art 1 5).
rtce I. Transfer of Sprts to ottuno-n- ond Department.
3. Paragraph (a) of secton 1 .4 s amended to read as foows:
Sec. 1S .-4 . (a) Remova of otted Sprts. Upon competon of battng,
the fed bottes wth abes and strp stamps propery aff ed must be paced n
rases marked n accordance wth rtce III, the red cases then seaed, after
whch such cases must be mmedatey removed from the bottng-n-bond depart-
ment wthout beng returned to the storage porton of the bonded warehouse f
botted for drect e portaton. If the sprts are botted for temporary storage
before e portaton, the botted sprts must be mmedatey removed to the storage
porton of the warehouse pendng wthdrawa for e portaton. ( Sees. 2905,
2910, 1. R. C.)
rtce II. Dumpng, Reducng, and ottng.
Sec. 1 .65. Remnant Cases of Domestc Sprts. Where there s ess than a
case of botted sprts remanng from a ot of sprts batted, the remnant w
be paced n a case constructed n the same manner as the cases descrbed n
rtce III. The remnant case w be gven the sera number of the ast
fu case contanng sprts n the same ot, foowed by the etter R, thus:
100R or 101R. If the ne t ot of sprts dumped for bottng s of the same
knd, produced by the same dster, under the same name, at the same dstery
durng the same year and dstng season, the remnant ease may be hed n
the bottng-n-bond department and used for fng a compete case, or the
contents may he dumped nto the bottng tank and mnged wth such other
sprts for bottng n bond for domestc purposes. Otherwse, the remnant case
w be removed wth the other cases from the bottng-n-bond department to
the storage porton of the warehouse and approprate entry made n the record.
Such remnant case (a) may be ta -pad for domestc consumpton or (6) may
be returned from the storage porton of the bonded warehouse to the bottng-
n-bond department when the ne t ot of sprts of the same knd, produced by
the same dster, under the same name, at the same dstery durng the same
year and dstng season s dumped for bottng and (1) the bottes used for
1Thp astersk ( ) at the end of sectons refers to sectons 2903, 2904, and 3176, n-
ternu Revenue Code.
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235
Regs, f, rte. , etc.
fng a compete case, or (2) the contents dumped Into the bottng tank and
mnged wth such other sprts for bottng-n-bond for domestc purposes. In
a cases when a remnant s dsposed of as heretofore provded, notaton w
be made on orms 1515 and 151 , showng the dsposton of such remnant.
Sec. 1 .66. Remnants of Low-Proof Sprts. Remnants of sprts resutng
from overfow n fng bottes, and sprts whch have deterorated n proof by
evaporaton or repackng of fters, may be returned, under the mmedate su-
pervson of the storekeeper-gauger, to the dumpng, reducng, dumpng and
reducng tank, or bottng tank, contanng the same or another ot of sprts of
the same knd, produced by the same dster, under the same name, at the same
dstery durng the same dstng season and year. Dsted sprts so returned
to the dumpng, reducng, dumpng and reducng, or bottng tank w be reported
on orm 1515, ppcaton to otte Dsted Sprts n ond, and orm
1510, Storekeeper-Gauger s Monthy Return of Dsted Sprts otted In
ond.
Sec. 1S .67. Remnants of Dsted Sprts otted n ond for port.
Where there s ess than a case of botted sprts remanng from a ot of sprts
botted In bond for e port, the remnant w be paced n a case whch must be
marked and branded as prescrbed by these reguatons for markng cases of
sprts botted n bond for e port, e cept as to the date of wthdrawa and the
names of the ports. If the ne t ot of sprts dumped for bottng n bond for
e port, or for domestc purposes, s of the same knd, produced by the same
dster, under the same name, at the same dstery durng the same year and
dstng season, the remnant case may be hed In the bottng-n-boud depart-
ment and used for fng a compete case, or the contents, even though dfferng
n proof, may be dumped nto the bottng tank and mnged wth such other
sprts for bottng n bond for e portaton, or for domestc purposes. Otherwse,
the remnant case w be removed wth the other cases from the bottng-n-bond
department to the storage porton of the warehouse and approprate entry made
n the record. Such remnant case (a) may be ta -pad for domestc consump-
ton or (6) may be returned from the storage porton of the bonded warehouse
to the bottng-n-bond department when the ne t ot of sprts of the same knd,
produced by the same dster, under the same name, at the same dstery
durng the same year and dstng season s dumped for bottng n bond for
e portaton or for domestc purposes and (1) the bottes used for fng a
compete case of (2) the contents, even though dfferng n proof, dumped nto
the bottng tank and mnged wth such other sprts for bottng n bond for
e port or for domestc purposes.
(a) Indca bottes. Lquor bottes conformng to secton 1 .70 must be
used n the event the remnant s to be returned to the storage porton of the
warehouse for ta payment or for subsequent dsposton as botted-n-bond
sprts for domestc consumpton.
(6) Labes, stamps, marks, and brands. The bottes must be propery abeed.
Where e port remnants are used for fng a compete case of sprts botted n
bond for domestc consumpton, the e port strp stamps must be repaced by the
domestc botted-n-bond stamps. Where e port remnants are ta -pad, the
e port stamps on the bottes must be repaced by red strp stamps, purchased
pursuant to orm 42 , uness the sprts are 100 degrees proof and have re-
maned n wooden contaners as requred by these reguatons for at east four
years from the date of orgna gauge as to frut brandy, or orgna entry as to
other sprts, n whch event they may be stamped wth domestc botted-n-bond
stamps. The remova of the e port stamps and the aff ng of the red strp
stamps or the domestc botted-n-bond stamps, as the case may be, w be under
the mmedate supervson of the storekeeper-gauger. Remnant cases must be
marked and hranded as requred by the reguatons governng the bottng of
ta -pad sprts (Reguatons 11 (26 C R, Part 1S9)), or these reguatons
governng the bottng of sprts n bond for domestc purposes, as the case may be.
(c) Records. In a cases where a remnant s dsposed of as heretofore pro-
vded, notaton w be made on orm 1515, and orm 206 or orms 655 and 1620,
as the case may be, showng the dsposton made of such remnant. ( Sees.
2 00, as amended, 2 0 , 2 71, I. R. C. Sec. 505, 49 Stat., 1965 27 T . S. C, Sup.,
205.)
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Itcgs. 6, rts. , etc
236
7. Sect on 1 S.C9 s amended to read as foows:
Sec. 1 . 9. Remnant Cases op Sprts otted n ond fob port Returned
to ott|nq-n- ond Department. When remnant cases of sprts botted In
bond for e port are to be returned to the bottng-n-bond department from the
storage porton of the warehouse for use In fng a compete case, they w be
Incuded n the appcaton. orm 206 or orm 655, as the ease may be, coverng
the wthdrawa of buk contaners for bottng for e port
rtce I . Stamps.
. Secton 1 .107 s amended to read as foows:
Sec. 1 .107. ppcaton orm 1515. ppcaton for e port strp stamps
w be made on orm 1515, n dupcate, to the storekeeper-gnuger n charge of
the warehouse for the necessary e port strp stamps to cover the bottes of
sprts to be ted. If the number and denomnaton of stamps requested by
the propretor are necessary to cover the quantty of sprts to be botted, the
storekeeper-ganger w ssue the stamps and make the necessary entry on hs
record of stamps, orm 1606. Upon competon of the bottng, the detas of
the statement Cases ed, on orm 1515, w be fed n by the storekeeper-
ganger n accordance wth the nstructons prnted on the form, and one copy
w be forwarded to the dstrct supervsor. n approprate entry w aso
be made of the cases fed on orm 206, or orm 655, and orm 1621), n accord-
ance wt the nstructons prnted on these forms. ( Sec. 2 05, I. R. C.)
rtce II. Storekeefer-Gauger s es.
Set. 1 .120. Monthy Report, orm 1516. The storekeeper-gauger n charge
of the bottng-n-bond department w keep a monthy record on orm 1516,
Storekeeper-Gnuger s Monthy Return of Dsted Sprts otted n ond,
of a dsted sprts receved n, and wthdrawn from, the bottng-n-bond
department. ntres w bo made us ndcated by the headngs of the coumns
and nes and n accordance wth the Instructons on the form. The storekeeper-
gauger w prepare and forward two copes of the record to the dstrct super-
vsor before the 5th day of the month succeedng that for whch rendered:
Provd(d. That the dstrct supervsor may e tend the tme for fng the return
to the 10th of such month n the case of bottng-u-bond departments where
there are numerous transactons. The record w be kept n bound form ava-
abe for nspecton by Government offcers.
rtce III. Dstrct Supervsor s Monthy ccount.
Sec. 1 .123. Monthy ccount, orm 1517. ach dstrct supervsor w
render a monthy account on orm 1517. Dstrct Supervsor s ccount of Ds-
ted Sprts otted n ond, of transactons at bottng-n-bond departments
of nterna revenue bonded warehouses, for ea . h State wthn hs dstrct The
requred data w be obtaned from audted orm 151 . ntres w be made
as ndcated by the headngs of the coumns and nes and In accordance wth
the nstruct ons on the form. orm 1517 w be prepared In dupcate, and one
copy, wth the supportng copes of orm 1516, w be forwarded to the Com-
mssoner not ater than the ast day of the month succeedng the month for
whch rendered. The remanng copy w be retaned by the dstrct supervsor.
11. These reguatons sha take effect November 1, 1946.
oseph D. Nunan, r.,
pproved ugust ,1946.
. . oey, r.,
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Regs. 11 (1940).
23S
dstrct supervsor. The storekeeper-gauger w retan orm 1620. Remnants
remanng after bottng dsted sprts n bond for e port sha be dsposed of
as provded n the reguatons governng the bottng of dsted sprts n bond,
and approprate notatons made on orms 655 and 1515 and aso on orm 1620
f tbe remnants are returned to the storage porton of the warehouse. ( Seca
2904, 2010, 2015, I. R. C.)
Sec. 1 5.300. Records. When the sprts have been removed from the storage
porton of the warehouse, the storekeeper-gauger sha make approprate entres
on orm 1513, and the propretor on orm 52C. ( Sec. 2904, I. R C.)
Sbo. 1 5.377. Records. The remova of the sprts from the cstern room for
depost n the nterna revenue bonded warehouse sha be reported on the store-
keeper-gauger s monthy return, orm 1592. The depost of the sprts n the
warehouse sha be reported on the storekeeper-gauger s monthy return. orm
1513, and the dstrct supervsor s monthy account, orm 1514. ( Sees. 2 77,
2915, 3170,3953, I. R. C.)
rttc-e LII. Records and Reports ok Propretor.
Sec. 1 5.474. Record of Removas rom Warehouse, orm 52C very pro-
pretor of an nterna revenue bonded warehouse sha keep a day record on
orm 52C, Monthy Record and Report of Interna Revenue onded Ware-
house, of (a) a buk and botted-n-bond dsted sprts removed from the
storage porton of the warehouse (6) a bottcd-n-bond dsted sprts re-
moved for e portaton from the bottng-n-bond department wthout beng re-
turned to the storage porton of the bonded warehouse and (c) a ta -pad
botted-n-bond dsted sprts removed from the bottng-n-bond department.
ntres w be made as ndcated by the headngs of the coumns and nes and
In accordance wth the nstructons on the form. ( Sees. 2 57, 2 59, I. R. C)
2. These reguatons sha take effect November 1,1946.
oseph D. Nunan, r.,
pproved ugust , 1946.
. . oey, r.,
Reguatons 11 (1940). 1946-20-12421
T. D.5541
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 1S9.
OTTLING O T -P ID DISTILL D SPIRITS.
mendng Reguatons 11 (1940).1
Washngton, D. O.
y vrtue of and pursuant to sectons 2 03, 2 71, and 3176, Interna
Revenue Code, Reguatons 11, ottng of Ta -Pad Dsted
Sprts, s hereby amended effectve October 1,1946, n the foowng
respects:
1. The foowng secton s revoked:
Secton 1 9.76
1 Tho astersk ( ) at the end of sectons refers to sectons 2 03, 2 71, and 3176. Interna
Revenue Code.
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239
Regs, (1940)
Sectons 1 9.65, 1 9.66, 1 9.70, 1 9.73, 1 9.74, 1 9.75, 1 9.77, 1 9. 5,
1 9.95, 1 9.9 , 1 9.99 and
3. The foowng new secton s added:
Secton 1 9.99a.
The amended and new sectons sha read as foows:

rtce I . Dumpng and ottng.
Sec. 1 9.65. ppcaton, orm 230. Propretors of tu -pad bottng houses
desrng to botte ta -pad sprts w e ecute appcaton on orm 230, n
dupcate, gvng a of the data caed for by the form as ndcated by the head-
ngs of the coumns and nes and the nstructons prnted thereon. The propretor
w enter on orm 230 the detas of the wthdrawa gauge for ta -payment when
packages of sprts are to be dumped for bottng, or when queurs or cordas
are authorzed to be botted from the orgna package, as provded n secton
1 9.7 . n actua gauge of the sprts w, however, be made n ether case
before the bottng begns, and the detas of such gauge w aso be entered
on the form, as provded n sectons 1 9.77 and 1 9.7 . ach orm 230 w be
gven a sera number begnnng wth 1 for the 1st day of anuary of each
year and runnng consecutvey thereafter to December 31, ncusve. separate
appcaton on orm 230 must be prepared for each tank of ta -pad sprts to be
botted.
Sec. 1 9.G0. Dster s Orgna ackaoes. Where the sprts to be dumped
are contaned n dster s orgna packages, the propretor w cut out wt 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. The scaped 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 orm 230.

Sec. 1 9.70. Wnes. Snce t s mpractcabe to scap wne stamps, the pro-
pretor w, whenever wnes are to be dumped from propery stamped contaners,
certfy to such fact by wrtng the words Wne stamps attached to the con-
taners n the coumns provded for the descrpton of stamps on orm 230.
If the wne to be dumped s n a tank car, storage tank, bottes, or other contaner
to whch wne stamps representng the ta are not attached, a statement e -
panng the absence of the stamps w be attached to one copy of orm 230.

Sec 1 9.73. tra orm 237. When rectfed sprts are authorzed to be
transferred by ppe ne from a rectfyng pant to a ta -pad bottng house on
contguous premses, an e tra copy of orm 237 w be prepared by the rectfer
and the same w be fuy e ecuted n the same manner as the orgna orm 237,
ncudng the storekeeper-gauger s certfcate of ta -payment, f the sprts are
sub|ect to the rectfcaton ta or the storekeeper-gauger s certfcate of e empton
from the rectfcaton ta , f the sprts are not sub|ect to such ta .
Sec. 1 9.74. Competon and Dsposton of orm 237. Upon competon of
the transfer of rectfed sprts to the ta -pad bottng house, there sha be en-
tered under the certfcate of cases fed on a copes of orm 237 a statement
that the sprts descrbed on the reverse sde of the form have been transferred by
ppe ne to bottng tank No. n the contguous ta -pad bottng house
operated by , together wth the date of transfer. When orm 230
authorzng the bottng of such sprts has been approved, as herenafter pro-
vded, the sera number of such orm 230 w be noted on a copes of orm 237.
The e tra copy of orm 237 w be securey attached by means of a stape, eye-
et, or smar devce, to the orgna orm 230 as evdence that the proper ta
on the sprts descrbed theren has been pad.
Sec. 1 9.75. pprova by Storekeeper-Gat|oeb. The propretor w submt both
copes of orm 230 for the approva of the storekeeper-gauger assgned to super-
vse operatons at the ta -pad bottng house. The storekeeper-gauger w e -
amne the packages descrbed n the appcaton and the scaped portons of ta -
pad stamps, or the affdavt or statement n eu thereof, or orm 237 (as pro-
vded n secton 1 9.74), attached to the orgna copy of orm 230, and f he fnd
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Regs. 11 (1940).
240
that the sprts to be botted are as descrbed and have beeu awfuy ta -pad,
and the forms are propery prepared, he w e ecute hs certfcate and the au-
thorzaton for bottng, and return both copes to the propretor.

Sf.c. 1 9.77. Transfer of Spkts to ottng Tank. Upon approva of orm
230 by the storekeeper-gauger, as provded n secton 1 9.75, the propretor w
dump the sprts and ruu them nto an approved bottng tank, where, after
reducton to the desred proof for bottng, he w gauge the same, enter the
detas of hs gauge on a copes of orm 230 and attach one copy of the form to
the bottng tank.

Sec. 1 9. 5. Destructon of Stamps, Marks, and rands. When packages of
sprts are dumped for bottng, a stamps, e cept the cut-out portons attached
to orm 230, and a marks and brands whch such packages are requred by aw
to bear, must e competey effaced and obterated. Ths shoud be done m-
medatey upon competon of the dumpng, dranng, and rnsng of tbe packages.
Certfcates of ta -payment aff ed to tank cars of dsted sprts, e cept tbe
porton thereof scaped for submsson to the dstrct supervsor, must kewse
be mmedatey destroyed when such cars are empted. When packages of wnes
are empted by any person a stamps and marks whch such packages are re-
qured by aw and reguatons to bear must be destroyed by scrapng or obtera-
ton mmedatey the packages are empted. Labes aff ed to tank cars, and
abes an stamps aff ed to tank trucks, of wne ndcatng ta -payment of the
contents must aso be scraped or obterated mmedatey the tank cars or trucks
are empted. ( Sees. 2 66, 3301, I. R. C.)

S C. 1 9.95. R OTTLING, R L LING, ND R ST MPING O OTTL D SPIRITS.
Where dsted sprts packaged n bottes are to e rebotted for domestc sae,
the bottes, f of a capacty of one-haf pnt or greater and not e ceedng 1 gaon,
must conform to the requrements of Reguatons 13 (26 C R, Part 175). Tbe
sprts may be rebotted n the same bottes from whch removed f such bottes
contanng the sprts orgnay conform to the requrements of Reguatons 13
and have not been sod to the consumer or opened, and the use of such bottes s
authorzed by the dstrct supervsor n accordance wth the sad reguatons. The
new abe must be covered by an approprate certfcate of abe approva or a cer-
tfcate of e empton from abe approva ssued under the edera coho dmn-
straton ct. If the new abe s covered by a certfcate of e empton from abe
approva, t must conform to the requrements of Reguatons 13. If the sprts
have eft the possesson of the orgna botter and are to be reabeed wthout re-
bottng, authorzaton to reabe the sprts must be obtaned n accordance wth
reguatons ssued under the edera coho dmnstraton ct and submtted
to the Government offcer supervsng operatons of the pant. henever botted
dsted sprts are dumped for rebottng, the red strp stamps on the bottes must
be destroyed at the tme of dumpng, and new red strp stamps must be aff ed to
the bottes n whch the sprts are rebotted. Such rebottng, reabeng, and re-
stampng operatons w be performed under the supervson of the Government
offcer. products to be rebotted w be dumped pursuant to orm 230.

rtce . Red Strp Stamps.

Sec. 1 9.9 . pprova of Requston. The propretor w submt a copes
of the requston, orm 42 , to the Government offcer for approva. efore ap-
provng the requston, the approvng offcer w see that t s propery e ecuted
and w satsfy hmsef that the number of stamps for whch requston s made
s necessary for the current needs of the propretor. No red strp stamps may be
ssued for use at ta -pad bottng houses uness orm 42 s approved. Upon
approva of the form, the approvng offcer w return a copes to the propretor.
Sec. 1 9.99. Purchase and Use. Red strp stamps w be purchased by pro-
pretors of ta -pad bottng houses from the coector of the dstrct n whch the
bottng house s ocated. 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 of ta -pad bottng houses sha not se or trans-
fer strp stamps. Unused strp stamps may be e changed or redeemed n accord-
ance wth the provsons of secton 1 9.111. Red strp stamps, used or unused.
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241
Regs. 15 (1940).
may not be purchased, sod, or possessed, e cept as specfcay provded by aws or
reguatons.
Sec. 1 9.99a. Remttance: Devery. orders for strp stamps must be ac-
companed by cash, certfed, cashers , and treasurers checks drawn on Natona
and State banks and trust companes, Unted States posta notes, and posta, bank,
e press, and teegraph money orders, n a sum equa to the vaue of the stamps.
When strp stamps are ordered sent by regstered ma, the propretor sha encose
wth hs order n separate remttance to cover 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 and regstry fee
and any 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. When stamps are ordered sent by
e press, the same w be sent coect. The propretor w forward a copes
of the approved orm 42 receved from the approvng offcer to the coector of
nterna revenue wth the remttances. The coector w enter the sera numbers
of the stamps ssued and stamp the date of sae on a copes of orm 42 , and w
retan one copy and send the orgna to the dstrct supervsor and one copy
(by ma) to the Government offcer at the ta -pad bottng house. The coector
w, n every case, forward the stamps to the Government offcer at the ta -pad
bottng house, n care of the propretor. The propretor w retan the package
dtact and dever t unopened to the Government offcer. Te Government offcer
w enter recept of the stamps n orm 1 2, Storekeeper-Gauger s Monthy
Record and Report of Red Strp Stamps, and w mmedatey pace them n the
Government cabnet.

Wm. T. Sherwood,
( ed wth the Dvson of the edera Regster September 13, 194C, 9.01 a. m.)
Reguatons 15 (1940). 1946-20-12422
T. D. 5542
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 190
R CTI IC TION O SPIRITS ND WIN S.
mendng Reguatons 15 (1940).1
Washngton, D. C.
y vrtue of and pursuant to sectons 2 01(e) (1), 3175, 3176, 3300,
3304 and 3656 of the Interna Revenue Code, Reguatons 15, Rect-
fcaton of Sprts and Wnes (1940), as amended, s hereby amended.
effectve October 1, 1946, n the foowng respects:
1. The foowng sectons are revoked:
Sectons 190.1 7, 190.224, 190.290, 190.291, 190.310, 190.311, 190.312,
190.345,190.3 6,190.3 7,190.43 ,190.441,190.442,190.443,190.444
Sectons 190.30,190.37,190.151,190.170(a), 190.17 ,190.1 3,190.1 6,
190.212, 190.222, 190.225, 190.250, 190.2 , 190.2 9, 190.292, 190.295,
190.296, 190.297, 190.29 , 190.299, 190.300, 190.30 , 190.309, 190.313,
The astersk ( ) at the end of sectons refers to sectons 2 01(e)(1) and 3176,
Interna Revenue Code.
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Regs. 15 (1940).
242
190.31.5, 190.316, 190.317, 190.320, 190.321, 190.344, 190.346, 190.349,
190.35 , 190.360, 190.374, 190.3 4, 190.3 5, 190.390, 190.437, 190.440.
190.453, 190.45 , 190.459, 190.460, 190.461, 190.464, 190.465, 190.466,
190.466e, 190.473 and
3. The foowng new sectons are added:
Sectons 190.361a, 190.361b, 190.361c, 190.361d, 190.361e, 190.361f,
190.361g, 190.361h, 190.361, 190.469a.

rtce . qupment.
Sec. 100.30. Scaes. Tte rectfer must provde sutabe and accurate scaes for
weghng sprts to be dumped from packages or storage tanks pursuant to orm
122 and for weghng rectfed products drawn nto packages. The beams or das
must ndcate weght n haf-pound graduatons. ( Sec. 2 01, I. R. C.)

Sec. 190.37. Recevng Tanks. Where rectfed products are produced by
redstaton, such as, gn and cordas, or where sprts are redsted, the
rectfer must provde a requste number of recevng tanks. ach such tank
sha be constructed of meta and sha be of unform dmensons from top to
bottom and equpped wth a sutabe measurng devce whereby the contents w
be correcty ndcated. Manhends, nets, and outets of such tanks must be
provded wth factes for ockng wth Government ocks. ach such tank
sha have pany and egby panted thereon words ndcatng ts use, as Gn
Recevng Tank, Corda Recevng Tank, eads and Tas Recevng Tank.
etc., foowed by ts sera number and capacty n wne gaons. Recevng tanks
must be ocated n the rectfyng room. ( Sec. 2 29,1. R. C.)

btcb . Instruments.

Sec. 190.151. ccuracy of Instruments To e Checked. Government offcers
w from tme to tme check the accuracy of a nstruments used at rectfyng
pants, and w be furnshed sutabe necessary nstruments for that purpose.
Great care must be taken n testng the nstruments n order to get correct
resuts. Instructons for use of the standard hydrometer set and of sma sts
(or wne sets) w be found n the Gaugng Manua (26 C R, Part ISO) and n
Reguatons 7 (26 C R, Part 17 ), respectvey. buometers w be tested n
accordance wth the nstructons furnshed wth the nstruments. Instructons
for the use of approved ebuometers w be found n the ppend to Regu-
atons 7.

rtce . Recept of Sprts.

Sec. 190.170(a). Recept n Tank Cars. Where dsted sprts are receved
n ank cars or wnes are receved n tank cars, tanks, or tank trucks, they
may be transferred drecty from such contaners nto processng or bottng
tanks f permsson s frst obtaned from the dstrct supervsor and the sprts
or wnes are frst nspected by a Government offcer. When quors are so trans-
ferred, the rectfer must submt orm 122 or orm 230 to the Government offcer
assgned to the pant for approva as provded n rtces I and I ,
mmedatey the tank cars, tanks, or tank trucks are empted. Dsted sprts
may be receved In tank cars ony f the premses of the rectfer are equpped
wth sutabe raroad sdng factes. efore permttng sprts to be trans-
ferred from a tank car nto a storage tank or a processng or bottng tank,
the Government offcer w see that the raroad car seas are ntact on the tank
car and that the car bears the coector s certfcate of ta -payment. orm - 95.
When sprts are transferred nto or out of storage tanks, the Government offcer
sha opt n and cose the Government ocks, but t sha be the duty of the pro-
pretor to manpuate the stopcocks or vaves controng the fow of the sprts.
The offcer w keep a memorandum record of the quanttes of sprts entered
nto and wthdrawn from each storage tank by dates, n order that he may de-
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243
Regs. 15 (1940).
termne that ony awfu, ta -pad sprts are wthdrawn from such tanks for
rectfcaton.

rtce I. Gaugng and Dumpng Sprts for Rectfcaton.

Sec. 190.17 . Dster s Obgna Packages. Where sprts, ncudng
acoho, contaned n dster s orgna packages are to be dumped, the rect-
fer w cut out wth a sharp nstrument that porton of each tac-pad stamp upon
whch s shown the sera number of the stamp, the date, the name of the ds-
ter or warehouseman, the proof gaons, and the sera number of the package.
The scaped 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 staped or otherwse smary attached
to one copy of orm 122. ( Sec. 2 13, I. R. C.)

Sec. 190.1 3. Wne Stamps. Snce It s mpractcabe to cut out or scap wne
stamps, the rectfer w, whenever wnes are to be dumped from propery
stamped contaners, certfy to such fact by wrtng the words Wne stamps
attached to the contaners, n the coumns provded for the descrpton of
stamps on orm 322. If the wne to be dumped s n a tank car, storage tank,
bottes, or other contaners to whch wne stamps representng the ta are not
attached, the rectfer w attach to one copy of orm 122 a statement e pan-
ng the absence of such stamps. ( Sec. 2 13, I. R. C.)

Sec. 190.1 . pprova by Offcer. The rectfer w submt both copes of
orm 122 to the Government offcer, who, f after nspecton of the sprts and
verfcaton of the entres on the appcaton fnds that the detas are correcty
gven, w sgn the certfcate on each copy. If the offcer s satsfed that the
appcaton covers ta -pad sprts, he w authorze the rectfer to dump the
sprts descrbed n the form by sgnng the approva statement on both copes,
and w |eturn the same to the rectfer.

rtce II. Rectfcaton.

PURI YING ND R INING SPIRITS.

Sec. 190.212. Dsposton. When acoho or other sprts, such as heads and
tas or hgh and ow fents, mpure or Imperfect sprts and products, resdues,
etc., are purfed or refned at a rectfyng pant, such purfed or refned sprts
must be prompty gauged n the recevng tank, orm 237 prepared, and the ta
pad by means of rectfed sprts stamps n accordance wth the procedure set
forth n secton 190.295 for the payment of ta on sprts n bottng tanks, uness
such purfed or refned sprts are to besed n the rectfyng pant n.the manu-
facture of ta -e empt rectfed products, as herenafter provded. Materas
used for purfyng or refnng sprts w be dsposed of n the manner prescrbed
by secton 190.23 . ( Sees. 2 00(a) (5), 2 61, I. R. C.)

L NDING O STR IG T W I I ND PUR RUIT R NDI S.

Sec. 190.222. ppcaton for Supervson. When a rectfer desres to bend
two or more straght whskes or two or more frut brandes dsted from the
same knd of frut, under e empton from rectfyng ta , he w make wrtten
appcaton, n dupcate, to the Government offcer assgned to the pant. The
appcaton w be accompaned by orm 122, n dupcate, propery e ecuted,
to show that t s desred to bend straght whskes aged n wood for a perod
of not ess than four years, or frut brandes dsted from the same knd of
frut and aged n wood for a perod of not ess than two years, wthout payment
of rectfcaton ta . ( Sec. 2 01 (c) (1), I. R. C.)
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Regs. 15 (1940).
244
Sec. 100.225. pprova by Offcer. The Government offcer w make the
e amnaton prescrbed n the foowng secton, and. If satsfed that the whskes
or brandes may be bended free of ta , he w e ecute hs certfcate and the
approva statement on orm 122, and return both copes to the rectfer.
( Sec. 2 01(c)(1), I. It. C)
.
M NU CTUR O SP R LING WIN S.

Sec. 190.250. Dumpng of St Wne. When the rectfer desres to dump
st wne for bottng for champagne manufacture or for the manufacture of a
sparkng wne of the champagne type by fermentaton n buk, he w submt
orm 122, n dupcate, propery e ecuted, to the Government offcer for approva,
and the same procedure w be foowed as n the case of the dumpng of wnes
for rectfcaton by other processes.

rtce . Gauge, Return, and Ta -Payment of Rectfed Sprts.

payment of rectfcaton ta .
Seo. 190.2 . orm 237. Where rectfed sprts are sub|ect to the rectfca-
ton ta of 30 cents per proof gaon and are to be ta -pud n packages. orm
237 w be prepared n trpcate. Where rectfed sprts are sub|ect to the
rectfcaton ta of 30 cents per proof gaon and are to be ta -pad n a bottng
tank. orm 237 w be prepared n dupcate, e cept that an e tra copy w be
made where the transfer of sprts by ppe ne to a contguous ta -pad bottng
house or rectfyng pant s authorzed, as provded n rtce II.
Sec. 190.2 9. Inspecton and pprova by Offcer. copes of orm 237
w be submtted by the rectfer to the Government offcer assgned to the rect-
fyng pant, who w then nspect the rectfed sprts. If. after nspecton of the
rectfed sprts and verfcaton of the entres on orm 237, the offcer fnds the
detas are correcty gven on the form, and that the orm 237 covers awfu ta -
pad sprts, he w, after ascertanng from the approved formua the rate of
ta appcabe, note hs approva on each copy of the form and the ta rate to
whch the sprts are sub|ect. e w then return a copes of the orm 237
to the rectfer.

Sec 190.292. Remttance of Ta for Packages. If the rectfed sprts are to
be ta -pad n packages, the rectfer w, upon recept of orm 237, duy approved,
forward a copes to the coector wth remttance for the ta due on the sprts.
The remttance sha be n the form set forth n secton 190.301.

T L PRODUCTS TO OTTL D.
Sec. 190.295. Ta -Payment. If orm 237 covers sprts n a bottng tank to be
botted, or wnes, cordas, or queurs to be botted n the wne bottng room
from the processng receptace n whch compounded, the rectfer w, upon
recept of orm 237, duy approved, cance the necessary stamps n the e act
amount of the ta due n the manner provded by secton 190.361d. e w
then attach the stamps to orm 237 and return a copes to the Government
offcer. The Government offcer w compete the canceaton of the stamps
as provded by secton ).3(d and w e ecute the certfcate on orm 237
evdencng the recept and canceaton of stamps for the amount of ta es due.
e w then return a copes of orm 237 and the canceed stamps to the rectfer,
who w attach the canceed stamps to the orgna of orm 237 by means of :
stape, eyeet, or smar devce, and attach one copy of the form to the board
provded therefor on the bottng tank, or to the door of the wne bottng room, as
the case may be. The sprts w be botted n accordance wth the procedure
prescrbed n rtce I.
Sec. )0.29t. Dsposton of odm 237 and Stamps. Upon the competon of
the bottng, the rectfer w e ecute the certfcate of cases fed on a copes
of orm 237, sgn each copy and submt same to the Government offcer, wbo w,
after proper verfcaton, sgn and date the verfcaton n the space provded
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245
Regs. 15 (1940).
therefor. The bottng tank or wne bottng room copy of the form w be
retaned n the rectfyng pant avaabe for nspecton by Government offcers.
The rectfer w mmedatey forward the competed orgna and stamps to
the dstrct supervsor.
T L SPI ITS TO TR NS RR D Y PIP LIN TO CONTIGUOUS T -P ID OTTLING
OUS O R CTI YING PL NT.
Sec. 190.297. Certfcate of Ta -Payment If orm 237 covers sprts In a
bottng tank to be transferred by ppe ne to a contguous ta -pad bottng house
or rectfyng pant, the procedure for ta -payng the sprts w be the same
as where the sprts are to be botted from a bottng tank. The e tra copy of the
form specfed by secton 190.2 w be attached after competon to orm 230
on the bottng tank n the contguous ta -pad bottng house or rectfyng pant,
as evdence that the proper ta on the sprts theren has been pad. The sprts
w be transferred n accordance wth the procedure prescrbed n rtce
II.
Sec. 190.29 . Dsposton of orm 237. Upon competon of transfer of the
rectfed sprts to the ta -pad bottng house or rectfyng pant, there sha be
entered on a copes of orm 237 a statement that the sprts descrbed on such
form have been transferred by ppe ne to bottng tank No. n the contguous
ta -pad bottng house or rectfyng pant operated by , together
wth the date of such transfer and the sera number of the orm 230 to whch
the e tra copy of orm 237 s to be attached n the bottng house. fter e ecu-
ton of such statement, the rectfer w submt the form to t Government
offcer, who w, after proper verfcaton, sgn and date the verfcaton n the
space provded therefor. The rectfer w retan hs bottng tank copy of the
form at the rectfyng pant, avaabe for nspecton by Government offcers, and
w mmedatey forwaTd the orgna copy of orm 237 wth the canceed stamps
to the dstrct supervsor.
ta ae speca products.
Sec. 190.299. Certfcate of Ta -Paymknt.- -Where the Commssoner has
e empted the rectfer from the usua processng and bottng requrements n
connecton wth the manufacture of champagne or other sparkng wnes, artf-
cay carbonated wnes, or other speca products, as provded n secton 190.2 4,
and t s mpractcabe to gauge the sprts and pay the ta pror to bottng n
the usua manner, the 30-cent rectfcaton ta w be pad upon competon of the
bottng or, f the bottng s ony a step n manufacture, upon competon of the
manufacture. The rectfer w prepare orm 237, n dupcate, modfed to ft the
crcumstances, and the same procedure w be foowed n payng the ta as
that prescrbed n the case of products to be botted from bottng tanks. Upon
recept of orm 237 from the Government offcer wth hs certfcate of ta -
payment e ecuted, and upon payment of the ta due (f any) under secton
3030(a), I. R. C, as provded n secton 190.30 , the products w be removed
to the fnshed products room.
Sec. 190.300. Dsposton of ohm 237. Upon remova of the product to the
fnshed products room, the rectfer w enter on each copy of orm 237 a state-
ment that the product descrbed on the form has been ta -pad and removed
to the fnshed products room. The rectfer w sgn each copy of orm 237
and submt same to the Government offcer, who w, after proper verfcaton,
sgn and date the verfcaton n the space provded therefor, and return both
copes to the rectfer. The rectfer w then forward the orgna copy of
orm 237 wth the canceed stamps to the dstrct supervsor and retan one
copy on fe at the pant, avaabe for nspecton by Government offcers.

P YM NT O T UND R S CTION 3030(a), 1. R. C.
Sec. 190.30 . Tme of Payment. Where rectfed products sub|ect to ta un-
der secton 3030(a), I. R. C, n eu of, or n addton to, the 30-cent rectfcaton
ta are manufactured, the ta es due under secton 3030(a), I. R. G., w be pad
as herenafter provded. The 30-cent rectfcaton ta , f due, w be pad n ac-
cordance wth the procedure prescrbed n sectons 190.2 to 190.294, ncusve.
Sec 190.309. Payabe by Use of Wne Stamps. Wne stamps w be used for
the payment of ta es due under secton 3030(a), I. R. G, and for the payment of
any addtona wne ta due by reason of a change n the ta abe grade of wne,
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Regs. 15 (1940).
246
or by an ncrease n the voume of wne, as provded heren. Such stamps w
be canceed and attached to the orgna copy of orm 237 n the manner pro-
vded n secton 100.295. ( Sec. 3030(b), I. . C.)

rtce I. ottng or Rectfed Spkts and Products.
Sec. 190.313. ottng Tank to be Used. cept as provded n .sectons
190.2 4 and 190.31 , a rectfed sprts or products to be botted w be trans-
ferred to an approved bottng tank and an accurate gauge thereof made and
reported on orm 237, as provded n rtce . Rectfed sprts and prod-
ucts may foe hotted ony after approva of orm 237 by the Government offcer
assgned to the rectfyng pant, and, If the sprts and products are sub|ect
to the rectfcaton ta , upon payment of such ta as provded by sectons 190.29.)
and 190.30 .

Sec. 190.315. Transfer ok Sprts to ottng Tank. t the tme of unockng
the net of the bottng tank, the Government offcer w ock the outet thereto,
whch must reman ocked unt the sprts have been transferred to the bot-
tng tank, the net ocked, the quantty of sprts n the bottng tank determned,
orm 237 prepared and approved, and the rectfcaton ta and tu due under
secton 3030(a), I. R. C, f any, pad n accordance wth the procedure prescrbed
n rtce .
Sec. 190.310. Reease of Sprts rom Tank. Upon presentaton by the rect-
fer of orm 237 n the case of sprts suh|ect to rectfcaton ta , and upon
conformance wth the ta -payment procedure prescrbed by secton 190.295, the
Government offcer w unock the outet of the tank and permt the sprts
to be botted. If orm 237 covers sprts e empt from rectfcaton ta , the
Government offcer w, upon presentaton of the form to hm, e ecute hs certf-
cate and the approva statement on the form, and f the form agrees wth the
contents of the bottng tank, e w ock the net and unock the outet of
the tank and aow the sprts to be botted. The net of the bottng tank w
reman ocked unt a sprts wthn the tank have been botted and the outet
has been ocked. orm 237 w then be competed and dsposed of as provded
n secton 190.296.
Sec. 190.317. ng Tank n Offcer s bsence. Where a Government off-
cer, who s not assgned to contnuous duty at the rectfyng pant, s present
thereat after the bottng of a ot of sprts has been competed, he w ock the
outet and unock the net of the bottng tank. When such s done, the tank
may bo fed n the absence of the Government offcer, orm 237 prepared, and.
upon approva thereof, the ta due, f any, pad as prescrbed n sectons 190.295
and 190.30S.

Sec. 190.320. Reease of Pkoducts rom Wne ottng Room. Upon presen-
taton by the rectfer of orm 237 n the case of products sub|ect to the rectfca-
ton ta , and upon conformance wth the ta -payment procedure prescrbed by
secton 190.295, the Government offcer w permt the products to be botted.
If the orm 237 covers products e empt from the rectfcaton ta , and f the
form agrees wth the contents of the receptaces, the Government offcer w
e ecute hs certfcate and the approva statement on the form, and permt te
products to be botted. orm 237 w be competed and dsposed of as provded n
secton 190.296.
Sec. 190.321. Separate orm 237 for ach Tank. separate orm 237 must
be prepared for each tank of sprts botted.

rtce I . ottng of Sprts and Wnes Wthout Rectfcaton.

Sec. 190.344. pprova by Offcer. Roth copes of orm 230 w e submtted
to the Government offcer assgned to the pant for approva, wth a request to
unock and ock the stopcocks on the bottng tank. The Government offcer w
e amne the contaners descrbed on the form and the cut-out portons of the
ta -pad stamps, or the affdavt or statement n eu thereof, attached to one copy
of the form, and f he fnds that the sprts to be botted have been awfuy
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247
Regs. 15 (1940).
ta -pad, and the forms are propery prepared, he w e ecute hs certfcate and
the authorzaton for bottng, and return both copes to the rectfer.

Sec. 190.346. Transfer of Sprts to ottng Tank. Upon approva of orm
230 by the storekeeper-ganger, as provded n secton 190.344, the rectfer w
dump the sprts and run them nto an approved bottng tank, where, after reduc-
ton to the desred proof for bottng (f reducton s permssbe), he w gauge
the same, enter the detas of hs gauge (corrected to voume n accordance wth
Tabe 7 of the Gausng Manua (26 C R, Part 1 6)) on a copes of orm 230,
and attach one copy of the form to the bottng tank. cept as provded n the
foowng secton, a sprts botted at a rectfyng pant must be botted from
approved bottng tanks. Sprts may be botted at a rectfyng pant wthout
rectfcaton ony after approva of orm 230 by the Government offcer.

Sec. 190.349. Transfer of Products to Wne ottng Room. Where the rect-
fer desres to botte from the orgna package wnes, cordas, or queurs author-
zed by the dstrct supervsor to be so botted, such packages w be paced n
the wne bottng room and orm 230 w be prepared and submtted to the
Government offcer assgned to the rectfyng pant for approva but no bottng-
w be done unt the packages have been nspected by an authorzed Government
offcer and an actua gauge of the sprts has been made and the detas of such
gauge entered on orm 230. When wnes, cordas, or queurs are to be botted
In the wne bottng room, the rectfer w attach one copy of the approved orm
230 to the door of such room.

Sec. 190.35 . Unrectfed Products to be ept Separate. When unrectfed
sprts or wnes are botted n a rectfyng pant, such quors must be kept com-
petey separate and apart from rectfed sprts and products. separate orm
230 must be prepared for each bottng tank of sprts or wnes to be botted wth-
out rectfcaton, and the same procedure w be foowed for each tank. Un-
rectfed quors must be kept competey separate and apart from rectfed sprts
and products.

Secton 190.360. Rebottng, Reabeng, and Restampno of otted
Sprts. Where dsted sprts packaged n bottes are to be rebotted for domes-
tc sae, the bottes, f of a capacty of one-hff pnt or greater and not e ceedng 1
gaon, must conform to the requrements of Reguatons 13 (26 C R, I art 175).
The new abe must be covered by an approprate certfcate of abe approva or a
certfcate of e empton from abe approva. If the new abe s covered by a
certfcate of e empton from abe approva, t must conform to the requrements
of Reguatons 13. If the sprts have eft the possesson of the orgna botter
and are to be reabeed wthout rebottng, authorzaton to reabe the sprts
must be obtaned n accordance wth reguatons Issued under the edera coho
dmnstraton ct and submtted to the Government offcer assgned to the
pant. Whenever botted dsted sprts are dumped for rebottng, the red strp
stamps on the bottes must be destroyed at the tme of dumpng, and new red
strp stamps must be aff ed to the bottes In whch the sprts are rebotted.
Such rebottng, reabeng, and restampng operatons w be performed under
the supervson of the Government offcer. products rebotted w be dumped
pursuant to orm 230 and w be reported n Part 4 of orm 45 n accordance
wth the nstructons thereon. ( Sees. 2 03, as amended, 2 71, I. R. C.)

rtce . Stamps.
R CTI I D SPIRITS ST MPS ( OR OTTLING T N S).
Sec. 190.361a. Denomnatons Purchase and Use. Stamps for the ta -pay-
ment of rectfed sprts n bottng tanks may be purchased n varous denomna-
tons. The denomnatons of such stamps are set forth on orm 427-C. Rectfed
sprts stamps for ta -payng the contents of bottng tanks shoud be purchased by
rectfers from the coector of nterna revenue of the dstrct n whch the rectfy-
ng pant s ocated. Stamps may not be purchased by one rectfer from another,
nor may they, e cept n cases of emergency, be purchased from coectors of other
dstrcts. Stamps may be sod ony to propretors of rectfyng pants and ony
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Regs. 15 (1940).
243
for the payment of ta on rectfed sprts. Rectfers sha not se or transfer
stamps e cept that they may (1) transfer such stamps to other rectfyng pants
operated by themseves as provded n secton 190.361c pursuant to the pror
approva of the dstrct supervsor or (2) return such stamps for redempton n
accordance wth secton tt0.361f. Rectfed sprts stamps used or unused may
not be purchased, sod, or possessed, e cept as specfcay provded by aw or regu-
atons. ( Sees. 3175, 3300, I. R. C.)
Sec. 190.361b. osm 427-C. Wth eac purchase of stamps the rectfer w
submt to the coector orm 427-C, Order for Stamps Rectfed Sprts, n trp-
cate, propery fed out. The coector w stamp the date of sae on a copes
of orm 427-C, return one copy to the rectfer wth the stamps and send one copy
to the approprate dstrct supervsor. The remanng copy of orm 427-C w
be ted 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 sub-
mtted.
Seo. 190.361c. Remttance Devery. orders for stamps must be accom-
paned by cash, certfed, cashers and treasurers checks drawn on Natona and
State hanks and trust companes. Unted States posta notes, and posta, bank,
e press, and teegraph money orders, n a sum equa to the vaue of the stamps.
Uness the stamps are caed for by the rectfer 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
rectfer. When the stamps are not caed for n person, the rectfer w specfy
on orm 427-C 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 rectfer sha encose wth hs order suffcent postage stamps, or a
separate remttance to cover the postage f the stamps are ordered sent by regs-
tered ma, the rectfer sha ncude the postage and regstry fee and any requred
regstry surcharge, as provded by the posta aws and reguatons. If the remt-
tance 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 be sent coect
( Sec. 3er 6, I. R C, Supp.)
Sec. 190.361d. Manner of Cance|no Stamps. t the tme of devery of the
stamps to the Government offcer for payment of the rectfed sprts ta , the rect-
fer sha cance the stamps by egby wrtng or stampng on each stamp wth
ndebe (Inda) nk hs name, regstry number, and the sera number of orm
237. The ta -pad stamps must be further canceed by beng sgned by the Gov-
ernment offcer, foowed by hs tte. acsme sgnatures of Government offcers
on stamps may be aff ed by the use of hand stamps, provded care s taken to use
ony such nk as w nether fade nor bur.
Sec. 190.361e. Transfer to Other Premses. When the rectfyng pant s per-
manenty dscontnued, or the propretor has no use for the stamps thereat and
the propretor operates other rectfyng pants n whch the stamps coud be used,
he may transfer the stamps to such other premses for use thereat Permsson
to so transfer stamps to other premses must be frst obtaned from the dstrct
supervsor. If the rectfyng pant to whch the stamps are to be transferred s
ocated n another supervsory dstrct, the dstrct supervsor grantng authorty
to transfer the stamps w advse the dstrct supervsor of the other dstrct so
that he may know that the recevng rectfyng pant s entted to receve the
stamps. The atter dstrct supervsor w aso nform the Government offcer
assgned to the recevng rectfyng pant of the authorty to receve stamps from
other rectfyng pants. Record of such transfers of stamps must be made on
orm 45, as provded n secton 190.3611.
Seo 190.361f. Redempton of Rectfed Sprts Stamps. Secton 3304. Inter-
na Revenue Code, provdes as foows:
(a) uthorzaton. The Commssoner, sub|ect to reguatons pre-
scrbed by the Secretary, may, upon recept of satsfactory evdence of the
facts, make aowance for or redeem such of the stamps, ssued under au-
thorty 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 ms-
take 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.
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249
Regs. 15 (1940).
(b) Method and Condtons of owance. Such aowance or re-
dempton 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 redemp-
ton sha be made n any case unt the stamps so spoed or rendered use-
ess sha have been returned to the Commssoner, or unt satsfactory
proof has been made showng the reason why the same cannot be re-
turned or, f so requred by the sad Commssoner, when the person pre-
sentng the same cannot satsfactory trace the hstory of sad stamps
from ther ssuance to the presentaton of hs cam as aforesad.
(c) Tme for ng Cams. No cam for the redempton of or a-
owance for stamps sha be aowed uness presented wthn four years
after the purchase of such stamps from the Government.
(d) naty of Commssoner s Decsons. The fndng of facts n
and the decson of the Commssoner upon the merts of any cam pre-
sented under or authorzed by ths secton sha, n the absence of fraud
or mstake n mathematca cacuaton, be fna and not sub|ect to rev-
son by any accountng offcer.
Sec. 190.361g. Cam to Co|ectoh. Rectfers desrng to have rectfed sprts
stamps redeemed under the foregong provsons of aw must make cam on
orm 43 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
estabsnng such destructon must accompany the cam. ( Sec. 3304, I. R. C.)
Sec. 190.361h. Unredeemabe Stamps. Rectfed sprts stamps may not be
redeemed whe rectfed sprts, on whch the stamps can be used n ta -payment,
reman on hand and whe the rectfyng pant remans n a quafed status.
When a rectfyng pant s dscontnued and stamps reman on hand, such stamps
are not redeemabe f the propretor operates other rectfyng pants at whch
the stamps coud be used. In such cases the stamps w be transferred to the
other premses for use thereat. Notaton of the transfer must be made on orm
45 of both premses. ( Sec. 3304, I. R. C.)
Sec. 190.3611. Stamp Record. The rectfer sha keep a record on. orm 45 of
a rectfed sprts stamps for bottng tanks receved and used at hs rectfyng
pant. When rectfed sprts stamps are surrendered for redempton, n accord-
ance wth sectons 190.361f and 190.361g, or are transferred to, or receved from,
other rectfyng pants operated by the propretor, as authorzed n secton
190.361e, record thereof must be made on orm 45, 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.
R CTI I D SPIRITS ST MPS ( OR P C G S).

W OL S L LI UOR D L R S ST MPS.

Sec. 190.374. Government Offcer s Certfcate. copes of orm 92 w
be submtted to the Government offcer assgned to the rectfyng pant, who, f
he fnds after nspecton of the sprts and verfcaton of the entres and state-
ments n the appcaton that the sprts are correcty descrbed and have been
propery ta -pad and have not been sub|ected to any act of rectfcaton, w
e ecute hs certfcate on each copy of the form and return a copes to the
rectfer. ( Sec. 2 63, I. R. C.)
.
Sec 190.3 4. Records. Where dsted sprts whch have been dumped for
bottng wthout rectfcaton are packaged under whoesae quor deaer s stamps,
the rectfer sha enter a fu descrpton of the packages and ther contents n
hs certfcate on orm 230, together wth a reference to the orm 92 under whch
the sprts were authorzed to be so packaged. The rectfer sha aso make
approprate entres and notatons on orm 45 whenever any dsted sprts are
packaged and removed under whoesae quor deaer s stamps. ( Sec. 2 63,
I. R. C.)
72S2 )S 47 17
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Regs. 15 (1940).
250
WIN ST MPS.
Sec. 190.3 5. Purchase. Transfer. Record, tc., of Wne Stamps. Wne stamps
for the payment of ta es on rectfed sprts or products under secton 3030(a),
I. R. C, w be provded n the denomnatons set forth on orm 427- . Such
stamps w he purchased by rectfers-pursuant to appcaton on orm 427-
from the coector of the dstrct n whch the rectfyng pant s ocated,
n accordance wth the provsons of secton 190.361a. Wne stamps may aso be
receved from another rectfyng pant operated by the rectfer pursuant to secton
10 .361e. The provsons of sectons 190.301a to 190.3611, ncusve, sha be ap-
pcabe to the procurement, possesson, use, and record of wne stamps. (
Sec. 3030(b) (1), L R. C.)

R .D STRIP ST MPS.

Pec. 190.390. pprova of Requston. The propretor w submt a copes
of the requston, orm 42 , to the Government offcer for approva. efore
approvng the requston, the approvng offcer w see that t Is propery e e-
cuted and w satsfy hmsef that the number of stamps for whch requston
Is made s necessary for the current needs of the rectfer. No red strp stamps
may be ssued for use at a rectfyng pant uness orm 42 s approved. Upon
approva of the form, the approvng offcer w return a copes to the rectfer.
( Sec. 2 03(d), I. R. C.)
a
rtce I . Rectfer s Records and Reports.

Sec. 11)0.-137. orms to he Provded bt Users. Records 52 and orms 45, 52 ,
52 , 122, 230, 237, and 33 w be provded by users at ther own e pense but
must be n the form prescrbed by the Commssoner: Provded. That, wth the
approva of the Commssoner, the forms may be modfed to adapt ther use to
tabuatng or other mechanca equpment: nd provded further. That, where
the form s prnted In book form, ncudng oose-eaf books, the nstructons may
be prnted on the cover or the fyeaf of the book nstead of on the ndvdua
form.
Sec. 190.440. amnaton by Government Offcers. Government offcers
nspectng rectfyng pants, or assgned to duty thereat, w e amne orm 45
(and 52, f kept) from tme to tme to see that they are beng propery kept and
w see that copes of orms 122, 230, 237, and 45 are beng retaned n proper
order by the rectfer at the rectfyng pant, avaabe for nspecton by Govern-
ment offcers.

rtce LIII. Operatng Under a New Name or Under Dfferent Trade
Names or Styes. .

Sec. 190.453. Records. Separate records on orms 45 and 1 2 w not be
requred for operatons under a new ndvdua or corporate name or under each
trade name or stye. The rectfer sha, however, note on orm 45, the nd-
vdua or corporate name or the trade names or styes under whch operatons
were conducted durng the month, and the dates of operaton under each. The
storekeeper-gauger w make a smar notaton on orm 1 2.
rtce LI . Change of Propretorshp.

Sec 190.45 . Ta -Payment of Partay Rectfed Products. Upon recept
from the dstrct supervsor of orm 237, wth the ta or ta es due duy spec-
fed, the outgong rectfer sha, n the case of a partay rectfed products n
packages, forward a copes of the form to the coector wth remttance for
the rectfcaton ta due, f any. The coector w e ecute the certfcate of
ta -payment, In a cases where remttance s receved, retan one copy, and
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251
Regs. 15 (1940).
return the remanng copes to the rectfer, together wth the requred number
of the approprate cass of rectfed sprts stamps where packages are sted on
the form. The outgong rectfer w af the rectfed sprts stamps to the
packages for whch they were ssued, and w cance such stamps and mark and
brand the packages, as provded n rtces and II. In the case of
partay rectfed products n tanks, the rectfcaton ta of 30 cents per proof
gaon sha be pad n accordance wth secton 190.295. If the orm 237 covers
a partay rectfed product n a tank, one copy thereof w be attached to the
tank pendng transfer to the successor, and the orgna copy wth the canceed
stamps attached w be dsposed of as provded n secton 190.296. If the
partay rectfed product s sub|ect to ta under secton 3030(a), I. R. C, wne
stamps representng such ta w be canceed and attached to orm 237 n the
manner provded by sectons 190.295 and 190.296.
Sec. 190.459. Competon and Dsposton of obm 237. When the partay
rectfed products n packages have been ta -pad (f sub|ect to ta ) and re-
moved to the fnshed products room, and such products n tanks have been
ta -pad (f sub|ect to ta ) and transferred to the successor, the outgong rect-
fer sha make approprate notaton of the dsposton of the products on orm
237, and, after approva by the Government offcer, w retan one copy of
the form and forward the orgna copy to the dstrct supervsor.
Sec. 190.460. Rectfcaton of Partay Rectfed Products by Successor.
When rectfed products contaned n tanks are to be further rectfed by the
successor, he sha, Immedatey upon recept thereof frbm the outgong rectfer,
prepare and submt orm 122 to show a constructve cumpng of the products
by hm for rectfcaton. The form w be prepared and submtted n the
manner presented by rtce I for the reguar dumpng of sprts for rect-
fcaton, e cept that the copy of orm 237 attached to the tank by the outgong
rectfer w be removed and attached to the dstrct supervsor s copy of orm
122 as evdence of the ta -pad character of the product, n eu of the cut-out
portons of the stamps requred to be attached to the form when packages are
dumped. Upon competon of the process of rectfcaton, pursuant to an ap-
proved formua, the successor sha prepare and submt orm 237 and pay a
ta es due on the product n accordance wth the procedure prescrbed n rtce
. Partay rectfed products receved from the outgong rectfer In
packages may be returned to the rectfyng room and dumped for further rect-
fcaton, pursuant to orm 122, provded approprate entres are made n orm
45 to show a constructve transfer of the products from the fnshed products room
to the recevng room.
Skc. 190.461. ottng of Partay Rectfed Products by Successor. Where
partay rectfed products n bottng tanks are transferred to the successor and
such products are to be botted wthout further rectfcaton, the successor sha
prepare and submt orm 230 n the manner prescrbed by rtce I , e cept
that the copy of orm 237 attached to the bottng tank by the outgong rectfer
w be removed and attached to the dstrct supervsor s copy of orm 230 as
evdence of the ta -pad character of the product n eu of the cut-out portons
of stamps requred to be attached to the form when packages are dumped.

Sec. 190.464. Transfer of Stamps orbdden. (a) Strp stamps. The out-
gong rectfer may not transfer any strp stamps to hs successor. Where the
change of propretorshp of the pant s to be of a temporary nature, any strp
stamps on hand beongng to the outgong propretor may be retaned n the
custody of the storekeeper-gauger pendng the quafcaton and resumpton of
operatons by such propretor.
(6) Rectfed sprts stamps and tcne stamps. The outgong rectfer may not
transfer any rectfed sprts stamps or wne stamps to hs successor, nor may
such stamps be otherwse transferred e cept as provded by secton 190.361e.
Where the change of propretorshp of the pant s to be of a temporary nature,
any rectfed sprts stamps and wne stamps on hand w be retaned n the
custody of the outgong propretor (the owner of the stamps) and proper report
w be rendered on orm 45. The rectfer w submt a monthy report of such
stamps due at the end of any monthy perod durng the perod of temporary
dscontnuance n accordance wth secton 190.36 durng such perod of tem-
porary dscontnuance. ( : Sec. 2 03(d), I. R. C.)
Sec. 190.465. Records and Reports. Where there s a change n propretor-
shp otherwse than by operaton of aw, the outgong rectfer sha make appro-
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Regs. 15 (1940).
252
rate entres on orm 45 coverng a sprts transferred to hs successor, who
sha n turn enter such tems on hs orm 45 as receved from hs predecessor.
The storekeeper-ganger w keep a separate record on orm 1 2 for the successor.
Sec. 190.4(50. Successon bt ducary. Where a change of propretorshp s
brought about by operaton of aw, the admnstrator, e ecutor, assgnee, re-
cever, trustee, or other fducary may not contnue the busness unt the requre
quafyng documents have been fed and approved. In the case of such change,
the fducary sha make approprate notaton of hs successon on orm 45
and on a copes of each outstandng orm 230 and orm 237, and upon compe-
ton of the bottng of sprts covered by orm 230 or orm 237. he sha com-
pete the e ecuton of the forms and dspose of the same as provded n rtces
and I . The storekeeper-gauger w make smar notaton of such
successon on orm 1 2.

rtce LI a. ottng and Labeng of Sprts and Wnes Under an
pproved Namk ob Names.

Sec. 190.460e. Records. Separate records on orms 45 and 1 2 w not be
requred for the bottng and abeng of sprts or wnes under a name other than
the rea name or trade name n whch the rectfyng pant s operated.

rtce L . Dscontnuance of Operatons.

Sec. 190.4 9a. Dsposton of Rectfed Sprts and Wne Stamps. of the
rectfed sprts stamps and wne stamps, f any, beongng to the propretor at
the tme of permanent dscontnuance of busness w be nventored by denom-
naton by the storekeeper-ganger, after whch the same may be dsposed of and
an account made n accordance wth secton 190.361e to secton 190.361, ncusve.

rtce L II. Concernng Locks and Sf.as.

Sec. 190.473. Where Locks are Requred. Dstrct supervsors w bear n
mnd that Government ocks are requred upon the door of the Government
cabnet upon the entrance doors of the wne bottng and e port storage rooms,
f any upon the manheads, nets, outets, and other openngs of storage tanks,
recevng tanks, and bottng tanks upon the manheads of gravty tanks upon
the vaves n ppe nes whch convey sprts from rectfyng sts to recevng
tanks where the ppe nes are equpped for refu ng the sprts to the sts or
for by-passng the berry basket n the case of gn sts, or whch convey sprts
from bottng tanks the rectfyng pant to bottng tanks n a contguous
ta -pad bottng house or rectfyng pant and upon such other vaves, stop-
cocks, and openngs n equpment and apparatus as are requred by these regu-
atons or deemed necessary by the dstrct supervsor to be secured wth
Government ocks.
.
Stewart erkshre,
( ed wth the Dvson of the edera Regster September 13, 1946, 9 a. m.)
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253
Regs. 2 1176.10, etc.
Reguatons 23, Secton 1 1.26: pprova 1946-20-12423
and submsson of cam. T. D. 5537
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 1 1.
STILLS ND DISTILLING PP R TUS.
mendng Reguatons 23.
Washngton 25, D. C.
To Dstrct Supervsors, Coectors of Interna Revenue, and Others
Concerned:
y vrtue of and pursuant to secton 3250(|) (3), Interna Revenue
Code (U. S. C, tte 26, secton 3250(|) (3)), secton 1 1.26 of Reg-
uatons 23, as amended (26 C R, Part 1 1), s hereby amended as
foows:
btce . portaton of Sts Wth eneft of Drawback.

Seo. 1 1.26. pprova and Submssons of Cams. (a) cton by coector.
The coector of nterna revenue w mmedatey e amne the two copes of
the cam for drawback on orm 1010, receved from the coector of customs
(secton 1 1.25), and f satsfed that the cam s a vad one, he w endorse
hs approva thereon and forward the orgna wth the ta -pad stamps attached
to the Commssoner of Interna Revenue, attenton coho Ta Unt.
(6) cton by Commssoner. If the Commssoner fnds that the cam s n
order, he w approve the cam and schedue t for payment. If the cam s
dsaowed n whoe or n part, the Commssoner w so notfy the camant
and state the reasons therefor. (Sec. 3250(|) (3), I. R. C.)
Wm. T. Sherwood,
pproved September 10, 1946.
Reguatons 2 , Sectons 176.10,176.21 (a), 1946-20-12424
176.57, and 176. 5. T. D. 5539
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 176.
DR W C ON DISTILL D SPIRITS ND WIN .
mendng Reguatons 2 .1
Washngton, D. C.
To Dstrct Supervsors, Coectors of Interna Revenue, and Others
Concerned:
y vrtue of and pursuant to sectons 2 7, as amended, 3176, and
3179, Interna Revenue Code, and sectons 309 (a), (b), (c), (d) and
1 The astersk ( ) at the end of secton 176.67 refers to secton 3179(b), nterna
Revenue Code, and secton 309 (a), (b), (c), (d) of the Tarff ct of 1930, as amended
(19 U. S. C, 1309 (a), (b), (c), (d)).
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Regs. 2 , 176.10, eto.
254
313(d), () of the Tarff ct of 1930, as amended (19 U. S. C, 1309
(a), (b), (c), (d) and 1313(d), (), sectons 176.10,176.21(a), 176.57,
and 176. 5 of Reguatons 2 , as amended (26 C R, Part 176), are
hereby amended as foows:
rtce I . Drawback of Interna Revenue Ta on 1 omestc coho Used
n the Manufacture of avoknq tracts, Medcna ok Toet Prep-
aratons, tc.

PPRO L O Or.MM ND P YM NT O DR W C .
Sec. 176.10. cton on Cam. Upon recept of certfcate on customs orm
4539 (ncudng a st of the ports of destnaton) prepared and forwarded by the
coector of customs, together wth a wrtten request addressed to the Comms-
soner of Interna Revenue by the camant for payment of the amount found to
be due, the Commssoner w e amne the data and f found to be n order w
approve the cam and schedue the amount aowed for payment. If any
certfcate. orm 4539, covers acoho used under more than one certfcate on orm
(UC, the orm 4539 sha specfy the quantty chargeabe aganst each certfcate,
orm 616, and the sera number of each such certfcate. (Sec. 313 of the Tarf
ct of 1930, as amended (19 U. S. C, 1313(d), ()).)

rtce . Drawback on Dsted Sprts and Wnes otted specay
fob port.

Sec. 176.21 (a). ppcaton orm 237 rocedtre. The rectfer sha make
appcaton on orm 237 to botte rectfed sprts especay for e port or package
such sprts for subsequent bottng especay for e port n accordance wth the
appcabe provsons of rtce of Reguatons 15, and an addtona copy
of such form w be prepared n each case. notce of ntenton sha be nserted
by the rectfer n each copy of orm 237 after the descrpton of the sprts or
wnes as foows:
The above-descrbed sprts (or wnes) rectfed pursuant to orm 122
sera No. dated , 19 , are to be botted
especay for e port wth beneft of drawback.
When the process of manufacturng sprts or wnes In accordance wth secton
176.20 has been competed, the rectfer sha note on orm 237 the quantty of
dsted sprts, or wnes, or both (cacuated on a proof-gaon bass as to sprts
and on a wne-gaon bass as to wnes) used n manufacturng the sprts or wnes.
If commerca favorng e tracts contanng acoho, not prepared by the rectfer
on hs rectfyng premses, are used n manufacturng the sprts or wnes, the
rectfer sha aso note on orm 237 the quantty thereof n wne gaons and
state the percentage of acoho by voume. The rectfcaton ta and wne ta
f due, w then be pad and orm 237 dsposed of n accordance wth the appcabe
provsons of rtce of Reguatons 15, and the addtona copy of orm
237 w be forwarded to the dstrct supervsor wth the orgna copy of orm
237. The storekeeper-ganger w, upon competon of the bottng or packagng
operatons, supervse the depost of the sprts or wnes n the e port storage room,
e cept as provded by secton 176.22.

Sec. 176.57. cton on Cam. The Commssoner w, upon recept of the cam.
orm 15 2 or orm 15 2- , from the dstrct supervsor, e amne the cam and
the records of hs offce, orms 230, 122, 237, 15 3, and 1600 prevousy furnshed
hm as provded by sectons 170.16 to 176.23, ncusve, to determne whether the
sprts or wnes descrbed n the cam have been fuy ta -pad. If the Comms-
soner fnds that such sprts or wnes have been fuy ta -pad, he w approve
the cam and schedue t for payment. If the cam s dsaowed, the Comms-
soner w so notfy the camant and state the reasons therefor.
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255
Regs. 2 , 176.10, etc.
rtce I. Drawback of Dsted Sprts ported n Dsters Orgna
Packages.

Sec. 176. 5. cton on Cam. The Commssoner of Interna Revenue w,
tpon recept of the cam and entry, orm 1629, and accompanyng documents
from the coector of customs, e amne the cam and the records of hs offce to
determne whether the sprts descrbed n the cam have been fuy ta -pad.
If the Commssoner fnds that such sprts have been fuy ta -pad, he w
approve the cam and schedue t for payment. If the cam s dsaowed, the
Commssoner w so notfy the camant and state the reasons therefor. The
dupcate of the drawback bond, orm 162 , w be retaned n the fes of the
Commssoner. (Sees. 2 7, as amended, and 3176, I. R. C.)
Wm. T. Sherwood,
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#
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256
OL OM RG RIN .
1946-14-12351
MS. 300
Schedue of oeomargarne produced and materas used durng the month of
ay, 1946, as compaed rth May, 1945.
May, 1946.
May, 1945.
Tota producton of uncoored oeomargarne
Pounds
39. d. 02
Pohh4m
42.9 5,125
Tota wthdraw n ta -pad
40.347.2 1
4O.04S.67S
Ingredent schedue of uncoored oeomargarne:
utter favor
530
2 3
1 4
4 5, 79
S
Ctrc acd
IS
0 ,410
15,629.660
22.501.4
72
Dervatve of gycerne
66,020
97
6
77.164
,265
61,144
6,673,319
31,955
149,134
143.791
139. 34
16.960
66,305
1,225,045
2 .551
15.006.159
Mk - -
4 , s-
T M
Sat
211 19
24.9
325,943
1.347.4C
27 950
a556.W.
2.700
7,473
er
9.
40.533.314
44.033,15
2,14 , 700
.339.6t
Ingredent schedue of coored oeomargarne:
1,5 3.13
1.42 .033
76
1,676
177
1.160
513,966
1
Coor
7.9 7
4.64T
6,475
503.3
t
17
1,546
360.466
u
Lecthn
24
1.5
5,660
um m
24.571
12, 5
. S
347.014
731. see
1,050
14, 219
74.064
1,274
1,151.441
124.500
um
Sat
2 1
3 2.. 0
S.45
7.4S.S47
4,177
2.6 1
Tota
2.162,675
11.476,22
: .
fgures are sub|ect to revson unt pubshed In the Commssoner s annua report.
1 Of the amount produced, 2,692 pounds were reworked.
1 Of the amount produced, 32 pounds were reworked.
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#
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g
o
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e
257
Msc.
1946-17-123 7
MS. 301
une, 19 G, as compared wth une, 9- 5.
Tota producton of uncoored oeomargarne..
Tota wthdrawn ta -pad .
utter cuture -
utter favor
Ctrc acd ---
Corn o
Cottonseed fakes
Cottonseed o
Dervatve of gycerne
Daeety
stearnc
Lecthn
Mk
Monostearne -
Neutra ard
Oeoo.
Oeo stearne
Oeo stock
Peanut o
Sat..
Soda (bcnoate of)
Soya bean o
Soya bean stearne
Taow
tamn eonccntrato..
Tota..
Tota producton of coored oeomargarne.
Tota wthdrawn ta -pad
Ingredent scheduo of coored oeomargarne:
utter favor
Coor
Com o
Cottonseed fakes
Cottonseed o
Dervatve of gycerne .
Daeety
stearne. -
Lecthn.
Mk
Monostearne
Neutra ard
Oeo o
Oeo stearne -
Oeo stock
Peanut o...
Sat.
Soda (benzoate of)
Soya bean o
oya fakes
tamn concentrate.
Tota
une, 1946.
Pound .
I 31, 434.537
33, 575, 560
105
501
164
511,313
13,0 2.725
59,417
46
6,930
41, 521
5,312, 095
25.31
103. 577
120. 057
7.649
16,5 5
600,760
51. 36
24.06
11,012,600
900
6, 37
31.995,004
4, 597, 160
991,793
25
3,0 1
I, 190
421.247
6. 7
229
222
4.520
59. 7 3
2.29
16, 446
,215
6,647
152, 120
2, 47
3, 237. 6 6
5,000
579
4,629,013
une, 194S.
Pound .
35.043, 567
30,451,902
237
121
622. 474
3, 755
19,295,015
67, 324
53
5.117
37.61
6,046.167
26.271
152, 64
19 , 29
76.239
22.070
2.5 , 109
1,031,121
24. 437
7, 56,600
44
1. 00
7.017
35, 733, 6 6
13. 577.9 9
931,911
276
7,735
923
,035
520,602
13,152
25
1,9 1
5,65
2,301,395
10.23
243. 664
442. 454
712
133.600
434
44 . 20
.536
9. 626, 1
4. 950
2,027
13,7 2,035
Of the amount produced, 594 pounds were reworked.
1 Of the amount produced, 1,217 pounds were reworked.
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#
p
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o
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e
Msc.
25
1946-19-12406
MS. 302
uy, 1946, as compared to uy, 19)5.
uy, 1940.
uy. 1945.
Tota producton f uneoored oeomargarne
Pound).
3 .333.190
Pan .
41.069. IIS
35.9S5.441
36.617.9
Ingredent schedue of uneoored oeomargarne:
103
23
105
50 .072
95
2.52S
utter favor -
m
Corn n - ......
6.2 1
24. sn
21,375, 29
Cottonseed fakes
Cottonseed o--.
1 . 752.211
63
73,9
64
CSS)
6 .073
62
9. 24
4 .40
6,432,175
2 .409
133,709
131.223
117,175
15.345
1.269.295
1,172,663
27.917
13,2 0,271
4
Mk
7,040.S
35.076
150,264
6.706
, 4
15,456
4217 3
n en stnet
Sat -. -
. 2.v,
oda fbenzoate of)-_
26.SC
M, 14 .SS2
Rova bean stearne
m
Taow -..
7,446
,100
Tota
39,00 ,724
41,933.4
Tota producton of coored oeomargarne
,929,2 5
12. 623. 753
1,246. 212
1.227,9
utter favor ...
32
7.14
22
4. 75
379.90
17.2 1
2 4
326
9,342
1.434,179
2,724
12,060
6,033
I
Mr
Mk
L673
4.390
60 , .IS
17.177
3,442
S.1 3
2,091,635
6, 74
202,725
445,7
923
123,400
3,696
430. W
9. ZD
,79 .723
7.0 2
1.722
Neutra ard - -
19,946
2 9. 46
4,610
15,000
1,227
Tota -
,99 ,19
.12.756.402
Of the amount produced, 3,162 pounds were reworked.
Of the amount produced, 2, 2 pounds were reworked.
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#
p
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o
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259
Msc.
194G-22-12437
MS. 303
ugust, 19 ,6, as compared tcth ugust, 1945.
ugust, 1946.
ugust, 1945.
Pounds.
3 ,S33, 715
Pounds.
3 ,169,537
Ingredent schedue of uneoored oeomargarne:
39,679, 711
3 ,75 , 791
Coor
220
2 5
252
16
227
97
50
365,549
16,06 , 765
759,413
19,629, 406
99
61,979
61
61,731
106
6,676
4 .766
6.4 1,4 6
31,127
5,611
106,360
199, 757
17,705
1,364,437
1,213,095
26.45
9,3 0
12,75 ,410
11,100
46,0 0
6,434, 73
33. 32
12 ,095
197,23
159,209
Peanut o
1 ,990
621,414
1,1 4,649
Sat
25, 50
0,632
9, 532,90
024
2,475
9,261
Tota
3 , 52, 10
3 , 61,246
5,167, 56
12,029, 90
1.101.660
1,026,644
Coor... _
16
3,421
91
3,135
432,6 3
4,43
406
6
3,914
3 ,699
2,377
13.554
6,7 3
752
7,569
403
3,770
493.094
14,769
42
4,347
3, 20
2,001, 9
,524
292,145
625,07
691
1 7,100
44,04
427,4 0
, 69
,120,349
9.717
1, 72
Mk
Monostearne
Oeo o
Oeo stearne
Oeo stock
Peanut o
15, 66
166,555
2, 71
3,6 5,259
5,620
736
at
Soda (benzoate of)
Soya bean o
Soya fakes
tamn concentrate
Tota
5,1 0,510
12,256,337
Of the amount produced, 31,140 pounds were reworked.
Or the amount produced, 3,146 pounds were reworked
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#
p
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g
o
o
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e
Msc.
260
1946-23-12442
MS. 301
(Schedue of oeomargarne produced and materas used durng the
September, 19 6, as compared wth eptember, 9 5.
of
September.
Tota producton of nncoored oeomargarne.
31,671,7 5
.451.13S
33.761,3
33.7SL7 0
utter cuture
utter favor
Ctrc aed _
Corn o
Cottonseed o
Dervatve of gycerne..
DaretyL.
stearne - ---
I-ecthn .--
Mk
Monnstearnc
Neutra ard
Oeo o
Oeo steanne - -
Oeo stock
Peanut o ---
at
Soda fhenroate of)
Soya bean o
Soya bean steanne --
Taow
tumu concentrate
41.701
5.734.113
16.505
1 9.5
16.2
TotaL..
32, 312.123
Tota producton of coored oeomargarne-
5.395.605
ngredent schedue of coored oeomargarne:
utte favor -
Coconut o
Coor - -
Corn o
Cottonseed fakes...
Cottonseed o
Dervatve of gycenne
TUaccty
stearne
Lccthu
Mk
M onostearne
Neutra ard
Oeo o
Oeo stock
eanut o -
Sat -
Soda d enzoate of)
Soya bean o
tamm concentrate -
921,525
15
2. OSt, M
2.595
414.D90
10,045
42
1.9W
1,516
17,526
,762
15.702
17 .
3.960
1. 5 , 16
511
Tota.
774.270
s. m
624.222
15,501
45
309
LST e S
10.474
m, m
157,
11.413
374.647
7.665
7,304,413
1.402
Of the amount produced, 2,411 pounds
Of the amount produced, ,474 pounds
forked.
Ths o used soey n oeomargarne manufactured for e port by the Unted
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#
p
d
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g
o
o
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e
261
Msc.
1946-25-12455
MS. 305
October, 194U, as compared cth October, 19 /5.
October, 1946.
October, 19-14,
Tota producton of uncoorcd oeomargarne.
utter cuture
utter favor
Ctrc acd
Com o -
Cottonseed fakes -
Cottonseed o
Cottonseed stearne
Dervatve of gycerne _
Daccty -
stearne -
Lecthn
Mk
Monostearne
Neutra ard
Oeo o
Oeo stearne _
Oeo stock
Peanut o
Sat
Soda (benzoate of)-..
Soya bean o
Soy s bean stearne
Taow
tamn concentrate
Tota.
Tota producton of coored oeomargarne.
utter favor
Coconut o1
Coor
Corn o -
Cottonseed o
Dervatve of gycerne
Dacety
stearne
Lecthn
Mk
Monostearne
Neutra ard
Oeo o
Oeo stock
Teanut o
Sat
Soda (benzoatc of)
Soya bean o
Soya bean stearne
tamn concentrate
Tota..
Pound .
50. 619. 30
411. Str. 7U3
as
637,4 0
22. 303,914
2, 443
03
61, 22
,515,911
5 ,3 9
102.369
114.630
117.552
32, 355
09.200
1,614.7 5
36, 4 S
16, 923. 669
12.200
,642
51.432,490
9.6.- ,350
1,530, 111
23
, 1 7, 749
4,50
2.6 3
52 ,37
9,694
173
6, 539
1,5 5, 196
3,411
19. 109
9,554
1.363
316. 292
3,99
1, 143, 527
2,400
1.316
9, 25,911
Of the amount produced, 16, 34 pounds were reworked.
Of the amount produced, 1 0 pounds were reworked.
Ths o used soey n oeomargarne manufactured for e port by the Unted States.
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#
p
d
-
g
o
o
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e
Msc.
262
TO CCO.
1946-14-12352
T. 164
Statement of manufactured tobacco produced, by casses, durng the month of
pr, 19. 6, as compared wth pr, 19.f.
pr, 1946.
pr. 1941
Pounds.
4. 172,41
49 .336
2 9. 43
3,647.310
7. 0 .436
3,333. 4 2
Pou d.
S. O. 197
571735
S23.256
4.267.572
11 766,1
3, 75.655
Pug
Twst ,
snu
19,749. 25 27.S20.5S5
1946-16-1236
T.166
May, 19 t, as compared toth May, 1945.
May. 1946.
May, 1945.
Pounds.
4.4 1,071
Pounds.
Twst
52 ,731
333. 64
2, 737,523
10,061,491
3.339.233
5.273.M
605.646
32 .9
4,3 3,43
15.105.06
Snuff....
4.075, m
21.471,914
29.773,96
1946-19-12107
T. 163
Statement of manufactured tobacco produced, by casses, durng the month
of une, 19 G, as compared wth une, 19IS.
une, 1946.
une, 1945.
Pug.
Pounds.
4.279. 11
45 .214
301.594
3,035,25
9.394,6 5
3,021,96
Pounds.
5.05 . 509
605.435
332.676
4.31I.I5S
14. 19.595
3,400,291
Twst
Smokng
Snuff
Tota
21.091,630
2S.52S.f62
fgures are sub|ect to revson unt pubshed n the Commssoner s annua report.
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1946-21-12430
T. 170
Statement of manvfactured tobacco produced, by casses, durng the month of uy,
1946, as compared wth uy, 1945.
uy, 1946.
uy, 1945.
Pounds.
Pounds.
6,019, 1 1
523,20
300,903
4,094,374
13, 1 5. 155
3. 153,392
rue _
4, 65(1,517
497.041
326,240
3.90 ,333
,90 , 06
2,721,097
Twst _ _ _
ne-cut chewng .
Scrap chewng- -
Snuff
Tota , 1 -
21,07 ,034
26, 276, 213
1946-22-1243
T. 172
. ugust, 1946, as compart tcth ugust, 1045.
ugust, 1946.
ugust, 1945.
Snuff
Pounds.
4,631,117
610,600
373, 20
4,437,432
9, 4 5, 33
3, 429, 135
Pounds.
5, 719, 615
622, 3
360.466
4.271,022
15, 401, 14
3, 673, 962
Tota
22, 67,937
30,049,051
1946-25-12456
T. 174
Statement of manufactured tobacco produced, by causes, durng the month of
September, 1946, as compared wth September, 1945.
September,
1946.
September,
1945.
Pug
Pounds.
4,361,432
461. 179
311,4 5
3, 59, 656
9, 617, 652
3, 060. 591
Pounds.
5.197, 740
546,502
337, 707
3,515,993
14. 670,09
3,461, 14
Twst _ _
ne-cut chewng
S-rap chewng
Smokng _
Snuff
Tota . .
21,671,995
27,729. 59
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264
CIG R TT S/
T. 1(
Premnary statement of sma cgarettes removed for consumpton durng t
month of une, 1946, as compared wth removas for the same motfth of 1945.
Removas. une, 1946. ane, 1945.
Numbrr. tn r.
_ 26.631,765.344 24. 1 r
2. 444.429,M 4, 43.473
29, 010,123
Ta -pa
Ta -tree -
Tota.
1946-19-1
rettes remove pr ff
. nf sma cgarette ovas for te
Removas.
Ta -P d
Ta -Ire
Tota
Nurafte
N , 22.313.4
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1946-21-12431
T. 171
Premnary statement of sma cgarettes removed for consumpton durng the month
of ugust, 1946, as compared wth removas for the same month of 1945.
Removas. .
ugust, 1946.
ugust, 1945.
Number.
2 . 530, aS9, 273
2,665,073,617
Number.
27, 743,027, 100
2,05 ,545,762
Tota
31, 195,462, 90
29, 01,672, 62
fgures are sub|ect to revson unt pubshed n the Commssoner s annua report.
1946-23-12443
T. 173
Premnary statement of sma cgarettes removed for consumpton durng the
month of September, 1946, as compared wth removas for the same month of
1945.
Removas.
September, 1946.
September, 1946.
Ta -free . -
Number.
27,303.2 3,935
1.944,205,909
Number.
26,724.02 ,164
01, 04,005
Tota
29, 247,4 9, 44
27, 525, 32, 229
1946-26-12462
T. 175
Premnary statement of sma cgarettes removed for consumpton durng the
month of October, 1946, as compared wth removas for the same month of
1945.
Removas.
October, 1946.
October, 1945.
Number.
32,600,429, 3
2, 561, 010,193
Number.
31, 25 , 7, 532
1, 269, 31 , 346
Tota
35. 251, 440, 076
32, 52 , 205, 7
72 29 47 1
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L GISL TION.
1946-13-12340
. . R S. 353. PU LIC L W 303, S NTY-NINT CONGR SS
C PT R 27 , S COND S SSION .
ont Resouton tendng the tme for the reease of powers
of appontment for the purposes of certan provsons of the In-
terna Revenue Code.
Resoved by the Senate and ouse of Representatves of the Unted
States of merca n Congress assembed, That secton 403(d)(3)
of the Revenue ct of 1942 (reatng to the reease of certan powers
of appontment) s amended by strkng out uy 1, 1946 wherever
t appears and nsertng n eu thereof uy 1, 1947 and secton
452(c) of the Revenue ct of 1942 s amended to read as foows:
(c) Reease efore m 1, 1947.
(1) reease of a power to appont hefore uy 1, 1947, sha not be
deemed a transfer of property by the ndvdua possessng such power.
(2) Ths subsecton sha appy to a caendar years pror to 1947 and
to that part of the caendar year 1947 pror to uy 1, 1947.
pproved May 29, 1946.
1946-15-12360
. R. 3611. PU LIC L W 427, S NTY-NINT CONGR SS
C PT R 439, S COND S SSION .
n ct To authorze the condemnaton of materas whch are
ntended for use n process or renovated butter and whch are unft
for human consumpton, and for other purposes.
e t enacted by the Senate and ouse of Representatves of the
Unted States of merca n Congress assembed, That secton 2325
of the Interna Revenue Code, approved ebruary 10, 1939 (53 Stat.
254), s amended to read as foows:
S C. 2325. INSP CTION O PROC SS OR R NO T D UTT R.
or the purpose of protectng nterstate and foregn commerce from process
or renovated butter whch s uncean, unwhoesome, unheathfu, or otherwse
unft for human food
(a) The Secretary of grcuture sha, through nspectors apponted by hm.
cause nspectons to be made of a mk, butter, butter o, and other ngredents
Intended for use n the manufacture of process or renovated butter. n-
gredents whch are found to be putrd or decomposed or whch contan organc
or norganc substances whch are foregn to such ngredents when propery
made, manufactured, produced, coected, stored, transported, or handed, and
whch organc or Inorganc substances cannot be removed by processng, sha be
deemed unft for use n the manufacture of process or renovated butter, sha
be marked U. S. Inspected and Condemned , and sha be denatured or de-
(266)
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267
stroyed under the supervson of the nspector. other ngredents sha be
marked U. S. Inspected and Passed , and sha be deemed ft for use n the manu-
facture of process or renovated butter.
(b) The Secretary of grcuture sha cause nspectons to be made of a
process or renovated butter. If such butter s found to be cean, whoesome,
heathfu, and otherwse ft for human food, t sha be marked U. S. Inspected
and Passed . Process or renovated butter that Is found to be uncean, unwhoe-
some, unheathfu, or otherwse unft for human food sha be denatured or
destroyed under the supervson of the nspector.
(c) The Secretary of grcuture sha cause nspectons to be made of a
factores wheren process or renovated butter Is manufactured to determne the
santary condtons thereof, and f t s found that the condtons e stng n
any such factory do not meet the standards prescrbed by the Secretary n bs
reguatons, he sha cause nspecton to be wthdrawn therefrom.
(d) The Secretary of grcuture s authorzed to wthdraw nspecton from
any factory wheren process or renovated butter s made, f the manufacturer
sha fa to compy wth any of the provsons of ths secton or wth any of
the rues and reguatons prescrbed hereunder.
(e) The Secretary of grcuture s authorzed to make such rues and regua-
tons as he deems necessary for the effcent admnstraton of the provsons
of ths secton, and a nspectons hereunder sha be made n such manner as
may be prescrbed n such reguatons. The Secretary of grcuture may, from
tme to tme, by reguatons defne the foregn substances and the e tent thereof
that render the ngredents unft for use n manufacturng process or renovated
butter.
(f) The Secretary of grcuture sha cause to be ascertaned, and he sha
report, from tme to tme, the quantty and quaty of a process or renovated
butter manufactured and the character and condton of the materas from whch
t s made.
(g) No person, frm, or corporaton sha forge, counterfet, smuate, fasey
represent, detach, or knowngy ater, deface, or destroy, or use wthout proper
authorty, any of the marks, stamps, abes, or tabs provded for n ths secton
or n any reguatons prescrbed hereunder by the Secretary of grcuture for
use on process or renovated butter or on wrappers, packages, contaners, or cases
n whch the product s contaned, or any certfcate n reaton thereto.
(h) -process or renovated butter and the packages or contaners thereof
sha be marked wth the words Process Putter and by such other marks,
abes, or brands, and n such manner, as may be prescrbed by the Secretary of
grcuture.
() No statement that Is fase or mseadng n any partcuar sha be paced
on or aff ed to any wrapper, abe, carton, or contaner of process or renovated
butter.
(|) No person, frm, or corporaton sha transport, or offer for transportaton,
or se or offer for sae, n nterstate or foregn commerce, or n commerce affect-
ng commerce among the States, any process or renovated butter that has not
been nspected and passed and marked, abeed, and branded n accordance wth
ths secton and the reguatons ssued hereunder.
(k) The admnstraton and enforcement of the provsons of ths ct, other
than ts provsons reatng to revenue, but ncudng the sezure and denaturng
or destructon of ngredents ntended to be used n the manufacture of process
or renovated butter and the denaturng or destructon of process or renovated
butter, are commtted e cusvey to the Secretary of grcuture: Provded, That
any powers and dutes of the ood and Drug dmnstraton of the edera
Securty gency under the edera ood, Drug, and Cosmetc ct, as amended
(21 U. S. C., 1940 edton, 301, and the foowng), as regards such ngredents
before they come nto the possesson of the manufacturers of process or renovated
butter, or as regards such powers and dutes n connecton wth process or
renovated butter after t eaves such manufacturers and comes nto the hands
of whoesae or reta deaers, or others, sha not be affected by ths ct.
Sec. 2. Subsecton (c) of secton 2326 of the Interna Revenue Code
(53 Stat. 255) s amended by strkng out sha be punshed by a fne
of not ess than 50 nor mqre than 500 or by mprsonment for not ess
than one month nor more than s months, or by both sad punsh-
ments, and by nsertng n eu thereof the foowng: sha be
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269
1946-1 -12392
n ct To amend the Raroad Retrement cts, the Raroad
Unempoyment Insurance ct, and subchapter of chapter 9 of the
Interna Revenue Code and for other purposes.
e t enacted by the Senate and ouse of Representatves of the Unted States
of merca n Congress assembed,
Dvson I.
Secton 1. Secton 1(c) of the Raroad Retrement ct of 1937, secton 1(e)
of the Raroad Unempoyment Insurance ct, and secton 1532(d) of the Interna
Revenue Code are each amended as foows: fter the word f where t frst
appears theren nsert () and for the phrase whch servces he renders for
compensaton substtute the foowng: or he s renderng professona or
technca servces and s ntegrated nto the staff of the empoye, or he s render-
ng, on the property use d n the empoyer s operatons, other persona servces
the rendton of whch s ntegrated nto the empoyer s operatons, and ()
he renders such servce for compensaton- , and for the purpose of contnung
the amendment of the Raroad Retrement ct of 1937, ony, add after the word
compensaton the foowng: , or a method of computng the monthy com-
pensaton for such servce s provded n secton 3(c) . Sad subsectons are
further amended by nsertng at the end of the frst provso the foowng:
, and f the appcaton of such meage formua, or such other formua as the
oard may prescrbe, woud resut n the compensaton of the ndvdua beng
ess than 10 per centum of hs remuneraton for such servce no part of such
remuneraton sha be regarded as compensaton .
Sec. 2. Secton 1(h) of the Raroad Retrement ct of 1937 s amended by
substtutng for the words earned by the words pad to , and secton ()
of the Raroad Unempoyment Insurance ct s amended by substtutng for
the word payabe the word pad and by nsertng at the end of sad
secton 1(h) of the Raroad Retrement ct of 1937 and at the end of sad
secton () of the Raroad Unempoyment Insurance ct, the foowng:
payment made by an empoyer to an ndvdua through the empoyer s pay ro
sha be presumed, n the absence of evdence to the contrary, to be compensaton
for servce rendered by such ndvdua as an empoyee of the empoyer n the
perod wth respect to whch the payment s made. n empoyee sha be deemed
to be pad, for tme ost the amount he s pad by an empoyer wth respect
to an dentfabe perod of absence from the actve servce of the empoyer, n-
cudng absence on account of persona n|ury, and the amount he s pad by the
empoyer for oss of earnngs resutng from hs dspacement to a ess remunera-
tve poston or occupaton. If a payment s made by an empoyer wth respect
to a persona n|ury and ncudes pay for tme ost, the tota payment sha be
deemed to be pad for tme ost uness, at the tme of payment, a part of such
payment s specfcay apportoned to factors other than tme ost, n whch
event ony such part of the payment as s not so apportoned sha be deemed to
be pad for tme ost. Compensaton earned n any caendar month before 1947
sha be deemed pad In such month regardess of whether or when payment w
have been n fact made, and compensaton earned n any caendar year after
1946 but pad after the end of such caendar year sha be deemed to be compensa-
ton pad In the caendar year n whch t w have been earned If t s so reported
by the empoyer before ebruary 1 of the ne t succeedng caendar year or, f
the empoyee estabshes, sub|ect to the provsons of secton , the perod durng
whch such compensaton w have been earned. and n sad secton 1(h),
Immedatey after the word earned at the end of ths nserton, nsert the
foowng addtona anguage: In determnng the monthy compensaton, the
average monthy remuneraton, and quarters of coverage of any empoyee, there
sha be attrbutabe as compensaton pad to hm n each caendar month n
whch he s n mtary servce credtabe under secton 4 the amount of 160 n
addton to the compensaton, f any, pad to hm wth respect to such month.
Sec. 3. (a) Secton 1500 of the Interna Revenue Code s amended to read as
foows:
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S C. 1500. R T O T .
In addton to other ta es, there sha be eved, coected, and pad upon the
ncome of every empoyee a ta equa to the foowng percentages of so much
of the compensaton, pad to such empoyee after December 31, 1946, for servces
rendered by hm after such date, as Is not n e cess of 300 for any caendar
month:
1. Wth respect to compensaton pad durng the caendar years 1947
and 194 , the rate sha be 5 per centum
2. Wth respect to compensaton pad durng the caendar years 1949,
1950, and 1951, the rate sha be 6 per centum
3. Wth respect to compensaton pad after December 31, 1951, the rae
sha be 6 4 per centum.
(b) The second sentence of secton 1501(a) of the Interna Revenue Code s
amended to read as foows: If an empoyee s pad compensaton after Decem-
ber 31, 1946, by more than one empoyer for servces rendered durng any caendar
month after 1946 and the aggregate of such compensaton s n e cess of 300,
the ta to be deducted by each empoyer other than a subordnate unt of a
natona raway-abor-organzaton empoyer from the compensaton pad by hm
to te empoyee wth respect to such month sha be taat proporton of the ta
wth respect to suc compensaton pad by a such empoyers whch the compen-
saton pad by hm after December 31, 1946, to the empoyee for servces rendered
durng such month bears to the tota compensaton pad by a such empoyers
after December 31, 1946, to such empoyee for servces rendered durng such
month and n the event that the compensaton so pad by such empoyers to the
empoyee for servces rendered durng such month s ess than 300, each sub-
ordnate unt of a natona raway-abor-organzaton empoyer sha deduct
such proporton of any addtona ta as the compensaton pad by such empoyer
after December 31, 1940, to such empoyee for servces rendered durng such
month bears to the tota compensaton pad by a such empoyers after December
31, 1940, to such empoyee for servces rendered durng such month.
(c) Secton 1510 of the Interna Revenue Code s amended to read as foows:
S C. 1510. R T O T .
In addton to other ta es, there sha be eved, coected, and pad upon the
Income of ench empoyee representatve a ta equa to the foowng percentages
of so much of the compensaton, pad to such empoyee representatve after
December 31, 1946, for servces rendered by hm after such date, as s not n
e cess of 300 for any caendar month:
1. Wth respect to compensaton pad durng the caendar years 1947
and 194 , the rate sha be 11 per centum
3. Wth respect to compensaton pad after December 31, 1951, the rate
sha be 12 per centum.
(d) Secton 1520 of the Interna Revenue Code s amended to read as foows:
S C. 1520. R T O T .
In addton to other ta es, every empoyer sha pay an e cse ta , wth respect
to havng ndvduas n hs empoy, equa to the foowng percentages of so
much of the compensaton, pad by such empoyer after December 31, 1946, for
servces rendered to hm after December 31, 1936, as s, wth respect to any em-
poyee for any caendar month, not n e cess of 300: Provded, hotccvcr, That f
an empoyee s pad compensaton after December 31, 1946, by more than one em-
poyer for servces rendered durng any caendar month after 1936, the ta m-
posed by ths secton sha appy to not more than 300 of the aggregate com-
pensaton pad to such empoyee by a such empoyers after December 31, 1946,
for servces rendered durng such month, and each empoyer other than a subor-
dnate unt of a natona raway-abor-organzaton empoyer sha be abe for
that proporton of the ta wth respect to such compensaton pad by a such
empoyers whch the compensaton pad by hm after December 31, 1946, to the
empoyee for servces rendered durng such month bears to the tota compensa-
ton pad by a such empoyers after December 31, 1946, to such empoyee for
servces rendered durng such month and n the event that the compensaton
so pad by such empoyers to the empoyee for servces rendered durng such
month s ess than 300, each subordnate unt of a natona raway-abor-or-
ganzaton empoyer sha be abe for such proporton of any addtona ta as
the compensaton pad by such empoyer after December 31, 1946, to such em-
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poyee for servces rendered durng such mouth bears to the tota compensaton
pad by a such empoyers after December 1, 1946, to such empoyee for servces
rendered durng such month:
1. Wth respect to compensaton pad durng the caendar years 1947 and
194 , the rate sha be 5 per centum
3. Wth respect to compensaton pad after December 31, 1951, the rate
sha be 6 4 per centum.
(e) Secton 1532(b) of the Interna Revenue Code s amended to read as fo-
ows:
(b) mpoyer. The term empoyee means any ndvdua n the servce
of one or more empoyers for compensaton: Provded, however, That the term
empoyee sha ncude an empoyee of a oca odge or dvson defned as an
empoyer n subsecton (a) ony f he was n the servce of or n the empoyment
reaton to a carrer on or after ugust 29, 1935. n ndvdua sha be deemed
to have been n the empoyment reaton to a carrer on ugust 29, 1935, f () he
was on that date on eave of absence from hs empoyment, e pressy granted to
hm by the carrer by whom he was empoyed, or by a duy authorzed representa-
tve of such carrer, and the grant of such eave of absence w have been es-
tabshed to the satsfacton of the Raroad Retrement oard before uy 1947
or () he was n the servce of a carrer after ugust 29, 1935, and before anu-
ary 1946 n each of s caendar months, whether or not consecutve or ()
before ugust 29, 1935, he dd not retre and was not retred or dscharged from
the servce of the ast carrer by whom he was empoyed or ts corporate or oper-
atng successor, but ( ) soey by reason of hs physca or menta dsabty he
ceased before ugust 29, 1935, to be n the servce of such carrer and thereafter
remaned contnuousy dsabed unt he attaned age s ty-fve or unt ugust
1045, or ( ) soey for such ast stated reason a carrer by whom he was em-
poyed before ugust 29,1935, or a carrer who s ts successor dd not on or after
ugust 29, 1935, and before ugust 1945 ca hm to return to servce, or (C)
f he was so caed he was soey for such reason unabe to render servce n s
caendar months as provded n cause () or (v) he was on ugust 20, 1935,
absent from the servce of a carrer by reason of a dscharge whch, wthn one
year after the effectve date thereof, was protested, to an approprate abor repre-
sentatve or to the carrer, as wrongfu, and whch was foowed wthn ten years
of the effectve date ttereof by hs renstatement n good fath to hs former serv-
ce wth a hs senorty rghts: Provded, That an ndvdua sha not be deemed
to have been on ugust 29, 1935, n the empoyment reaton to a carrer f before
that date he was granted a penson or gratuty on the bass of whch a penson
was awarded to hm pursuant to secton 6 of the Raroad Retrement ct of 1937,
or f urng the ast pay-ro perod before ugust 29, 1935, n whch he rendered
servce to a carrer he was not n the servce of an empoyer, n accordance wth
subsecton (d), wth respect to any servce n such pay-ro perod, or f he coud
have been n the empoyment reaton to an empoyer ony by reason of hs havng
been, ether before or. after ugust 29, 1935, n the servce of a oca odge or dv-
son defned as an empoyer n subsecton (a).
The term empoyee ncudes an offcer of an empoyer.
The term empoyee sha not ncude any ndvdua whe such ndvdua
s engaged n the physca operatons consstng of the mnng of coa, the prepara-
ton of coa, the handng (other than movement by ra wth standard raroad
ocomotves) of coa not beyond the mne tppe, or the oadng of coa at the
tppe.
(f) Secton 1532(e) of the Interna Revenue Code s amended by addng at
the end thereof the foowng new paragraph:
payment made by an empoyer to an ndvdua through the empoyer s pay
ro sha be presumed, n the absence of evdence to the contrary, to be com-
pensaton for servce rendered by such ndvdua as an empoyee of the empoyer
n the perod wth respect to whch the payment s made. n empoyee sha be
deemed to be pad, for tme ost the amount he s pad by an empoyer wth
respect to an dentfabe perod of absence from the actve servce of the em-
poyer, ncudng absence on account of persona n|ury, and the amount he s
pad by the empoyer for oss of earnngs resutng from hs dspacement to a ess
remuneratve poston or occupaton. If a payment s made by an empoyer wth
respect to a persona n|ury and ncudes pay for tme ost, the tota payment
sha be deemed to be pad for tme ost uness, at the tme of payment, a part
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be nether fuy nor currenty nsured under the Soca Securty ct, or f he has
no wage quarters of coverage.
Sec. 204. new subsecton s added to secton 1 as foows:
(p) The terms quarter and caendar quarter sha mean a perod of
three caendar months endng on March 31, une 30, September 30, or De-
cember 31.
Sec. 205. Secton 2(a) s amended by substtutng for a that porton of the
subsecton after the frst numbered paragraph the foowng:
2. Women who w have attaned the age of s ty and w have competed
thrty years of servce.
3. Indvduas who w have attaned the age of s ty and w have com-
peted thrty years of servce, but the annuty of such an ndvdua sha be re-
duced by one one-hundred-and-eghteth for each caendar month that he s under
age s ty-fve when hs annuty begns to accrue.
4. Indvduas havng a current connecton wth the raroad ndustry, and
whose permanent physca or menta condton s such as to be dsabng for
work n ther reguar occupaton, and who () w have competed twenty
years of servce or () w have attaned the age of s ty. The oard, wth
the cooperaton of empoyers and empoyees, sha secure the estabshment of
standards determnng the physca and menta condtons whch permanenty
dsquafy empoyees for work n the severa occupatons n the raroad ndustry,
and the oard, empoyers, and empoyees sha cooperate n the promoton of the
greatest practcabe degree of unformty n the standards apped by the severa
empoyers. n Indvdua s condton sha be deemed to be dsabng for work n
bs reguar occupaton f he w have been dsquafed by hs empoyer because
of dsabty for servce n hs reguar occupaton n accordance wth the app-
cabe standards so estabshed f the empoyee w not have been so dsquafed
by hs empoyer, the oard sha determne whether hs condton s dsabng for
work n hs reguar occupaton n accordance wth the standards generay estab-
shed and, f the empoyee s reguar occupaton s not one wth respect to whch
standards w have been estabshed, the standards reatng to a reasonaby com-
parabe occupaton sha be used. If there s no such comparabe occupaton,
the oard sha determne whether the empoyee s condton s dsabng for work
n hs reguar occupaton by determnng whether under the practces generay
prevang n ndustres n whch such occupaton e sts such condton s a per-
manent dsquafcaton for work n such occupaton. or the purposes of ths
secton, an empoyee s reguar occupaton sha be deemed to be the occupa-
ton n whch he w have been engaged n more caendar months than the caen-
dar months n whch he w have been engaged n any other occupaton durng the
ast precedng fve caendar years, whether or not consecutve, n each of whch
years he w have earned wages or saary, e cept that, f an empoyee estab-
shes that durng the ast ffteen consecutve caendar years he w have been
engaged n another occupaton n one-haf or more of a the months n whch he
w have earned wages or saary, he may cam such other occupaton as hs
reguar occupaton or
5. Indvduas whose permanent physca or menta condton s such that
they are unabe to engage n any reguar empoyment and who () have com-
peted ten years of servce, or () have attaned the age of s ty.
Such satsfactory proof sha be made from tme to tme as prescrbed by
the oard, of the dsabty provded for n paragraph 4 or 5 and of the con-
tnuance of such dsabty (accordng to the standards apped n the estabsh-
ment of such dsabty) unt the empoyee attans the age of s ty-fve. If the
ndvdua fas to compy wth the requrements prescrbed by the oard as to
proof of the contnuance of the dsabty unt he attans the age of s ty-fve
years, hs rght to an annuty by reason of such dsabty sha, e cept for good
cause shown to the oard, cease, but wthout pre|udce to hs rghts to any sub-
sequent annuty to whch he may be entted. If before attanng the age of
s ty-fve an empoyee n recept of an annuty under paragraph 4 or 5 s found
by the oard to be no onger dsabed as provded n sad paragraphs hs annuty
sha cease upon the ast day of the month In whch he ceases to be so dsabed.
n empoyee, n recept of such annuty, who earns more than 7o n servce
for hre, or n sef-empoyment, n each of any s consecutve caendar months,
sha be deemed to cease to be so dsabed n the ast of such s months and
such empoyee sha report to the oard mmedatey a such servce for hre,
or such sef-empoyment. If after cessaton of hs dsabty annuty the em-
poyee w have acqured addtona years of servce, such addtona years of
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servce may be credted to hm wth the same effect as f no annuty had prev-
ousy been awarded to hm.
Sec.206. Secton 2(b) s amended by substtutng for 2(b) and 3 the
numbers 4 and 5 respectvey.
Sec. 207. Secton 3(b)(4) s amended by substtutng for the porton of the
sentence foowng une 30, 1937 the foowng: and after the end of the
caendar year n whch the ndvdua attans the age of s ty-fve .
Sec. 20 . Secton 3(c) s amended by substtutng the phrase pad to an em-
poyee wth respect to for the phrase earned by an empoyee In .
Sec. 209. Secton 3(c) s further amended by substtutng for that porton
of the subsecton foowng the phrase and (2) the foowng: the amount
of compensaton pad or attrbutabe as pad to hm wth respect to each month of
servce before September 1941 as a staton empoyee whose dutes conssted of
or ncuded the carryng of passengers hand baggage and otherwse assstng
passengers at passenger statons and whose remuneraton for servce to the
empoyer was, n whoe or n substanta part, n the forms of tps, sha be the
monthy average of the compensaton pad to hm as a staton empoyee n hs
months of servce n the perod September 1940- ugust 1941: Propded, how-
ever, That where servce n the perod 1924-1931 n the one case, or n the perod
September 1940- ugust 1941 n the other case, s, n the |udgment of the oard,
nsuffcent to consttute a far and equtabe bass for determnng the amount
of compensaton pad or attrbutabe as pad to hm n each month of servce
before 1937, or September 1941, respectvey, the oard sha determne the
amount of such compensaton for each such month n such manner as n ts
udgment sha be far and equtabe. In computng the monthy compensaton,
no part of any month s compensaton n e cess of 300 sha be recognzed.
Sec. 210. Secton 3(e) s amended to read as foows:
(e) In the case of an ndvdua havng a current connecton wth the raroad
ndustry and not ess than fve years of servce, the mnmum annuty payabe
sha, before any reducton pursuant to subsecton 2(a) (3), be whchever of the
foowng s the east: (1) 3 mutped by the number of hs years of servce
or (2) 50 or (3) hs monthy compensaton.
Seo. 211. Secton 3(f) s amended to read as foows:
nnuty payments w-hch w have become due an ndvdua but w not yet
have been pad at death sha be pad to the same Indvdua or ndvduas who,
n the event that a ump sum w have become payabe pursuant to secton 5
hereof upon such death, woud be entted to receve such ump sum, n the same
manner as, and sub|ect to the same mtatons under whch, such ump stun
woud be pad, e cept that, as determned by the oard, frst, brothers and ssters
of the deceased, and f there are none such, then grandchdren of the deceased,
f vng on the date of the determnaton, sha be entted to receve payment
pror to any payment beng made for rembursement of bura e penses. If
there be no ndvdua to whom payment can thus be made, such annuty pay-
ments sha escheat to the credt of the Raroad Retrement ccount.
Sec. 212. Secton 4 s repeaed, secton 3 s renumbered as secton 4, sub-
sectons (h) and (m) of sad secton are repeaed, and a references to secton
3 are changed to 4 .
Sec. 213. The headng precedng secton 5, and secton 5 are amended to
read as foows:
NNUITI S ND LUMP SUMS O SU r O S.
Sec 5. (a) Wdow s nsuhance annuty. wdow of a competey nsured
empoyee, who w have attaned the age of s ty-fve, sha be entted durng
the remander of her fe or, If she remarres, then unt remarrage to an annuty
for each mouth equa to three-fourths of such empoyee s basc amount.
(b) Wdow s current nsurance annuty. wdow of a competey or par-
tay nsured empoyee, who s not entted to an annuty under subsecton (a)
and who at the tme of fng an appcaton for an annuty under ths subsecton
w have n her care a chd of such empoyee entted to receve an annuty under
subsecton (c) sha be entted to an annuty for each month equa to three-
fourths of the empoyee s basc amount. Such annuty sha cease upon her death,
upon her remarrage, when she becomes entted to an annuty under subsecton
(a), or when no chd of the deceased empoyee s entted to receve an annuty
under subsecton (c), whchever occurs frst.
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275
(c) Chd s nsurance annuty. very chd of nn empoyee who w have
ded competey or partay nsured sha be entted, for so ong as such chd
ves and meets the quafcatons set forth n paragraph (1) of subsecton (1), to
an annuty for each month equa to one-haf of the empoyee s basc amount.
(d) Parent s nsurance annuty. ach parent, s ty-fve years of age or
over, of a competey nsured empoyee, who w have ded eavng no wdow
and no chd, sha be entted, for fe, or, f such parent remarres after the
empoyee s death, then unt such remarrage, to an annuty for each month equa
to one-haf of the empoyee s basc amount.
(e) When there s more than one empoyee wth respect to whose death a
parent or chd s entted to an annuty for a month, such annuty sha be one-
haf of whchever empoyee s basc amount s greatest.
(f) Lump-sum payment. Upon the death, on or after anuary 1, 1947, of a
competey or partay nsured empoyee who w have ded eavng no wdow,
chd, or parent who woud on proper appcaton therefor be entted to receve
an annuty under ths secton for the month n whch such death occurred, there
sha be pad a ump sum of eght tmes the empoyee s basc amount to the foow-
ng person (or f more than one there sha be dstrbuted among them) whose
reatonshp to the deceased empoyee w have been determned by the oard, and
who w have been vng on the date of such determnaton: to the wdow or
wdower of the deceased or, f no such wdow or wdower be then vng, to any
chd or chdren of the deceased and to any other person or persons who, under
the ntestacy aw of the State where the deceased w have been domced, w
have been entted to share as dstrbutees wth such chdren of the deceased, n
such proportons as s provded by such aw or, If no wdow or wdower and no
such chd and no such other person be then vng, to the parent or parents of the
deceased, n equa shares. person who s entted to share as dstrbutee wth
an above-named reatve of the deceased sha not be precuded from recevng a
payment under ths subsecton by reason of the fact that no such named reatve
w have survved the deceased or of the fact that no such named reatve of the
deceased w have been vng on the date of such determnaton. If none of the
persons descrbed n ths subsecton be vng on the date of such determnaton,
such amount sha bo pad to any person or persons, equtaby entted thereto,
to the e tent and n the proportons that he or they sha have pad the
e penses of bura of the deceased. If a ump sum woud be payabe to a
wdow, chd, or parent under ths subsecton e cept for the fact that a survvor
w have been entted to receve an annuty for the month n whch the
empoyee w have ded, but wthn one year after the empoyee s death there
w not have accrued to survvors of the empoyee, by reason of hs death annu-
tes whch, after a deductons pursuant to paragraph (1) of subsecton () w
have been made, are equa to such ump sum, a payment to any then survvng
wdow, chdren, or parents sha nevertheess be made under ths subsecton equa
to the amount by whch such ump sum e ceeds such annutes so accrued after
such deductons. No payment sha be made to any person under ths subsecton,
uness appcaton therefor sha have been fed by or on behaf of any suc person
(whether or not egay competent), pror to the e praton of two years after the
date of death of the deceased empoyee, e cept that If the deceased empoyee s a
person to whom secton 2 of the ct of March 7, 1912 (56 Stat. 143, 144), s
appcabe such two years sha run from the date on whch the deceased empoyee,
pursuant to sad ct, s determned to be dead, and for a other purposes of ths
secton such empoyee, so ong as It does not appear that he s n fact ave, sha
be deemed to have ded on the date determned pursuant to sad ct to be the date
or presumptve date of death.
(g) Correaton of payments. (1) n ndvdua, entted on appyng
therefor to receve for a month before anuary 1,1947, an nsurance beneft under
the Soca Securty ct on the bass of an empoyee s wages, whch beneft s
greater n amount than woud be an annuty for such ndvdua under ths sec-
ton wth respect to the death of such empoyee, sha not be entted to such annu-
ty. n Indvdua, entted on appyng therefor to any annuty or ump sum
under ths secton wth respect to the death of an empoyee, sha not be entted
to a ump-sum death payment or, for a month begnnng on or after anuary 1,
1947, to any Insurance benefts under the Soca Securty ct on the bass of the
wages of the same empoyee.
(2) wdow or chd, otherwse entted to an annuty under ths secton,
sha be entted ony to that part of such annuty for a month whch e ceeds the
tota of any retrement annuty, and nsurance beneft under the Soca Securty
ct to whch such wdow or chd woud be entted for such month on proper
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277
dvdua fed an appcaton for such annuty: Provded, That such ndvdua s
annuty sha begn wth the frst month for whch he w otherwse have been
entted to receve such annuty f he fes such appcaton pror to the end of
the thrd month mmedatey succeedng such month. No appcaton for an
annuty under ths secton fed pror to three months before the frst month for
whch the appcant becomes otherwse entted to receve such annuty sha
be accepted. No annuty sha be payabe for the month n whch the recpent
thereof ceases to be quafed therefor.
(k) Provsons for credtng raroad ndustry servce under the soca
securty act n certan cases. (1) or the purpose of determnng nsurance
benefts under tte II of the Soca Securty ct whch woud begn to accrue on
or after anuary 1, 1947, to a wdow, parent, or survvng chd, and wth respect
to ump-sum death payments under such tte payabe n reaton to a death
occurrng on or after such date, secton 15 of the Raroad Retrement ct of
1935, secton 209(b)(9) of the Soca Securty ct, and secton 17 of ths ct
sha not operate to e cude from empoyment , under tte II of the Soca
Securty ct, servce whch woud otherwse be Incuded n such empoyment
but for such sectons. or such purpose, compensaton pad n a caendar year
sha, n the absence of evdence to the contrary, be presumed to have been pad
n equa proportons wth respect to a months n the year n whch the empoyee
w have been n servces as an empoyee.
(2) Not ater than anuary 1, 1950, the oard and the edera Securty
dmnstrator sha make a speca |ont report to the Presdent to be submtted
to Congress settng forth the e perence of the pard n credtng wages toward
awards, and the e perence of the Soca Securty oard n credtng compensa-
ton toward awards, and ther recommendatons for such egsatve changes as
are deemed advsabe for equtabe dstrbuton of the fnanca burden of such
awards between the retrement account and the edera Od ge and Survvors
Insurance Trust und.
(3) The oard and the edera Securty dmnstrator sha, upon request,
suppy each other wth certfed reports of records of compensaton or wages and
perods of servce and of other records n ther possesson or whch they may
secure, pertnent to the admnstraton of ths secton or tte II of the Soca
Securty ct as affected by paragraph (1). Such certfed reports sha be con-
cusve n ad|udcaton as to the matters covered theren: Provded, That f the
oard or the edera Securty dmnstrator receves evdence nconsstent wth
a certfed report and the appcaton nvoved s st n course of ad|udcaton or
otherwse open for such evdence, such recertfcaton of such report sha be made
as, n the |udgment of the oard or the edera Securty dmnstrator, whch-
ever made the orgna certfcaton, the evdence warrants. Such recertfca-
ton and any subsequent recertfcaton sha be treated n the same manner and
be sub|ect to the same condtons as an orgna certfcaton.
(1) Defntons. or the purposes of ths secton the term empoyee
ncudes an ndvdua who w have been an empoyee , and
(1) The quafcatons for wdow , chd , and parent sha be, e cept for
the purposes of subsecton (f), those set forth n secton 209 (|) and (k), and
secton 202(f) (3) of the Soca Securty ct, respectvey and n addton
() a wdow sha have been vng wth her husband empoyee at the
tme of hs death
() a chd sha have been dependent upon ts parent empoyee at
the tme of hs death sha not be adopted after such death sha be un-
marred and ess than eghteen years of age and
() a parent sha have been whoy dependent upon and supported
at the tme of hs death by the empoyee to whom the reatonshp of parent
s camed and sha have fed proof of such dependency and support wthn
two years after such date of death, or wthn s months after anury 1,
1947.
wdow or chd sha be deemed to have been so vng wth a husband or
so dependent upon a parent f the condtons set forth n secton 209(n) or secton
202(c) (3) or (4) of the Soca Securty ct, respectvey, are fufed. In
determnng whether an appcant s the wfe, wdow, chd, or parent of an
empoyee as camed, the rues set forth n secton 209(m) of the Soca Securty
ct sha be apped
(2) The term retrement annuty sha mean an annuty under secton 2
awarded before or after ts amendment but not ncudng an annuty to a sur-
vvor pursuant to an eecton of a |ont and survvor annuty and the term
penson sha mean a penson under secton 6
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27
(3) The term quarter of coverage sha mean a compensaton quarter of
coverage or a wage quarter of coverage, and the term quarters of coverage
sha mean compensaton quarters of coverage, or wage quarters of coverage,
or both: Provded. That there sha be for a snge empoyee no more than four
quarters of coverage for a snge caendar year
(4) The term compensaton quarter of coverage sha mean any quarter
of coverage computed wth respect to compensaton pad to an empoyee after
1930 n accordance wth the foowng tabe:
Tota compensaton pad n the caendar year.
Months of servce In a caendar year.
Less than
50.
50 but
ess than
100 but
ess t han
150.
150 but
ess than
200.
200 or
more.
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(5) The term wage quarter of coverage sha mean any quarter of coverage
determned n accordance wth the provsons of tte II of the Soca Securty
ct
(6) The term wages sha mean wages as defued n secton 209(a) of the
Soca Securty ct
(7) n empoyee w have been competey nsured f t appears to the
satsfacton of the oard that at the tme of hs death, whether before or after
the enactment of ths secton, he w have had the quafcatons set forth n auy
one of the foowng paragraphs:
() a current connecton wth the raroad ndustry- and a number of
quarters of coverage, not ess than s , and at east equa to one-haf of the
number of quarters, eapsng n the perod after 1936, or after the quarter
whch he w have attaned the age of twenty-one, whchever s ater, and
up to hut e cudng the quarter n whch he w have attaned the ase of
s ty-fve years or ded, whchever w frst have occurred (e cudng from
the eapsed quarters any quarter durng any part of whch a retrement an-
nuty w have been payabe to hm) and f the number of such eapsed
quarters s an odd number such number sha be reduced by one or
() a current connecton wth the raroad ndustry and forty or more
quarters of coverage or
() a penson w have been payabe to hm or a retrement annuty
based on servce of not ess than ten years (as computed n awardng the
annuty) w have begun to accrue to hm before 194S
( ) n empoyee w have been partay nsured f t appears to the sats-
facton of the oard that at the tme of hs death, whether before or after the
enactment of ths secton, he w have had () a current connecton wth the
raroad ndustry and () s or more quarters of coverage n the perod be-
gnnng wth the thrd caendar year ne t precedng the year n whch he w
have ded and endng wth the quarter ne t precedng the quarter n whch he
w have ded
(9) n empoyee s average monthy remuneraton sha mean the quotent
obtaned by dvdng ( ) the sum of the compensaton and wages pad to hm
after 1936 and before the quarter n whch he w have ded, emnatng for any
snge caendar year, from compensaton, any e cess over 300 for any caendar
month n such year, and from the sum of wages and compensaton any e cess over
3,000, by ( ) three tmes the number of quarters eapsng after 1936 and before
the quarter n whch he w have ded: Provded, That for the perod pror to
and ncudng the caendar year In whch he w have attaned the age of twenty-
two there sha be ncuded n the dvsor not more than three tmes the number
of quarters of coverage n such perod: Provded further. That there sha be e -
cuded from the dvsor any caendar quarter durng auy part of whch a retre-
ment annuty w have been payabe to hm.
Wth respeqt to an empoyee who w have been awarded a retrement an-
nuty, the term compensaton sha, for the purposes of ths paragraph, mean
the compensaton on whch such annuty w have been based
(10) The term basc amount sha mean
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279
(1) for an empoyee who w have been partay nsured, or competey
Insured soey by vrtue of paragraph (7)() or (7)() or both: the sum
of ( ) 40 per centum of hs average monthy remuneraton, up to and n-
cudng. pus ( ) 10 per centum of such average monthy remuneraton
e ceedng 75 and up to and ncudng 250, pus (C) per centum of the sum
of ( ) pus ( ) mutped by the number of years after 1936 n each of
whch the compensaton, wages, or both, pad to hm w have been equa
to 200 or more f the basc amount, thus computed, s ess than 10 It sha
be ncreased to 10
() for an empoyee who w have been competey nsured soey by
vrtue of paragraph (7) () : the sum of 40 per centum of hs monthy com-
pensaton f an annuty w have been payabe to hm, or, f a penson w
have been payabe to hm, 40 per centum of the average monthy earnngs
on whch such penson was computed, up to and ncudng 75, pus 10 per
centum of such compensaton or earnngs e ceedng 75 and up to and n-
cudng 250. If the average monthy earnngs on whch a penson payabe
to hm was computed are not ascertanabe from the records n the possesson
of the oard, the amount computed under ths subdvson sha be 33.33,
e cept that f the penson payabe to hm was ess than 25, such amount sha
be four-thrds of the amount of the penson or 13.33, whchever s greater.
The term monthy compensaton sha, for the purposes of ths subdvson,
mean the monthy compensaton used n computng the annuty
() for an empoyee who w have been competey nsured under para-
graph (7) () and ether (7) () or (7) () : the hgher of the two amounts
computed n accordance wth subdvsons () and ().
Sec. 214. Secton s amended by strkng out the word monthy each tme
t appears by substtutng for the phrase ny such return the phrase The
oard s record of the compensaton so returned by substtutng for the phrases
earned by and be earned by the phrases pad to and w have been
pad to , respectvey by nsertng after the phrase the fact that the phrase
the oard s records show that and by substtutng for the terms month
and caendar month the word perod .
Sec. 215. Secton 11 s amended to read as foows:
Decsons of the oard determnng the rghts or abtes of any person
under ths ct sha be sub|ect to |udca revew n the same manner, sub|ect
to the same mtatons, and a provsons of aw sha appy n the same manner
as though the decson were a determnaton of correspondng rghts or abtes
under the Raroad Unempoyment Insurance ct e cept that the tme wthn
whch proceedngs for the revew of a decson wth respect to an annuty, penson,
or ump-sum beneft may be commenced sha be one year after the decson w
have been entered upon the records of the oard and communcated to the
camant.
Dvson III.
The Raroad Unempoyment Insurance ct s amended as foows:
Sec. 301. (a) Subsecton 1(h) s amended by nsertng after the phrase ast
precedng regstraton perod the phrase whch began wth a day for whch
he regstered at an empoyment offce .
(b) Subsecton 1(h) s further amended by addng the foowng sentence:
The term regstraton perod means aso, wth respect to any empoyee, the
perod whch begns wth the frst day wth respect to whch a statement of sckness
s fed n hs behaf n accordance wth such reguatons as the oard may
prescrbe, or the frst such day after the end of a regstraton perod whch w
have begun wth a day wth respect to whch a statement of sckness was fed
n hs behaf, and ends wth the thrteenth day thereafter.
Sec. 302. Subsecton (|) s amended by substtutng for the perod at the end
thereof a comma and addng maternty nsurance, or sckness nsurance .
Sec. 303. The frst paragraph of subsecton (k) s amended by nsertng (1)
after the phrase secton 4 of ths ct, , and by substtutng for the coon before
the phrase Provded, however, the foowng: and (2) a day of sckness ,
wth respect to any empoyee, means a caendar day on whch because of any
physca, menta, psychoogca, or nervous n|ury, ness, sckness, or dsease he
s not abe to work or whch s ncuded n a maternty perod, and wth respect
to whch () no remuneraton s payabe or accrues to hm, and () n accordance
wth such reguatons as the oard may prescrbe, a statement of sckness Is
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fed wthn such reasonabe perod, not n e cess of ten days, as the oard may
prescrbe: .
Sec. 304. Subsecton 1 (1) s amended by substtutng therefor the foowng:
(1) The term benefts (e cept n phrases ceary desgnatng other payments)
means the money payments payabe to an empoyee as provded n ths ct, wth
respect to hs unempoyment or sckness.
(1) (1) The term statement of sckness means a statement wth respect to
days of sckness of an empoyee, and the term statement of maternty sckness
means a statement wth respect to a maternty perod of a femae empoyee, n each
case e ecuted n such manner and form by an ndvdua duy authorzed pursuant
to secton 12( to e ecute such statements, and ted as the o trd may prescrbe
by reguaton
(1)(2) The term maternty perod means the perod begnnng ffty-seven
days pror to the date stated by the doctor of a femae empoyee to be the
e pected date of the brth of the empoyee s chd and endng wth the one hundred
and ffteenth day after t begns or wth the thrty-frst day after the day of the
brth of the chd, whchever s ater.
Sec. 305. (a) The frst sentence of subsecton 2(a) s amended to read as
foows: enefts sha be payabe to any quafed empoyee () for each day of
unempoyment n e cess of seven durng the frst regstraton perod, wthn a
beneft year, n whch he w have had seven or more days of unempoyment, and
for each day of unempoyment n e cess of four durng any subsequent regstra-
ton perod n the same beneft year, and () for each day of sckness (other than
a day of sckness n a maternty perod) n e cess of seven durng the frst regs-
traton perod, wthn a beneft year, n whch he w have had seven or more
such days of sckness, and for each such day of sckness n e cess of four durng
nny subsequent regstraton perod n the same beneft year, and () for each day
of sckness n a maternty perod.
(b) Subsecton 2(a) s further amended by nsertng after the word unem-
poyment n the second sentence the words or sckness , by changng the phrase
the tota amount of compensaton payabe to hm wth respect to empoyment
to hs tota compensaton wth respect to empoyment , by substtutng the
foowng nes for the ast ne of the tabe:
1,000 to 1,999.99
2,000 to 2,499.99.
2,500 and over
and by addng to the subsecton, after the tabe, the foowng paragraphs:
The amount of benefts payabe for the frst fourteen days n each maternty
perod, and for the frst fourteen days n a maternty perod after the brth of
the chd, sha be one and one-haf tmes the amount otherwse payabe under
ths subsecton. enefts sha not be pad for more than eghty-four days of
sckness n a maternty perod pror to the brth of the chd. uafcaton for and
rate of benefts for days of sckness n a maternty perod sha not be affected by
the e praton of the beneft year n whch the maternty perod w have begun
uness n such beneft year the empoyee w not have been a quafed empoyee.
In computng benefts to be pad, days of unempoyment sha not be combned
wth days of sckness n the same regstraton perod.
Sec. 300. Subsecton 2(c) Is amended by substtutng for one hundred at the
end thereof the foowng: one hundred and thrty, and the ma mum number of
days of sckness, other than days of sckness n a maternty perod, wthn a
beneft year for whch benefts may be pad to an empoyee sha be one hundred
and thrty .
Sec. 307. Subsecton 2(f) s amended by nsertng after the word unempoy-
ment each tme t appears the words or sckness .
Sec. 30 . Secton 3 s amended by changng the phrase there was payabe to
hm compensaton of to hs compensaton w have been .
Sec. 309. (a) Secton 4(a) Is amended by redesgnatng t secton 4(a-). by
Incudng theren ony paragraphs (v) to (v), ncusve, by redesgnatng sad
paragraphs as () through (v), by nsertng after the phrase day of unem-
poyment, n the frst cause thereof the phrase or as a day of sckness, , and
by changng the semcoon at the end thereof to a perod.
(b) Secton 4(a-) s further amended by changng paragraph () thereof
to read as foows:
() any day n any perod wth respect to whch the oard fnds that he
s recevng or w have receved annuty payments or pensons under the
- 4.00
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Raroad Retrement ct of 1935 or the Raroad Retrement ct of 1937, or
nsurance benefts under tte II of the Soca Securty ct, or unempoyment,
maternty, or sckness benefts under an unempoyment, maternty, or sckness
compensaton aw of any State or of the Unted States other than ths ct,
or any other soca-nsurance payments under a aw of any State or of the
Unted States: Provded, That f an empoyee receves or s hed entted to
receve any such payments, other than unempoyment, maternty, or sckness
payments, wth respect to any perod whch ncude days of unempoyment or
sckness n a regstraton perod, after benefts under ths ct for such regs-
traton perod w have been pad, the amount by whch such benefts under
ths ot w have been ncreased by ncudng such days as d ys of unem-
poyment or as days of sckness sha be recoverabe by the e -1: Provded
further. That, f that part of any such payment or payment.,, other than
unempoyment, maternty, or sckness payments, whch s apportonabe to
such days of unempoyment or days of sckness s ess n amount than the
benefts under ths ct whch, but for ths paragraph, woud be payabe
and not recoverabe wth respect to such days of unempoyment or days of
sckness, the precedng provsons of ths paragraph sha not appy but such
benefts under ths ct for such days of unempoyment or days of sckness
sha be dmnshed or recoverabe n the amount of such part of such other
payment or payments .
(c) Secton 4 s further amended by nsertng after subsecton (a-1) a sub-
secton to be desgnated (a-2), n the foowng anguage: There sha not be
consdered as a day of unempoyment wth respect to any empoyee , by
ncudng n subsecton (a-2) paragraphs (), (), ( ), and (v) of subsecton
4(a) as t e sted pror to ts amendment by ths ct, and by redesgnatng sad
paragraph (v) as paragraph (v).
Sec. 310. Subsectons 4(b) through 4(e) are amended by substtutng for the
references to 4(a) (1) , 4(a) () , and 4(a) ( ) , references to 4(a-2) () ,
4(a-2) () , and 4(a-2) () , respectvey.
Sec. 311. (a) The frst paragraph of subsecton 5(c) s amended by strkng out
the phrase dstrct board at the end of the frst sentence thereof and substtut-
ng referee or such other revewng body as the oard may estabsh or assgn
thereto , and by strkng out the baance thereof.
(b) The thrd paragraph of subsecton 5(c) s amended by deetng the phrase
does not compy wth the provsons of ths ct and , and by nsertng between
the second and thrd sentences thereof the foowng:
The oard may aso desgnate one of ts offcers or empoyees to receve ev-
dence and report to the oard whether or not any person or company s entted
to a refund of contrbutons or shoud be requred to pay contrbutons under
ths ct, regardess of whether or not any cams for benefts w have been fed
upon the bass of servce n the empoy of such person or company, and sha
foow such procedure f contrbutons are assessed and payment s refused or
payment s made and a refund camed upon the bass that such person or com-
pany s or w not have been abe for such contrbutons.
Subsecton 5(c) s further amended by addng the foowng paragraph:
ny ssue determnabe pursuant to ths subsecton and subsecton (f) of ths
secton sha not be determned n any manner other than pursuant to ths sub-
secton and subsecton (f).
Sec. 312. Subsecton 5(d) s amended by substtutng for the phrase dstrct
boards the words revewng bodes , and by strkng out the phrase a ds-
trct board or of each tme t appears.
Sec. 313. Subsecton 5(e) s amended by deetng the phrases upon a cam
for benefts, and aowng or denyng benefts , and by changng the word
camant to partes .
Seo. 314. The frst sentence of subsecton 5(f) s amended to read as foows:
ny camant, or any raway abor organzaton organzed n accordance wth
the provsons of the Raway Labor ct, of whch camant s a member, or any
other party aggreved by a fna decson under subsecton (c) of ths secton,
may, ony after a admnstratve remedes wthn the oard w have been
avaed of and e hausted, obtan a revew of any fna decson of the oard by
fng a petton for revew wthn nnety days after the mang of notce of
such decson to the camant or other party, or wthn such further tme as
the oard may aow, n the Unted States crcut court of appeas for the crcut
n whch the camant or other party resdes or w have had hs prncpa pace
2 29 47 19
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of busness or prncpa e ecutve offce, or In te Unted States Crcut Court of
ppeas for the Seventh Crcut or In the Court of ppeas for the Dstrct of
Coumba.
Sue. 315. Subsecton 5(g) Is amended by substtutng for the phrase benefts
or refund and the words benefts or refund, the determnaton of any other
matter pursuant to subsecton (c) of ths secton, and .
Sec. 16. Subsecton 5(1) s amended by nsertng after the word camant
each tme t appears the words or other propery Interested person and by
nsertng after the phrase counse or agent the words for a camant .
Sec. 317. Secton 6 Is amended by substtutng for the phrase earned by ,
each tme t appears, and for the phrase be earned by , the phrases pad to
and have been pad to , respectvey.
Sec. 31 . (a) Secton (a) s amended by changng the word payabe to
pad wherever It appears and by substtutng for the porton of the subsecton
begnnng wth the words and each such empoyer and contnung to the end of
the subsecton, the foowng: and each empoyer other than a subordnate unt
of a natona raway-abor-organsaton empoyer sha be abe for that
proporton of the contrbuton wth respect to such compensaton pad by a such
empoyers whch the compensaton pad by hm after December 31, 1946, to the
empoyee for servces durng any caendar month after 1 46 bears to the tota
compensaton pad by a such empoyers after December 1.1 46, to such empoyee
for servces rendered durng such month: and In the event that the compensa-
ton so pad by such empoyers to the empoyee for servces rendered durng such
month s ess than 00, each subordnate unt of a natona ra way-abor-organ-
zaton empoyer sha be abe for such proporton of any addtona contrbuton
as the compensaton pad by such empoyer after December 31, 1946, to such em-
poyee for servces rendered durng such month bears to the tota compensaton
pad by a such empoyers after December 31, 1946, to such empoyee for servces
rendered durng such month.
(b) Subsecton (h) of secton of the Raroad Unempoyment Insurance ct
as amended, s amended to read as foows:
(h) provsons of aw, ncudng penates, appcabe wth respect to any
ta Imposed by secton 1 00 or 2700 of the Interna Revenue Code, and the prov-
sons of secton 3661 of such code, Insofar as appcabe and not nconsstent wth
the provsons of ths ct, sha be appcabe wth respect to the contrbuton
requred by ths ct: Provded, That a authorty and functons conferred by or
pursuant to such provsons upon any offcer or empoyee of the Unted tates,
e cept the authorty to nsttute and prosecute, and the functon of Insttutng
and prosecutng, crmna proceedngs, sha, wth respect to such contrbutons,
be vested n and e ercsed by the oard or such offcers and empoyees of the
oard as t may desgnate therefor.
Sec. 319. Subsecton 12(b) s amended by Insertng after the phrase beng
carred on n the Dstrct of Coumba, the phrase or the Dstrct Court of the
Unted States for the Northern Dstrct of Inos, If the Investgaton or proceed-
ng s beng carred on n the Northern Dstrct of Inos, and by Insertng
before the phrase n such proceedngs may run the phrase or of the Dstrct
Court of the Unted States for the Northern Dstrct of Inos .
Sec. 320. Subsecton 12(f) Is amended by changng the phrases unempoy-
ment-compensaton aws , unempoyment benefts , and unempoyment-com-
pensaton aw to unempoyment-compensaton, sckness, or maternty aws ,
unempoyment, sckness, or maternty benefts , and unempoyment-compensa-
ton, sckness, or maternty aw , respectvey.
Sec. 321. Subsecton 12(g) s amended by nsertng after the word unempoy-
ment , each tme t appears, the phrase , sckness, or maternty , and by
strkng out the phrase , wth respect to unempoyment after une SO, 1939, .
Sec. 322. Subsecton 12(1) s amended by Insertng the foowng paragraph
between the second and thrd paragraphs thereof:
The oard sha provde a form or forms for statements of sckness and a
procedure for the e ecuton and fng thereof. Such forms and procedure sha
be desgned wth a vew to havng such statements provde substanta evdence
of the days of sckness of the empoyee and, In the case of maternty sckness,
the e pected date of brth and the actua date of brth of the chd. Such
statements may be e ecuted by any doctor (authorzed to practce n the State
or foregn |ursdcton n whch he practces hs professon) or any offcer or
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supervsory empoyee of a hospta, cnc, group heath assocaton, or other
smar organzaton, who s quafed under such reguatons as the oard may
prescrbe to e ecute such statements. The oard sha ssue reguatons for
the quafcaton of such persons to e ecute such statements. When so e ecuted
by any such person, or, n the dscreton of the oard, by others desgnated
by the oard ndvduay or by groups, they may be accepted as nta proof
of days of sckness suffcent to certfy for payment a cam for benefts.
Sec. 323. Secton 12 s further amended by addng thereto the foowng
subsectons:
(n) ny empoyee camng, entted to, or recevng sckness benefts under
ths ct may be requred to take such e amnaton, physca, medca, menta,
or otherwse, n such manner and at such tmes and by such quafed ndvduas,
ncudng medca offcers or empoyees of the Unted States or a State, as the
oard may prescrbe. The pace or paces of e amnaton sha be reasonaby
convenent for the empoyee. No sckness or maternty benefts sha be payabe
under ths- ct wt respect to any perod durng whch the empoyee unreason-
aby refuses to take or wfuy obstructs an e amnaton as prescrbed by
the oard.
ny doctor who renders any attendance, treatment, attenton, or care, or
performs any e amnaton wth respect to a sckness of an empoyee or as to
the e pected date of brth of a femae empoyee s chd, or the brth of such
a chd, upon whch a cam or rght to benefts under ths ct s based, sha
furnsh the oard, n such manner and form and at such tmes as the oard
by reguatons may prescrbe, nformaton and reports reatve thereto and to
the condton of the empoyee. n appcaton for sckness or maternty benefts
under ths ct sha contan a waver of any doctor-patent prvege that the
empoyee may have wth respect to any sckness or maternty perod upon
whch such appcaton s based: Provded, That such nformaton sha not
be dscosed by the oard e cept n a court proceedng reatng to any cam
for benefts by the empoyee under ths ct.
The oard may enter Into agreements or arrangements wth doctors, hos-
ptas, cncs, or other persons for secur|ng the e amnaton, physca, medca,
menta, or otherwse, of empoyees camng, entted to, or recevng sckness or
maternty benefts under ths ct and the performance of servces or the use
of factes n connecton wth the e ecuton of statements of sckness. The
oard may compensate any such doctors, hosptas, cncs, or other persons
upon such reasonabe bass as the oard sha prescrbe. Such doctors, hos-
ptas, cncs, or other persons and persons empoyed by any of them sha
not be sub|ect to the ct of Congress npproved March 3, 1917 (39 Stat. 1106,
ch. 163, sec. 1). In the event that the oard pays for the physca or menta
e amnaton of an empoyee or for, the e ecuton of a statement of sckness
and such empoyee s cam for benefts s based upon such e amnaton or
statement, the oard sha deduct from any sckness or maternty benefts pay-
abe to the empoyee pursuant to such cam such amount as, n the |udgment
of the oard, s a far and reasonabe charge for such e amnaton or e ecu-
ton of such statement.
(o) enefts payabe to an empoyee wth respect to days of sckness sha
be payabe regardess of the abty of any person to pay damages for such
nfrmty. The oard sha be entted to rembursement from any sum or
damages pad or payabe to such empoyee or other person through sut, com-
promse, settement, |udgment, or otherwse on account of any abty (other
than a abty under a heath, sckness, accdent, or smar nsurance pocy)
based upon such nfrmty, to the e tent that t w have pad or w pay
benefts for days of sckness resutng from such nfrmty. Upon notce to
the person aganst whom such rght or cam e sts or s asserted, the oard
sha have a en upon such rght or cam, any |udgment obtaned thereunder,
and any sum or damages pad under such rght or cam, to the e tent of the
amount to whch the oard s entted by way of rembursement.
(p) The oard may, after hearng, dsquafy any person from e ecutng
statements of sckness who, the oard fnds, () w have socted, or w
have empoyed another to soct, for hmsef or for another the e ecuton of
any such statement, or () w have made fase or mseadng statements
to the oard, to any empoyer, or to any empoyee, n connecton wth the
awardng of any benefts under ths ct, or () w have faed to submt
medca reports and records requred by the oard under ths ct, or w have
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faed to submt any other reports, records, or Informaton requred by the oard
In connecton wth the admnstraton of ths ct or any other ct heretofore
or hereafter admnstered by the oard, or (v) w have engaged n any
mapractce or other professona msconduct. No fees or charges of any knd
sha accrue to any such person from the oard after hs dsquafcaton.
(q) The oard sha engage n and conduct research pro|ects, nvestga-
tons, and studes wth respect to the cause, care, and preventon of, and bene-
fts for, accdents and dsabtes and other sub|ects deemed by the oard
to be reated thereto, and sha recommend egsaton deemed advsabe n
the ght of such research pro|ects, nvestgatons, and studes.
Sue. 324. Subsecton 13(b) s amended by nsertng after 1939, n the frst
second, and thrd sentences thereof, and for the payment of sckness and
maternty benefts for sckness or for maternty perods after une 30, 1947. .
or to sckness or maternty benefts under a sckness or maternty aw of
any State wth respect to sckness or to maternty perods occurrng after
une 30, 1947, , and or of State sckness or maternty aws after une 30.
1947 , respectvey.
Dvson I .
Sec. 401. cept as otherwse provded In ths ct, the provsons thereof sha
become effectve upon approva.
Sec. 402. Secton 306 sha become effectve on uy 1, 1946, and sectons 203,
20f , 200, 207, 210, 211, 213, and 31 sha become effectve on anuary 1, 1947.
The amendments to secton 1532 of the Interna Revenue Code made by
sectons 1 and 3 (e) and (f) sha be effectve ony wth respect to servces
rendered after December 31, 1946. The amendments made by secton 3 (a),
(b), (c), and (d) sha take effect anuary 1, 1947. Sectons 1500, 1510, and
1520 of te Interna Revenue Code as n effect on December 31, 1946, sha
reman n fu force and effect on and after anuary 1, 1947, wth respect to
any remuneraton whch consttutes compensaton under the aw as n effect
on December 31, 1946, to whch such sectons as amended by ths ct are not
appcabe.
Sec. 403. Sectons 301, 302, 303, 304, 305 (e cept for the revson of the tabe
whch sha be effectve on the date of enactment of ths ct), 307, 30 , 300,
and 310 sha become effectve on uy 1, 1947.
Sec. 404. cept as herenafter provded, the rghts of persons to whom
pensons or annutes were awarded before the date of approva of ths ct
sha contnue to be governed by the provsons of aw appcabe thereto pror
to the approva of ths ct. In the award of annutes or Increases n an-
nutes after the date of approva of ths ct on appcatons on whch no
award or n parta award has been made pror to sad date, servce pror to
1937 (and the compensaton therefor) sha be credted ony f such servce Is
credtabe under the amendments made by secton 201. No annuty or ncrease
n annuty so awarded credtng such servce sha begn to accrue pror to
the date of approva of ths ct.
Sec. 405. The eecton of a ont and survvor annuty made before the date
of approva of ths ct by an ndvdua to whom an annuty accrues before
anuary 1, 1947, sha be gven effect as though the provsons of aw under whch
the eecton was made had contnued to be operatve uness no annuty was
awarded to such Indvdua pror to the date of approva of ths ct and, wthn
one year after the approva of ths ct, he revokes the eecton n such form and
manner aR the oard may prescrbe. Such eecton by an ndvdua to whom
no annuty accrues before anuary 1, 1947, sha aso be gven such effect f the
Indvdua, before anuary 1, 194 , reaffrms the eecton n such form and
manner as the oard may prescrbe.
Sec. 406. Payments upon death as provded In sectons 5 of the Raroad Re-
trement cts of 1935 and 1937, other than survvor annutes pursuant to an
eecton, sha be made ony wth respect to deaths occurrng before anuary
1, 1947.
Sec. 407. n ndvdua to whom an annuty accrued pror to anuary 1, 194 ,
and who woud as of the date of nta accrua have been entted to an annuty
n a greater amount by reason of the amendments made by secton 201, 202, 205,
or 210 had such amendments been n effect at the date of nta accrua (or, n
the case of a survvor annuty, at the date of nta accrua of the annuty from
whch t derves), sha, wthout further appcaton therefor other than a state-
ment of any servce camed under secton 202, be awarded an annuty In such
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1946-1 -12393
. R. 6 90. PU LIC L W 671, S NT -NINT CONGR SS
C PT R 7 , S COND S SSION .
n ct To amend the rst War Powers ct, 1941.
Unted States of merca n Congress assembed, That the rst War
Powers ct, 1941 (55 Stat. 3 ), as amended, s hereby further amended
by addng at the end of tte III thereof the foowng:
Sec. 305. The Tradng Wth the nemy ct of October 6, 1917 (40 Stat. 411),
as amended, s hereby further amended by nsertng after secton 2 thereof,
and before the secton added by Pubc Law 2, Seventy-nnth Congress, the
foowng sectons:

Sec. 6. (a) The vestng In or transfer to the en Property Custodan of
any property or Interest (other than any property or nterest acqured by the
Unted States pror to December 1 , 1941), or the recept by hm of any earnngs.
Increment, or proceeds thereof sha not render Inappcabe any edera, State,
Terrtora, or oca ta for any perod pror or subsequent to the date of such
vestng or transfer, nor render appcabe the e emptons provded n tte II
of the Soca Securty ct wth respect to servce performed n the empoy of
the Unted States Government or of any nstrumentaty of the Unted States.
(b) The en Property Custodan sha, notwthstandng the fng of any
cam or the nsttuton of any sut under ths ct, pay any ta ncdent to any
such property or Interest, or the earnngs, ncrement, or proceeds thereof, at
the earest tme appearng to hm to be not contrary to the nterest of the Unted
States. The former owner sha not be abe for any such ta accrung whe
such property, Interest, earnngs, ncrement, or proceeds are hed by the en
Property Custodan, uness they are returned pursuant to ths ct wthout pay-
ment of such ta by the en Property Custodan. very 6uch ta sha be
pad by the en Property Custodan to the same e tent, as neary as may be
deemed practcabe, as though the property or nterest had not been vested n
or transferred to the en Property Custodan, and sha be pad ony out of
the property or Interest, or earnngs, Increment, or proceeds thereof, to wheh
they are Incdent or out of other property or nterests acqured from the same
former owner, or earnngs, Increment, or proceeds. thereof. No ta abty
may be enforced from any property or nterest or the earnngs, Increment, or
proceeds thereof whe hed by the en Property Custodan e cept wth hs
consent. Where any property or Interest Is transferred, otherwse than pur-
suant to secton 9(a) or 32 hereof, the en Property Custodan may transfer
the property or nterest free and cear of any ta , e cept to the e tent of any
en for a ta e stng and perfected at the date of vestng, and the proceeds
of such transfer sha, for ta purposes, repace the property or nterest n
the hands of the en Property Custodan.
(c) Sub|ect to the provsons of subsecton (b) hereof, the manner of com-
putng any edera ta es, ncudng wthout mtaton by reason of ths enu-
meraton, the appcabty n such computaton of credts, deductons, and e -
emptons to whch the former owner s or woud be entted, and the tme and
manner of any payment of such ta es and the e tent of any compance by the
Custodan wth provsons of edera aw and reguatons appcabe wth re-
spect to edera ta es, sha be n accordance wth reguatons prescrbed by
the Commmssoner of Interna Revenue wth the approva of the Secretary of
the Treasury to effectuate ths secton. Statutes of mtatons on assessment,
coecton, refund, or credt of edera ta es sha be suspended, wth respect
to any vested property or nterest, or the earnngs, Increment or proceeds thereof,
whe vested and for s months thereafter but no Interest sha be pad upon
any refund wth respect to any perod durng whch the statute of mtatons
Is so suspended.
(d) The word ta as used n ths secton sha ncude, wthout mtaton
by reason of ths enumeraton, any property, ncome, e cess-profts, war-profts,
e cse, estate and empoyment ta , mport duty, and speca assessment and
aso any Interest, penaty, addtona amount, or addton thereto not arsng
from any act, omsson, negect, faure, or deay on the part of the Custodan.
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290
(b) Te amendment effected by subsecton (a) sha not operate, pror to
anuary 1, 1 4 , to nvadate any provson, In effect on the date of enactment
of ths ct, n any State unempoyment compensaton aw.
S C. 302. D INITION O MPLOYM NT.
That part of secton 1007(c) of the Interna Revenue Code, as amended, whch
reads as foows:
(c) mpoyment. The term empoyment means any servce performed
pror to anuary 1, 1940, whch was empoyment as denned n ths secton pror
to such date, and any servce, of whatever nature, performed after December
1, 1939, wthn the Unted States by an empoyee for the person empoyng hm,
rrespectve of the ctzenshp or resdence of ether, e cept
s amended, effectve uy 1, 1946, to read as foows:
(c) mpoyment. The term empoyment means any servce performed
pror to uy 1, 1946, whch was empoyment as denned n ths secton as n
effect at the tme the servce was performed and any servce, of whatever
nature, performed after une 30, 1946, by an empoyee for the person empoyng
hm. Irrespectve of the ctzenshtp or resdence of ether, ( ) wthn the Unted
States, or ( ) on or n connecton wth an mercan vesse under a contract
of servce whch s entered nto wthn the Unted States or durng the per-
formance of whch the vesse touches at a port n the Unted States, f the
empoyee s empoyed on and n connecton wth such vesse when outsde the
Unted States, e cept .
S C. 03. S R IC ON OR IGN SS LS.
Secton 1607(c) (4) of the Interna Revenue Code, as amended, s amended,
effectve uy 1, 1946, to read as foows:
(4) Servce performed on or n connecton wth a vesse not an mercan
vesse by an empoyee, f the empoyee s empoyed on and In connecton
wth such vesse when outsde the Unted States .
S C. 304. C RT IN IS ING S R IC S.
(a) Secton 1607(c) (15) of such Code s amended by strkng out or at
the end thereof.
(b) Secton 1607(c) (16) of such Code s amended by strkng out the perod
and nsertng n eu thereof the foowng: or .
(c) Secton 1607(c) of such Code s further amended by addng after para-
graph (16) a new paragraph.to read as foows:
(17) Servce performed by an ndvdua n (o as an offcer or member
of the crew of a vesse whe It s engaged n) the catchng, takng, harvest-
ng, cutvatng, or farmng of any knd of fsh, shefsh, Crustacea, sponges,
seaweeds, or other aquatc forms of anma and vegetabe fe (ncudng
servce performed by any such ndvdua as an ordnary ncdent to any
such actvty), e cept ( ) servce performed n connecton wth the catchng
or takng of samon or habut, for commerca purposes, and ( ) servce
performed on or n connecton wth a vesse of more than ten net tons
(determned n the manner provded for determnng the regster tonnage
of merchant vesses under the aws of the Unted States).
(d) The amendments made by ths secton sha take effect uy 1, 1946.
S C. 305. D INITION O M RIC N SS L
Secton 1607 of such Code, as amended, s further amended, effectve uy 1
1946, by addng after subsecton (m) a new subsecton to read as foows:
(n) mercan esse. The term mercan vesse means any vesse doc-
umented or numbered under the aws of the Unted States and Incudes any
vesse whch s nether documented or numbered under the aws of the Unted
States nor documented under the aws of any foregn country, f ts crew s
empoyed soey by one or more ctzens or resdents of the Unted States or
corporatons organzed under the aws of the Unted States or of any Stata
S C. 306. R CON RSION UN MPLOYM NT N ITS OR S M N.
The Soca Securty ct, as amended, Is amended by addng after secton
1201(c) a new tte to read as foows:
Tte III Reconverson Unempoyment enefts fob Seamen.
Sec. 1301. Ths tte sha be admnstered by the edera Securty d-
mnstrator.
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292
wages or saary for the ast pay perod of such servce occurrng pror to the
tme he fes hs Inta cam for compensaton: and
(2) to the e tent that nformaton Is nadequate to assure the prompt
payment of compensaton authorzed by ths secton (ether on the bass of
the e act wages or saares of the ndvduas concerned or on the bass
prescrbed In cause (1) of ths subsecton), accept certfcaton under oath
by ndvduas of facts reatng to ther edera martme ervoe and to
wages and saares pad them wth respect to such servce.
DMINISTR TION.
Sec. 1304. (a) Determnatons of enttement to payments of compensaton
by a State unempoyment compensaton agency under an agreement under ths
tte sha be sub|ect to revew In the same manner and to the same e tent as
determnatons under the State unempoyment compensaton aw, and ony n
such manner and to such e tent
(b) or the purpose of payments made to a State under Tte III admnstra-
ton by the unempoyment compensaton agency of such State pursuant to an
agreement under ths tte sha be deemed to be a part of the admnstraton
of the State unempoyment compensaton aw.
(c) The State unempoyment compensaton agency of each State sha fur-
nsh to the dmnstrator such nformaton as the dmnstrator may fnd neces-
sary In carryng out the provsons of ths tte, and such Informaton sha be
deemed reports requred by the dmnstrator for the purposes of secton
303(a) (6).
P YM NTS TO ST T S.
Sec. 1305. (a) ach State sha be entted to be pad by the Unted States
an amount equa to the addtona cost to the State of payments of compensaton
made under and n accordance wth an agreement under ths tte, whch woud
not have been ncurred by the State but for the agreement.
(b) In makng payments pursuant to subsecton (a) of ths secton, there
sha be pad to the State, ether In advance or by way of rembursement, as may
be determned by the dmnstrator, such sum as the dmnstrator estmates
the State w be entted to receve under ths tte for each caendar quarter
reduced or ncreased, as the case may be, by any sum by whch the dmnstrator
fnds that hs estmates for any pror caendar quarter were greater or ess than
the amounts whch shoud have been pad to the State. The amount of such pay-
ments may be determned by such statstca, sampng, or other method as may
be agreed upon by the dmnstrator and the State agency.
(c) The dmnstrator sha from tme to tme certfy to the Secretary of
the Treasury for payment to each State the sums payabe to such State under
ths secton. The Secretary of the Treasury, pror to audt or settement by the
Genera ccountng Offce, sha make payment, at the tme or tmes f ed by the
dmnstrator, n accordance wth certfcaton, from the funds for carryng out
the purposes of ths tte. Notwthstandng any other provson of ths tte,
no compensaton sha be pad to any ndvdua pursuant to ths tte wth respect
to unempoyment occurrng pror to the date when funds are made avaabe for
such payments.
(d) money pad to a State under ths secton sha be used soey for
the purposes for whch t s pad and any money so pad whch s not used
for such purposes sha be returned to the Treasury upon termnaton of the
agreement or termnaton of the reconverson perod, whchever frst occurs.
(e) n agreement under tWs tte may requre any offcer or empoyee of
the State certfyng payments or dsbursng funds pursuant to the agreement,
or otherwse partcpatng n ts performance, to gve a surety bond to the Unted
States n such amount as the dmnstrator may deem necessary, and may pro-
vde for the payment of the cost of such bond from appropratons for carryng
out the purposes of ths tte.
(f) No person desgnated by the dmnstrator, or desgnated pursuant to
an agreement under ths tte, as a certfyng offcer sha, n the absence of
gross neggence or ntent to defraud the Unted States, be abe wth respect
to the payment of any compensaton certfed by hm under ths tte.
(g) No dsbursng offcer sha, n the absence of gross neggence or Intent
to defraud the Unted States, be abe wth respect to any payment by hm
under ths tte f t was based upon a voucher sgned by a certfyng offcer
desgnated as provded n subsecton (f).
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S C. 402. C ILD S INSUR NC N ITS.
(a) Secton 202(c) (1) of such ct s amended by strkng out the word
adopted and substtutng n eu thereof the foowng: adopted (e cept for
adopton by a stepparent, grandparent, aunt, or unce subsequent to the death of
such fuy or currenty nsured ndvdua) .
(b) Secton 202(c) (3) (C) s amended to read as foows:
(C) such chd was vng wth and was chefy supported by such chd s
stepfather.
S C. 403. P R NT S INSUR NC N ITS.
(a) Secton 202(f)(1) of such ct s amended by strkng out eavng no
wdow and no unmarred survvng chd under the age of eghteen and nsert-
ng n eu thereof f such ndvdua dd not eave a wdow who meets the con-
dtons n subsecton (d) (1) (D) and ( ) or an unmarred chd under the age
of eghteen deemed dependent on such Indvdua under subsecton (c) (3) or
(4), and and by strkng out n cause ( ) thereof the word whoy and n-
sertng In eu thereof the word chefy .
(b) The amendment made by subsecton (a) of ths secton sha be appcabe
ony n cases of appcatons for benefts under ths ct fed after December 31,
194d
S C. 404. LUMP-SUM D T P YM NTS.
(a) Secton 202(g) of such ct s amended to read as foows:
LUMP-SUM D T P YM NTS.
(g) Upon the death, after December 31, 1939, of an ndvdua who ded a
fuy or currenty nsured ndvdua eavng no survvng wdow, chd, or parent
who woud, on fng appcaton n the month n whch such ndvdua ded, be
entted to a beneft for such month under subsecton (c), (d), (e), or (f) of ths
secton, an amount equa to s tmes a prmary nsurance beneft of such n-
dvdua sha be pad n a ump sum to the person, f any, determned by the
dmnstrator to be the wdow or wdower of the deceased and to have been
vng wth the deceased at the tme of death. If there s no such person, or If
such person des before recevng payment, then such amount sha be pad to any
person or persons, equtaby entted thereto, to the e tent and n the proportons
that he or they sha have pad the e penses of bura of such nsured ndvdua.
No payment sha be made to any person under ths subsecton, uness appcaton
therefor sha have been fed, by or on behaf of any such person (whether or not
egay competent), pror to the e praton of two years after the date of death
of such nsured Indvdua.
ony n cases where the death of the nsured ndvdua occurs after December
31, 1946.
(c) In the case of any ndvdua who, after December 6, 1941, and before the
date of the enactment of ths ct, ded outsde the Unted States (as defned n
secton 1101(a) (2) of the Soca Securty ct, as amended), the two-year perod
prescrbed by secton 202(g) of such ct for the fng of appcaton for a ump-
sum death payment sha not be deemed to have commenced unt the date of
enactment of ths ct. /
S C. 405. PPLIC TION OR PRIM RY INSUR NC N ITS.
(a) Secton 202(h) of such rt s nmended to read as foows:
(h) n ndvdua who woud have been entted to a beneft under subsecton
(a), (b), (c), (d), (e), or (f) for any month had he fed appcaton therefor
pror to the end of such month, sha be entted to such beneft for such month
f he fes appcaton therefor pror to the end of the thrd month mmedatey
succeedng such month. ny beneft for a month pror to the month n whch
appcaton s fed sha be reduced, to any e tent that may be necessary, so that
t w not render erroneous any beneft whch, before the fng of such appca-
ton, the dmnstrator has certfed for payment for such pror month.
ony n cases of appcatons for benefts under ths tte fed after December 3L
1946.
S C. 406. D DUCTIONS ROM INSUR NC N ITS.
(a) Secton 203(d) (2) of such ct (reatng to deductons for faure to attend
schoo) Is repeaed.
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S C. 412. D INITION O W G S INT RN L R NU COD .
(a) edera Insurance Contrbutons ct. Secton 1426(a)(1) of the ed-
era Insurance Contrbutons ct (Interna Revenue Code, sec. 1426(a)(1)) s
amended to read as foows:
(1) That part of the remuneraton whch, after remuneraton equa to
3,000 has been pad to an ndvdua by an empoyer wth respect to empoy-
ment durng any caendar year, s pad, pror to anuary 1,1947, to such nd-
vdua by such empoyer wth respect to empoyment durng such caendar
year or that part of the remuneraton whch, after remuneraton equa to
3,000 wth respect to empoyment after 1936 has been pad to an Indvdua
by an empoyer durng any caendar year after 1946, s pad to such ndvd-
ua by such empoyer durng such caendar year .
(b) edera Unemfoyment Ta ct. Secton 1 07(b)(1) of the edera
Unempoyment Ta ct (Interna Revenue Code, sec. 1607(b)(1)) s amended
to read as foows:
ment durng any caendar year, s pad after December 31, 1939, and pror
to anuary 1, 1947, to such ndvdua by such empoyer wth reseet to em-
poyment durng such caendar year or that part of the remuneraton whch,
after remuneraton equa to 3,000 wth respect to empoyment after 193
has been pad to an Indvdua by an empoyer durng any caendar year after
1946, spud to such ndvdua by such empoyer durng such caendar year .
S C. 413. SP CI L R UNDS TO MPLOY S.
Secton 1401(d) of the edera Insurance Contrbutons ct (Interna Revenue
Code, sec. 1401(d)) s amended to read as foows:
(d) Speca Refunds.
(1) Wages receved before 1947. If by reason of an empoyee render-
ng servce for more than one empoyer durng any caendar year after the
caendar year 1939, the wages of the empoyee wth respect to empoyment dur-
ng such year e ceed 3,000, the empoyee sha be entted to a refund of any
amount of ta , wth respect to such wages. Imposed by secton 1400, deducted
from such wages and pad to the coector, whch e ceeds the ta wth
respect to the frst 3,000 of such wages receved. Refund under ths secton
may be made n accordance wth the provsons of aw appcabe n the case
of erroneous or ega coecton of the ta e cept that no such refund sha
be made uness ( ) the empoyee makes a cam, estabshng hs rght
thereto, after the caendar year n whch the empoyment was performed
wth respect to whch refund of ta s camed, and ( ) such cam s made
wthn two years after the caendar year n whch the wages are receved
wth respect to whch refund of ta s camed. No nterest sha be aowed
or pad wth respect to any such refund. No refund sha be made under
ths paragraph wth respect to wages receved after December 31,1946.
(2) Wages receved after 4 . If by reason of an empoyee recevng
wages from more than one empoyer durng any caendar year after the
caendar year 1946, the wages receved by hm durng such year e ceed 3,000,
the empoyee sha be entted to a refund of any amount of ta , wth respect
to such wages, mposed by secton 1400 and deducted from the empoyee s
wages (whether or not pad to the coector), whch e ceeds the ta wth
respect to the frst 3,000 of such wages receved. Refund under ths secton
may be made n accordance wth the provsons of aw appcabe n the case of
erroneous or ega coecton of the ta e cept that no such refund sha be
made uness ( ) the empoyee makes a cam, estabshng hs rght thereto,
after the caendar year In whch the wages were receved wth respect to
whch refund of ta s camed, and ( ) such cam s made wthn two
years after the caendar year n whch such wages were receved. No nterest
sha be aowed or pad wth respect to any such refund.
S C. 414. D INITION O W G S UND R TITL II O SOCI L S CU-
RITY CT.
(a) So much of secton 209(a) of the Soca Securty ct, as amended, as
precedes paragraph (3) thereof s amended to read as foows:
(a) The term wages means a remuneraton for empoyment, Incudng the
cash vaue of a remuneraton pad n any medum other than cash e cept that
such term sha not Incude
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297
ment durng any caendar year pror to 1940, Is pad, pror to anuary 1,1947,
to such Indvdua by such empoyer wth respect to empoyment durng such
caendar year
3,000 has been pad to an ndvdua wth respect to empoyment durng
any caendar year after 1939, s pad to such ndvdua, pror to anuary 1,
1947, wth respect to empoyment durng such caendar year
3,000 wth respect to empoyment has been pad to an ndvdua dur-
ng any caendar year after 19-16, s pad to such ndvdua durng such
caendar year .
(b) The paragraphs of secton 209(a) of such ct heretofore desgnated (3) ,
(4) , (5) , and (6) are redesgnated (4) , (5) , (6) , and (7) ,
respectvey.
S C. 415. TIM LIMIT TION ON LUMP-SUM P YM NTS UND R 1935 L W.
No ump-sum payment sha be made under secton 204 of the Soca Securty ct
(as enacted n 1935), or under secton 902(g) of the Soca Securty ct mend-
ments of 1939, uness appcaton therefor has been fed pror to the e praton of
s months after the date of the enactment of ths ct.
S C. 416. WIT DR W L O MPLOY CONTRI UTIONS OR DIS-
ILITY N ITS.
(a) Paragraph (4) of subsecton (a) of secton 1603 of the edera Unempoy-
ment Ta ct, as amended, s amended by strkng out the semcoon at the end
thereof and nsertng n eu thereof the foowng: : Provded, That an amount
equa to the amount of empoyee payments nto the unempoyment fund of a State
may be used n the payment of cash benefts to ndvduas wth respect to ther
dsabty, e cusve of e penses of admnstraton .
(b) The ast sentence of subsecton (f) of secton 1607 of the edera Un-
empoyment Ta ct, as amended, s amended by strkng out the perod at the
end thereof and nsertng n en thereof the foowng: : Provded, That an
amount equa to the amount of empoyee payments nto the unempoyment fund
of a State may be used n the payment of cash benefts to ndvduas wth respect
to ther dsabty, e cusve of e penses of admnstraton.
(c) Paragraph (5) of subsecton (a) of secton 303 of the Soca Securty ct,
as amended, s amended by strkng out the semcoon mmedatey before the word
and at the end thereof and nsertng n eu of such semcoon the foowng: :
Provded, That an amount equa to the amount of empoyee payments nto the
unempoyment fund of a State may be used n the payment of cash benefts to
ndvduas wth respect to ther dsabty, e cusve of e penses of admnstra-
ton .
TITL ST T GR NTS OR OLD- G SSIST NC , ID TO
D P ND NT C ILDR N, ND ID TO T UND.
S C. 501. OLD- G SSIST NC .
(a) Secton 3(a) of the Soca Securty ct, as amended, s amended to read
as foows:
Sac. 3. (a) rom the sums approprated therefor, the Secretary of the
Treasury sha pay to each State whch has an approved pan for od-age
assstance, for each quarter, begnnng wth the quarter commencng October 1,
1946, (1) an amount, whch sha be used e cusvey as od-age assstance, equa
to the sum of the foowng proportons of the tota nmounts e pended durng
such quarter as od-age assstance under the State pan wth respect to each needy
Indvdua who at the tme of such e pendture s s ty-fve years of age or oder
and s not an nmate of a pubc nsttuton, not countng so much of such
e pendture wth respect to any such Indvdua for any month as e ceeds 45
( ) Two-thrds of such e pendtures, not countng so much of any
e pendture wth respect to any month as e ceeds the product of 15
mutped by the tota number of such ndvduas who receved od-age
assstance for such month, pus
( ) One-haf of the amount by whch such e pendtures e ceed the
ma mum whch may be counted under cause ( )
72 29 47 20
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and (2) an amount equa to one-haf of the tota of the sums e pended durng
such quarter as found necessary by the dmnstrator for the proper ard effcent
admnstraton of the State pan, whch amount sha be used for payng the corns
of admnsterng the State pan or for od-age assstance, or both, and for no other
purpose.
(b) Secton 3(b) of such ct s amended (1) by strkng out one-haf , and
nsertng n eu thereof the State s proportonate share (2) by strkng out
cause (1) of wherever t appears n such subsecton (3) by strkng out n
accordance wth the provsons of such cause and Insertng n eu thereof n
accordance wth the provsons of such subsecton and (4) by strkng out
, ncreased by 5 per centum .
S O. 502. ID TO D P ND NT C ILDR N.
(a) Secton 403(a) of the Soca Securty ct, as amended, s amended to read
as foows:
Sec. 403. (a) rom the sums approprated therefor, the Secretary of the
Treasury sha pay to each State whch has an approved pan for ad to dependent
chdren, for each quarter, begnnng wth the quarter commencng October 1,
1946, (1) an amount, whch sha be used e cusvey as ad to dependent
chdren, equa to the sum of the foowng proportons of the tota amounts
e pended durng such quarter as ad to dependent chdren under the State pan,
not countng so much of such e pendture wth respect to any dependent chd for
any month as e ceeds 24, or f there s more than one dependent chd n the
same home, as e ceeds 24 wth respect to one such dependent chd and 15 wth
respect to each of the other dependent chdren
mutped by the tota number of dependent chdren wth respect to whom
ad to dependent chdren s pad for such month, pus
and (2) an amount equa to one-haf of the tota of the sums e pended durng
such quarter as found necessary by the dmnstrator for the proper and effcent
admnstraton of the State pan, whch amount sha be used for pavng the costs
of admnsterng the State pan or for ad to dependent chdren, or both, and for
no other purpose.
(b) Secton 403(b) of such ct s amended by strkng out one-haf and
nsertng n eu thereof the State s proportonate share .
S C. 503. ID TO T LIND.
(a) Secton 1003(a) of the Soca Securty ct, as amended, s amended to
read as foows:
Seo. 1003. (a) rom the sums approprated therefor, the Secretary of the
Treasury sha pay to each State whch has an approved pan for ad to the
bnd, for each quarter, begnnng wth the quarter commencng October 1, 1946,
(1) an amount, whch sha be used e cusvey as ad to the bnd, equa to the
sum of the foowng proportons of the tota amounts e pended durng suet
quarter as ad to the bnd under the State pan wth respect to each needy nd-
vdua who s bnd and s not an nmate of a pubc nsttuton, not countng so
much of such e pendture wth respect to any such ndvdua for any month as
e ceeds 45
mutped by the tota number of such ndvduas who receved ad to te
bnd for such months, pus
and (2) an amount equa to one-haf of the tota of the sums e pended durn|r such
quarter as found necessary by the dmnstrator for the proper and effcent
admnstraton of the State pan, whch amount sha be used for payng the
costs of admnsterng the State pan or for ad to the bnd, or both, and for
no other purpose.
(b) Secton 1003(b) of such ct s amended by strkng out one-haf , and
Insertng n eu thereof the Stnte s proportonate share .
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299
S C. 504. CTI P RIOD.
Sectons 501, 502, and 503 sha be effectve wth respect to the perod com-
mencng October 1,1946, and endng on December 31, 1947.
TITL I T R NS M RG NCY OUSING CT O 1946.
Sec. 601. Secton 2(a) of the ct of une 11, 1946 (Pubc Law 404, Seventy-
nnth Congress), s amended by strkng out the perod at the end thereof and
nsertng a semcoon and the foowng: and the eterans mergency ousng
ct of 1946 .
pproved ugust 10, 1946.
1946-1 -12396
n ct To mprove, strengthen, and e pand the oregn
Servce of the Unted States and to consodate and revse the
aws reatng to ts admnstraton.
Unted States of merca n Congress assembed,
TITL I S ORT TITL , O CTI S, ND
D INITIONS.
Part Short Tte.
Sec. 101. Ttes I to , ncusve, of ths ct may be cted as the
oregn Servce ct of 1946 .

TITL . MISC LL N OUS.

Part empton rom Ta aton.
Sec. 1051. Secton 116 of the Interna Revenue Code, as amended
(53 Stat. 4 53 Stat. 575 56 Stat. 42 5 Stat. 46 26 U. S. C.
116), reatve to e cusons from gross ncome, s further amended
by addng at the end thereof a new subsecton to read as foows:
(k) In the case of an offcer or empoyee of the oregn Servce of the Unted
States, amounts receved by such offcer, or empoyee as aowances or otherwse
under the terms of tte I of the oregn Servce ct of 1946.

TITL I T MPOR RY PRO ISIONS.

Part ffectve Date of ct.
Sec. 1141. The effectve date of ths ct sha be three months fo-
owng the date of ts enactment.
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IND .
ccountng methods, change n
Raroad Retrement Ta ct (P. L. 572)
Soca Securty ct mendments of 1946 (P. L. 719)
ffated corporatons, fng consodated returns, fsca years
endng n 1946, eecton to fe separate returns
coho, ndustra, Reguatons 3 amended
en Property Custodan, vestng n or transfer to, certan
property (P. L. 671)
mendments:
rst War Powers ct, 1941, secton 305 (added)
Gaugng Manua, rtce I
Interna Revenue Code
Secton 22(b)
Secton 1532(d)
Secton 2325
Secton 3126(a)
Raroad Retrement ct of 1937, secton 1(c)
Raroad Unempoyment Insurance ct, secton 1(e)
Reguatons 116, secton 405.102(/)
Reguatons 113, sectons 143.1, 143.25, 143.26
Reguatons 111
Sectons 29.11-1, 29.12-1, 29.12-2, 29.12-3, 29.13-1,
29.15-1, 29.22(b)(9)-, 29.22(b)(10)-1, 29.23( )-,
29.25-1, 29.25-3, 29.25-5, 29.25-6, 29.26-4, 29.47-1,
29.47-2, 29.5 -2, 29.102-4, 29.10 -2 (added),
29.131- , 29.143-3, 29.163-1, 29.214-1, 29.362-2,
29.400-1, 29.401-1
Sectons 29.22(b) (9)-, 29.22(b) (10)-1
Secton 29.116-2
Sectons 29.131-2, 29.251-4...
Secton 29.322-7 _
Reguatons 10 , secton 6.2 ,
Reguatons 107-
Sectons 403.202, 403.203(a), 403.206
Secton 403.226a (added)
Secton 403.602
Reguatons 106
Sectons 402.101(a), 402.202, 402.203(a) 402.206
Secton 402.226a (added)
Secton 402.704( )
Reguatons 105, secton 1.24(5)
Reguatons 42 (1942), sectons 130.1, 130.44, 130.61
Reguatons 2 , sectons 176.10, 176.21(a), 176.57, 176. 5__.
Reguatons 23, secton 1 1.26
Reguatons 15 (1940), sectons 190.30, 190.37, 190.151,
190.170(a), 190.17 , 190,1 3, 190.1 6, 190.1 7
(revoked), 190.212. 190.222, 190.224 (revoked),
190.225, 190.250, 190.2 , 190.2 9, 190.290-190.291
(revoked), 190.292, 190.295-190.300, 190.30 , 190.309,
190.310-190.312 (revoked), 190.313, 190.315-190.317,
190.320, 190.321, 1 0.344, 190.345 (revoked), 190.346,
190.349, 190.35 , 190.360, 190.361a-190.361, ncusve
(added), 190.374, 190.3 4, 190.3 5, 190.3 6-190.3
Rung
No.
12400
12392
12395
12429
12417
1241
12393
12393
12339
12377
12392
12360
12361
12392
12392
12343
1234
12334
1245
12343
12401
1245
1235
12346
12346
12346
12346
12346
12346
12357
12347
12424
12423
(301)
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302
mendments Contnued.
Reguatons 15 (1940) Contnued.
(revoked), 190.390, 190.437, 190.43 , (revoked),
190.440, 190.441-190.444 (revoked), 190.453, 190.45 -
190.461, 190.464-190.466, 190.466e, 190.469a (added),
190.473
Reguatons 11, sectons 1 9.65, 1 9.66, 1 9.70, 1 9.73,
. 1 9.74, 1 9.75, 1 9.76 (revoked), 1 9.77, 1 9. 5,
1 9.95, 1 9.9 , 1 9.99
Reguatons 10, rtces , I, III, and LII..
Reguatons 9, artce 1
Reguatons 6, rtces , I, II, I , II, and
..:
Reguatons 5
Sectons 1 4.3, 1 4.4 (6), (c), (s) (revoked), 1 4.60.
1 4.64, 1 4.65, 1 4.67(a)-1 4.67(o), ncusve
(added), 1 4.12 , 1 4.130, 1 4.132, 1 4.133, 1 4.134
(a), (6) (added), 1 4.13 (6), 1 4.139 (6), 1 4.140 (6),
1 4.141(0) (added), 1 4.142, 1 4.143, 1 4.14 ,
1 4.149, 1 4.150, 1 4.151, 1 4.152, 1 4.154, 1 4.155
(a) (added), 1 4.156, 1 4.15 , 1 4.159a (added),
1 4.161, 1 4.161a (added), 1 4.162a (added),
1 4.163, 1 4.164, 1 4.251
Sectons 1 4.31, 1 4.41, 1 4.12 , 1 4.132, 1 4.1 4,
1 4.1 5, 1 4.1 6, 1 4.1 7, 1 4.231, 1 4.232, 1 4.239,
1 4.240, 1 4.419, 1 4.427
Reguatons 4, rtces , I, III, I , ,
, I , , I, and LII
Reguatons 3
Secton 1 2.7b (added)
Sectons 1 2.342, 1 2.345(a), 1 2.354, 1 2.355(a),
1 2.359, 1 2.364( ), 1 2.367(a), 1 2.371(rf),
1 2.377(d), 1 2.3 3(d), 1 2.3 9(d), 1 2.391,
1 2.39 , 1 2.405, 1 2.410, 1 2.412. 1 2.437, 1 2.443,
1 2.450, 1 2.451, 1 2.455, 1 2.456, 1 2.457 (re-
voked), 1 2.45 . 1 2.461, 1 2.464, 1 2.632 (re-
voked), 1 2.644(e)(2), 1 2.7 7(e), 1 2.1000(a)
Secton 1 2.527
Saary Stabzaton reguatons, secton 1002.103
Treasury Decsons
5115 (C. . 1942-1, 266), revoked
5506 (C. . 1946-1, 303), secton 1002.10
ppcaton for reef under secton 722 of Code, procedure,
cess Profts Ta Counc
ppcaton of the proft-mtng provsons of the nson ct,
as amended, after repea of the e cess profts ta n 1945
rmed forces eave bonds, reguatons governng
rmed forces of Unted States:
qua treatment of personne n matter of eave (P. L. 704).
Persona money aowance pad under secton 7, Pay Read-
|ustment ct of 1942
ssets, capta, securtes acqured for nvestment purposes,
treatment
R.
onds, rmed forces eave, reguatons governng.
ottng ta -pad dsted sprts, Reguatons 11 amended.
Rung
No.
12422
12421
123 4
12391
123 5
12419
32420
123S6
123 3
12417
1241
12450
12415
12405
1237
12433
12454
12394
12434
12453
12454
12421
randy, producton of, Reguatons 5 amended .. | 2420
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2

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303
ureau of Interna Revenue:
Organzaton change
Pocy regardng appcaton of Treasury Decson 54
(C. . 1946-1, 19), reatng to ta abty of ncome of
certan trusts
usness e penses, stamp ta es pad on transfer or conveyance
of securtes or rea estate
utter, process or renovated, materas for use theren unft for
human consumpton, authorty to condemn (P. L. 427)
C.
Caforna, communty property, acqured after uy 29, 1927,
ncome from, treatment
Capta e pendtures, amounts e pended n deveopng farms,
orchards, and ranches
Capta gans and osses:
Invountary converson or sae of property used n trade or
busness
Securtes acqured soey for nvestment purposes, treat-
ment
Carrers Ta ng ct of 1937. (See mpoyment ta es.)
Chd, unemancpated, vaue of meas and odgng furnshed by
father, deductbty
Cgarettes:
Statement of remova of, for consumpton
May, 1946 and 1945...
une, 1946 and 1945
uy, 1946 and 1945
ugust, 1946 and 1945
September 1946 and 1945
October, 1946 and 1945
Ctzen, mercan, resdent of Phppnes durng ta abe year
1946, earned ncome, ta abty
Ctzens, Unted States, camng benefts of secton 251
Coconut o, suspenson of addtona ta on processng, con-
tnued
Coorado, husband and wfe, |ont tenancy
Commssons, annua,1 pad out of testamentary trust corpus
pursuant to State aw, effect on fe benefcary s ncome
Communcaton servces, certan, reguatons amended
Communty property:
Caforna, ncome from property acqured after uy 29,
1927, treatment
Gan or oss upon sae or other dsposton, Te as
Compensaton:
bove grade pay dfferenta to cvan empoyees overseas-
mounts recovered from empoyer by returnng servceman,
wthhodng
Mtary and nava forces, members of
Pad other than n cash
Pay and aowances receved by member of armed forces of
the Unted States contrbuted to partnershp, treatment
for ncome ta purposes
Persona money aowance to offcers of rmy, Navy,
Marne Corps, Coast Guard, and Coast and Geodetc
Survey, ta abty
Conspracy, voaton of quor aws
Contrbutons:
Compensaton and aowances of members of armed forces
of the Unted States contrbuted to partnershp, ta -
abty -.
mpoyees trust or annuty pan, rghts of empoyees not
vested at tme of contrbuton, deductbty
12306
12440
12336
12360
97
31
41
266
12410
49
12342
45
12364
70
12453
6
12373
29
12353
264
12369
264
1240
264
12431
265
12443
265
12462
265
12427
59
12390
93
12359
175
12441
51
12460
47
12347
171
12410
49
12355
5
12344
67
12356
127
12399
34
12373
29
12435
37
12434
2
12350
210
12435
37
12337.1
43
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2

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2

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304
Rung
No.
Conventon, ncome ta , Unted States and Unted ngdom,
benefts accorded resdents, etc., of Unted ngdom
Conversons, nvountary, renvestment of proceeds of, gan or
oss
Corporatons:
ffated, eecton to fe separate ncome ta returns
stock owned by foregn government, ta abty
Dstrbutons by, ta abe to stockhoders of record on date
payabe even though stockhoder s on accrua bass
Cost of vng aowance of certan cvan empoyees overseas,
ta abty-.
Court decsons:
mercan Lght Tracton Co. Commssoner v
Commssoner v. mercan Lght Tracton Co
Los ngees Soap Co. Unted States v
Pnkerton v. Unted States
Roya Loan Co. ct a. v. Unted States
Unted States v. Los ngees Soap Co
Unted States Pnkerton v
Unted States Roya Loan Co. et a. v
Credt or refund, e tenson of tme for fng cam for, Regua-
tons 111 amended
Currency, Unted States, converted nto Me can pesos, gan
or oss on reconverson nto Unted States currency
D.
Deductons-
mounts e pended n deveopng farms, orchards, and
ranches, treatment
Contrbutons to an empoyees trust or annuty pan
where rghts of empoyees not vested, treatment
Deprecaton aowances, method of computng
Indana gross ncome ta , n case of ndvduas engaged n
trade or busness
New York State franchse ta , accrua date
Stamp ta es pad on ssuance, transfer, or conveyance of
bonds, stocks, or rea estate, effect of secton 23(c) (1)( )
of Code
Deprecaton, method of computng, for ncome ta purposes...
Deveopment perod of o propertes
Dvdends, corporatons, dstrbutons to stockhoders
Dsted sprts:
ottng ta -pad, Reguatons 11 amended
Drawback on, Reguatons 2 amended
Manufacture, Reguatons 4 amended
Markng and brandng requrements, Gaugng Manua
amended
Other than acoho, bottng n bond, Reguat ons 6 amended
Remsson or mtgaton of forfetures, reguatons prescrbed
Sts, e portaton of, beneft of drawback, Reguatons 23
amended
Warehousng, Reguatons 10 amended
Wnes and sprts, rectfcaton of, Reguatons 15 (1940)
amended
.
arnngs, norma, concept of, restatement of treatment under
secton 722
ffectve date of Treasury Decson 54 3 (C. . 1945, 277)
mbezzement, proceeds of, ta abty
mpoyer, may not furnsh muncpa agency copy of wthhod-
ng statement ( orm W-2)
12445 I
12411

12452
57
12429
72
12376
66
12413
135
12344
67
12413
135
12413
135
123 2
176
12350
210
1233
1 0
123 2
176
12350
210
1233
1 0
1245
32
12363
55
12342
45
12337
43
12400
42
12459
3
12375
40
12336
41
12400
42
12446
95
12413
135
12421
23
12424
253
123 6
214
12339
213
123 5
234
12416
194
12423
253
123 4
237
12422
241
12463
123
12379
104
12335
27
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305
mpoyment ta es:
Carrers Ta Dg ct of 1937, Raroad Retrement Ta ct
(P. L. 572)
Interna Revenue Code
cepted servces
grcutura abor
Cotton, gnnng of
Dary farm operators
atcheres, servces performed n the operaton of-
Internatona organzatons, reguatons amended-.
Martme servces, changes effected by Soca
Securty ct mendments of 1946
Internatona Organzatons Immuntes ct, regua-
tons amended to conform to provsons of
Rates of ta , changes effected by Soca Securty ct
mendments of 1946
Refund cams, servces rendered nternatona organ-
zatons, reguatons amended
Wages
ack pay awards made by order of Natona
Labor Reatons oard
3,000 mtaton, changes effected by Soca
Securty ct mendments of 1946
Reguatons 106 amended
Wages, payments made by empoyer under ar Labor
Standards and Wash- eaey cts
Soca Securty ct-
cepted servces
grcutura abor
Dary farm operators
Wages, renstatement payments by order of Na-
tona Labor Reatons oard
Soca Securty ct mendments of 1946 (P. L. 719)-
state ta , power of appontment, reease of, Reguatons 105
amended
cess Profts Ta Counc:
uetn on Secton 722 of the Code, memorandum re-
atng to
stabshed, ureau of Interna Revenue
Norma earnngs, restatement of treatment under secton
722
Organzaton and rues of procedure
Procedure appcabe to consderaton of secton 722 cams,
etc
Procedure as to appcatons for reef under secton 722 of
Code
Rungs and memoranda, rue as to pubcaton
Secton 722 fed commttees, submsson of evdence to
emptons, Internatona Organzatons Immuntes ct, regu-
atons amended
tenson of tme acoho pants may produce sugars and srups
(P. L. 437)
tenson of tme for fng cam for credt or refund based
upon overpayment of ta due to faure to take war oss de-
ducton, Reguatons 111 amended
tenson of tme:
Powers of appontment, reease of (P. L. 393)
Sugar ct of 1937, as amended ..
12392
12425
14
12461
150
123 0
146
12346
139
12436
15
12346
139
12436
15
12346
139
123 1
155
12436
15
12346
139
12346
1S9
12345
130
12461
ISO
123 1
155
12395
2 7
12357
163
12447
121
1244
122
12449
122
12366
97
12463
123
12371
104
12404
110
1237
97
12402
103
12464
126
1234
173
12361
26
1245
32
12340
266
12374
26
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306
.
armers, gross ncome, sae of ctrus groves wth frut on trees.
arms, orchards, and ranches, amounts e pended n deveop-
ment of, treatment
gures to be used n determnng reserve and other pocy ab-
ty credt, fe nsurance companes, ta abe year 1946
oregn government, soe owner of corporaton stock, ta -
abty
oregn Servce of Unted States, to mprove, strengthen, and
e pand (P. L. 724)
orfetures, remsson or mtgaton of, reguatons prescrbed.
orm W-2, Wthhodng statement for 1947, rues for repro-
ducton .
rut trees, ctrus, aocaton of prce receved from sae of
G.
Gan or oss:
Conversons, nvountary, renvestment of proceeds of
Property hed for productve use n trade or busness, or
for nvestment
Sae or other dsposton of communty property, Te as
Gaugng Manua, markng and brandng requrements, rtce
I amended
Gft ta :
Powers of appontment, reease of, Reguatons 10
amended
Property transferred pursuant to dvorce or separaton
agreement, adequacy of consderaton
Gross ncome:
d|usted Indana gross ncome ta , ndvdua ta payer
engaged n trade or busness, deductbty
Compensaton of members of mtary and nava forces of
Unted States
Corporaton, a of whose stock owned by foregn govern-
ment
Cost-of-vng aowances to certan cvan empoyees over-
seas, treatment
mbezzement, proceeds of, ta abty
armers, sae of ctrus groves wth frut on trees
aue of meas and odgng furnshed unemancpated chd
by father, ta abty
.
usband and wfe:
Caforna, communty property, ncome from, treatment
for edera ncome ta purposes
Coorado, |ont tenancy
I.
Income, earned, mercan ctzen resdent of Phppnes durng
. ta abe year 1940, ta abty
Income, trust, corpus dstrbuted for mantenance of bene-
fcary, ta abty
Indana, gross ncome ta of ndvdua ta payer engaged n
trade or busness, deductbty for edera ncome ta pur-
poses
Inspecton of process or renovated butter, authorty of Secretary
of grcuture
Inspecton of returns, Senate speca commttee to nvestgate
operaton of the natona defense program, permsson
Insurance companes, fe, fgures to be used n determnng
reserve and other pocy abty credt, ta abe year 1940-.
Rung
No.
123 9
12342
12465
12376
12396
12416
12412
123 9
12452
12363
12355
12339
1235
12367
12459
12399
12376
12344
12335
123 9
12373
12410
12441
12427
12365
12459
12360
12370
12465
G
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2
2

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#
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307
Internatona Organzatons Immuntes ct, e emptons under,
reguatons amended
L.
Leave, armed forces of Unted States, equa treatment of per-
sonne (P. L. 704)
Legsaton:
Seventy-nnth Congress
Pubc Law 393
Pubc Law 427
Pubc Law 437
Pubc Law 55
Pubc Law 572
Pubc Law 57
Pubc Law 671
Pubc Law 704
Pubc Law 719
Pubc Law 724
Lquor aws, conspracy to voate.
M.
Manufacturer e cse ta es, saes for e port T. D. 5115 (C. .
1942-1, 266) revoked
Me co, Unted States currency converted nto pesos, recon-
verted nto Unted States currency, gan or oss
Mtary and nava forces of Unted States, compensaton of
members of
Msceaneous ta es:
Oeomargarne, mportaton of, from Phppne Isands,
Reguatons 9 amended
Processng ta es
Coconut o from the Phppnes, suspenson of add-
tona ta on processng of, contnuaton
Sut to en|on coecton
Rea estate transferred n trust, subsequenty reconveyed..
Safe depost bo es and certan transportaton and commu-
ncatons servces, Reguatons 42 amended
Securtes, corporate, sae or transfer, ta abty
Transportaton of property, Reguatons 113 amended
N.
Natona Labor Reatons oard, back pay awards to be con-
sdered wages for wthhodng purposes
Nava and mtary forces of Unted States, compensaton of
New York, State franchse ta , accrua date for ncome ta pur-
poses.
Newfoundand, smar credt requrement
O.
O propertes, deveopment perod of
Os, coconut, from Phppnes, contnuaton of suspenson of
addtona ta on processng of
Oeomargarne:
Importaton of, from Phppne Isands, Reguatons 9
amended
Schedue of producton and materas used
May, 1946 and 1945
une, 1946 and 1945 -
uy, 1946 and 1945 -
1234
12394
12340
12360
12361
12374
12392
12377
12393
12394
12395
12396
12350
12415
12363
12399
12391
12359
123 2
12414
12347
1233
1234
12403
12399
12375
1242
12446
12359
12391
12351
123 7
12406
G
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a
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d

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1
3
-
0
1
-
2
2

0
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:
0
2

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2
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3
9
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5
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7
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3
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#
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30
Oeomargarne Contnued
Schedue of producton, etc. Contnued
September, 1940 and 1945
October, 1946 and 1945
Organzaton and rues of procedure, cess Profts Ta Counc,
ureau of Interna Revenue
Organzaton change, ureau of Interna Revenue
Organzatons, nternatona, e tenson of certan prveges,
e emptons, and mmuntes to, reguatons amended
P.
Payment of rebates under Renegotaton of War Contracts ct,
treatment -
Phppne Isands:
mercan ctzen, resdent of, durng ta abe year 1946,
status, for ncome ta purposes, of earned ncome
Change of status to sef-governng naton
Oeomargarne, mportaton of, from, Reguatons 9
amended
Suspenson of addtona ta on processng of coconut o,
contnuaton
Pocy, ureau of Interna Revenue, regardng ta abty of the
ncome of certan trusts
Powers of appontment:
tenson of tme for reease of
Pubc Law 393
Pubc Law 437
Reease of
Prce dmnstraton, Offce of, ceng prces, sae of property
above, capta gans and osses ,
Prveges, e emptons, and mmuntes of certan nternatona
organzatons, reguatons amended
Processng ta es:
Coconut o from the Phppnes, suspenson of addtona
ta on processng of, contnuaton
Sut to en|on coecton
Property:
Mnera or o, deveopment perod, appcaton of secton
721(a)(2)(C) of Code
Transferred pursuant to dvorce or separaton agreement,
adequacy of consderaton
Used n trade or busness, nvountary converson, capta
gans and osses .
Pubcty of returns, wtmodng statement ( orm W-2) s an
ncome ta return
R.
Rea estate transferred n trust, subsequenty reconveyed, ta -
abty of transacton
Rebates, renegotaton, payments
Refunds and credts of ta es pad, mtatons upon
Reguatons. (See mendments: Reguatons.)
Reguatons governng armed forces eave bonds
Reguatons reatng to remsson or mtgaton of forfetures
Reproducton of orm W-2, Wthhodng statement for 1947,
rues for
Reserve and other pocy abty credt, fe nsurance com-
panes, fgures to be used, 1946 ta abe year
R:ng
No.
12437
12442
12455
12371
12366
12343
12349
12427
12401
12391
12359
12440
12340
12361
12357
1235
12364
12343
12359
123S2
12446
12367
12364
12445
12414
12349
12459
12454
12416
12412
12465
G
e
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r
a
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e
d

f
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n

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g

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)

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2
0
1
3
-
0
1
-
2
2

0
2
:
0
2

G
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/

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/
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/
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.
3
9
0
1
5
0
7
6
0
3
1
6
4
3
P
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#
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g
o
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e
309
Returns, nspecton of, by Senate speca commttee to nvest-
gate operaton of natona defense program
Returns, nspecton of, wthhodng statement ( orm W-2) may
not be furnshed muncpa agency by empoyer
Returns, separate ncome ta , eecton of affated corporatons
to fe
Revenue ct of 1945, Reguatons 111 amended to conform to.,
S.
Safe depost bo es and certan transportaton and communca-
tons servces, Reguatons 42 amended
Saary stabzaton:
Reguatons amended
Saary ncreases, waver of rght to appy for approva of
unapproved, reguatons amended
Saes for e port, ta -pad, to foregn governments T. D. 5115
(C. . 1942-1, 266) revoked
Secton 722 fed commttees, submsson of evdence to
Secton 722 of the Code, uetn on, cess Profts Ta Counc
memorandum reatng to
Securtes acqured soey for nvestment purposes, gan or oss,
treatment
Senate speca commttee to nvestgate operaton of natona
defense program, permsson to nspect certan ta returns
Servce, oregn, of Unted States, to mprove, strengthen, and
e pand (P. L. 724)
Smar credt requrement, Newfoundand satsfes
Stabzaton of saares, reguatons amended
Stamps, ndustra acoho, Reguatons 3 amended
-Stamp ta es:
mount pad on ssuance, transfer, or conveyance of bonds,
stocks, or rea estate, effect of secton 23(c)(1)( ) of
Code for edera ncome ta purposes
Rea estate transferred n trust, subsequenty reconveyed..
State, New York franchse ta , accrua date for ncome ta
purposes
Sts, e portaton of, wth beneft of drawback, Reguatons 11
amended
Sugars and srups:
mergency producton n ndustra acoho pants
Tme e tended durng whch acoho pants may produce. .
T.
Ta Court of the Unted States, The, formery Unted States
oard of Ta ppeas:
Decsons of, st of acquescences and nonacquescences
Ta Counc, cess Profts, rungs and memoranda, rue for
pubshng
Te as, communty property, sae of, bass for determnng gan
or oss
Tobacco:
Statement of manufactured, produced, by casses
pr, 1946 and 1945
May, 1946 and 1945
une, 1946 and 1945
uy, 1946 and 1945
September, 1946 and 1945..
Tradng Wth the nemy ct, 1917, amended (P. L. 671)
Rung
No.
12370
12445
12429
12334
1245
12347
12405
12450
12415
12464
12447
1244
12449
12453
12370
12396
1242
12405
12450
1241
12336
12414
12375
12423
123 3
12361
12457
12402
12355
12352
1236
12407
12430
1243
12456
12393
G
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d

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)

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2
0
1
3
-
0
1
-
2
2

0
2
:
0
2

G
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/

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7
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3
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5
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7
6
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3
1
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4
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#
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-
g
o
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e
310
Transportaton of property, Reguatons 113 amended
Transportaton servces, certan, reguatons amended
Treasury Decson 54 3 (C. . 1945, 277), effectve date
Trusts:
ureau pocy regardng ta abty of ncome of certan
Dscretonary, corpus apped to mantenance of bene-
fcary, ta abty of ncome
Testamentary, annua commsson pad out of corpus
pursuant to State aw, effect on fe benefcary s ncome.
U.
Unted ngdom:
enefts accorded resdents, etc., of, by ncome ta conven-
ton between Unted States and
Conventon between Unted States and, for reease of e cess
ta wthhed, e empton from and reducton n rate of
wthhodng n the case of resdents and ctzens of
Unted States ctzens camng beneft of secton 251
esses, nava, and rmy and Navy arcraft, appcaton of
proft-mtng provsons of the nson ct, as amended,
after repea of the e cess profts ta n 1945
nson ct, appcaton of proft-mtng provsons of, after
repea of the e cess profts ta n 1945
W.
Wages:
mount recovered from empoyer by returnng servceman,
wthhodng
ack pay awards of Natona Labor Reatons oard to be
consdered as, for ncome ta purposes
Suppementa payments under ar Labor Standards ct
(193 ) and Wash- eacy Pubc Contracts ct, status of.
Ta wthhed at source, recepts for rues for reproducton
of orm W-2 for 1947-_-:
Wne, drawback on dsted sprts and, Reguatons 2 amended
Wnes and sprts, rectfcaton of, Reguatons 15 (1940)
amended
Wthhodng of ta at source:
ack pay awards of Natona Labor Reatons oard to be
consdered as wages for ncome ta purposes
Income ta conventon between Unted States and LTnted
ngdom, benefts accorded resdents, etc., of Unted
ngdom .
Unted ngdom, conventon between Unted States and,
for reease of e cess ta wthhed, e empton from and
reducton of wthhodng rate, n the case of resdents
and ctzens of
Wage payments, suppementa, under ar Labor Stand-
ards and Wash- eaey cts, status
Wages recovered from empoyer by returnng servcemen.
Wthhodng statement ( orm W-2) s an ncome ta return
Rung
No.
1234
12347
12379
12440
12365
12460
12411
12397
12390
12433
12433
12356
12403
12345
12412
12424
12422
12403
12411
12397
12345
12356
12445
o
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d

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U
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Bureau of Internal Revenue Cumulative Bulletin 1946-2

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Bureau of Internal Revenue Cumulative Bulletin 1946-2

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SP CI L TT NTION s drected to the cautonary notce on ths page that pub-

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