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Income Tax Accounting







Lecturer in Accounting, University of Cincinnati
Author of "Public Accounting and Auditing"

South-Western Publishing Company

Cincinnati, Ohio


Copyright 1925



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This treatise on Income Tax Accounting is the result of a demand from the schools and colleges of commerce for a clear interpretation of the Income Tax Law and practice material requiring an application of its provisions to the returns of individuals and corporations which may be used as a basis of instruction in income tax accounting and procedure. The constantly changing laws and regulations have made it difficult for instructors to obtain suitable text material. Unless a treatise is based upon the Revenue Act now in effect and the latest regulations of the Treasury Department, it is not satisfactory for instruction purposes.

The first edition of this treatise was published in 1920 and was based on the 1918 Revenue Act. The second edition was published in 1922 and was based on the 1921 Revenue Act. The present edition is a complete revision of the treatise, and is based upon the 1924 Revenue Act and the latest rulings and regulations of the Treasury Department.

The material may be divided into two general divisions, the first relating to the income tax on individuals and the second relating to the income tax on corporations. Four Units are devoted to a discussion of the tax on individuals and two Units to the tax on corporations.

At the end of each Unit will be found a list of questions and problems for practice work. The questions are not memory questions, but are such that it will be necessary for the pupil to understand the provisions of the Law as set forth in the Unit before he can answer them intelligently. The problems are practical. Some have been selected from the C. P. A. Examinations and from the examinations given applicants for membership in the American Institute of Accountants. Others have been selected from the working papers of accountants engaged in actual accounting practice and the preparation of returns. The problem method is used because it is the only practical method of presentation in a treatise of this subject.

The instructor of this subject should have a copy of the Revenue Act of 1924, a copy of Regulations No. 65 and copies of all the official forms issued by the Treasury Department, to be used in connection with this book. This material may be obtained without charge from the local Collector of Internal Revenue. If, for any reason, the local Collector is not supplied with the desired forms or other material, they may be obtained from the Government Printing Office at Washington, D. C.


It is the purpose of the regulations issued by the Treasury Department to interpret the Law. These regulations are issued in pamphlet form. Those dealing with the Income Tax Law of 1917 are known as Regulations No. 33. Those dealing with the Excess Profits Tax Law of 1917 are known as Regulations No. 41. Those dealing with the Revenue Act of 1918 are known as Regulations No. 45. This Act constituted the income tax law for the years of 1918, 1919 and 1920. The regulations dealing with the Revenue Act of 1921 were known as Regulations No. 62. This Act constituted the income tax law for the years 1921, 1922 and 1923. In ordering a copy of the regulations for use with this book, the instructor should request Regulations No. 65 which are applicable to the Revenue Act of 1924.

Instructors will also find it advantageous to subscribe for the Internal Revenue Bulletin service. This service consists of weekly bulletins, quarterly digests and semiannual cumulative bulletins. The weekly bulletins contain the rulings to be made public and all internal revenue treasury decisions. These rulings will be an aid in studying the Law and will indicate the trend of official opinion in the administration of the Bureau of Internal Revenue. The complete bulletin service may be obtained on a subscription basis from the Superintendent of Documents, Government Printing Office, Washington, D. C., for $2.00 per year.

The author desires to thank the many teachers and practicing accountants who have offered numerous helpful suggestions which have been incorporated in this edition. He is especially indebted to Paul F. Fusselman, attorney-at-law, income tax inspector, U. S. Treasury Department, for the valuable assistance rendered in preparing the manuscript.

It is hoped that it will be found advisable to continue the publication of this material in future years, and with this in view suggestions and constructive criticism, from teachers and others who may have occasion to make use of this book, will be gladly received.


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