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turn. If an individual is a married person living with husband or wife, it is not necessary to make a return unless their aggregate gross income for the taxable year is at least $5,000.00 or their aggregate net income is at least $2,500.00. In the event their aggregate gross income for the taxable year is $5,000.00 or over, or their aggregate net income is $2,500.00 or over, it will be necessary for each individual to file a separate return regardless of the amount of the individual income of each unless they unite in making a single joint return. If a single joint return is filed, the tax is computed on the aggregate net income.

In every case where husband and wife have separate incomes they have the option of filing either separate returns or a single joint return. Where the wife does not file a separate return or join with the husband in a return setting forth her income separately, it is necessary for the husband to include in his return any income derived from services rendered by the wife or from the sale of products of her labor.

In the event the husband and wife set forth their income separately on a single return form, it has been ruled that the presumption is that they intended to file separate returns of income and should, therefore, be taxed accordingly. In this case the normal and surtax should be computed on the separate income of each. However, even if the husband and wife set forth their income separately on a single return, but compute the tax on their combined net income, the return is held to be a joint return and both the normal and surtax should be assessed on the basis of the combined net income. To avoid a possible misunderstanding of the intent of the parties, the husband and wife, when they desire to file separate returns, should use separate forms.

A parent has a legal right to the earnings of a minor and when he appropriates such earnings they must be included in the return of the parent. In the event a minor has been emancipated, his income is held to be his own and it need not be included in the return of the parent. If the minor has a net income of his own of $1,000.00 or over, if single, or $2,500.00 or over, if married, or a gross income of $5,000.00 or over, for the taxable year, he must file a return. In the absence of proof to the contrary, it will be assumed that a minor has not been emancipated and that the parent has a legal right to his earnings and must, therefore, include them in his return.

Emancipation of a minor may be expressed or implied. If a minor supports himself and pays his board at home, it is an implied emancipation. This would also be true if a parent allowed his minor child to carry on a business for himself and exercised no control over the earnings of the child. When a parent has either lost or relinquished his right to his child's earnings, such earnings belong to the child.

Partnership Returns. Every partnership shall make a return for each taxable year, stating specifically the items of its gross income and the deductions allowed by this title, and shall include in the return the names and addresses of the individuals who would be entitled to share in the net income if distributed and the amount of the distributive share of each individual. The return shall be sworn to by any one of the partners.

(Section 224—1924 Act) Every partnership is required to make a return of income regardless of the amount of its net income. The return shall be made on a form prescribed and furnished by the Treasury Department. This form may be obtained from the Collector of Internal Revenue and should be prepared, sworn to by one of the partners, and filed on or before the last day of the time allowed for filing returns. The real purpose of a partnership return is to show each partner's distributive share of the net income of the partnership. No tax is assessed against the partnership, but each of the partners must include, in his individual return, his distributive share of the net income of the partnership. In other words, partners are taxed as individuals.

Fiduciary Returns. (a) Every fiduciary (except a receiver appointed by authority of law in possession of part only of the property of an individual) shall make under oath a return for any of the following individuals, estates, or trusts for which he acts, stating specifically the items of gross income thereof and the deductions and credits allowed under this title

(1) Every individual having a net income for the taxable year of $1,000 or over, if single, or if married and not living with husband or wife;

(2) Every individual having a net income for the taxable year of $2,500 or over, if married and living with husband or wife;

(3) Every individual having a gross income for the taxable year of $5,000 or over, regardless of the amount of his net income;

(4) Every estate or trust the net income of which for the taxable year is $1,000 or over;

(5) Every estate or trust the gross income of which for the taxable year is $5,000 or over, regardless of the amount of the net income; and

(6) Every estate or trust of which any beneficiary is a nonresident alien.

(b) Under such regulations as the Commissioner with the approval of the Secretary may prescribe a return made by one of two or more joint fiduciaries and filed in the office of the collector of the district where such fiduciary resides shall be sufficient compliance with the above requirement. Such fiduciary shall make oath (1) that he has sufficient knowledge of the affairs of the individual, estate or trust for which the return is made, to enable him to make the return, and (2) that the return is, to the best of his knowledge and belief, true and correct. Any fiduciary required to make a return under this Act shall be subject to all the provisions of this Act which apply to individuals.

(Section 225—1924 Act) (b) The term "fiduciary" means a guardian, trustee, executor, administrator, receiver, conservator, or any person acting in any fiduciary capacity for any person.

(Section 200—1924 Act) In accord with the above provisions of the Law, fiduciaries are required to file returns under the following conditions:

(1) For every individual who is single and has a net income for the taxable year of at least $1,000.00;

(2) For every individual who is single and has a gross income for the taxable year of at least $5,000.00;

(3) For every individual who is married but not living with husband or wife and has a net income for the taxable year of at least $1,000.00;

(4) For every individual who is married but not living with husband or wife and has a gross income for the taxable year of at least $5,000.00;

(5) For every individual who is married and living with husband or wife and has a net income for the taxable year of at least $2,500.00;

(6) For every individual who is married and living with husband or wife and who has a gross income for the taxable year of at least $5,000.00;

(7) For every estate or trust the net income of which for the taxable year amounts to at least $1,000.00;

(8) For every estate or trust the gross income of which for the taxable year amounts to at least $5,000.00;

(9) For every estate or trust of which any beneficiary is a nonresident alien.

Fiduciaries are required to make returns under the above conditions regardless of whether or not any tax is to be paid.

Returns of Nonresident Aliens. A nonresident alien is one whose residence is not within the United States and who is not a citizen of the United States. Such nonresident aliens are required to make or have made a full and accurate return of income received from sources within the United States regardless of amount, unless the tax on such income has been fully paid at the source. A special form is ded for the use of nonresident aliens in filing their returns.

Bases Upon Which Returns May be Filed. The Law provides that returns may be filed upon the basis of either a calendar or fiscal year and upon either a cash or accrual basis. The net income must be computed upon the basis of a fixed period which is usually twelve months and is known as a taxable year. The year in which any item of income or deduction is to be accounted for must be determined in the light of the fundamental rule that the computation shall be made in such a manner as clearly reflects the taxpayer's income.

Taxable Year or Fiscal Year. (a) The term "taxable year” means the calendar year, or the fiscal year ending during such calendar year, upon the basis of which the net income is computed under section 212 or 232. The term “fiscal year" means an accounting period of twelve months ending on the last day of any month other than December. The term "taxable year" includes, in the case of a return made for a fractional part of a year under the provisions of this title or under regulations prescribed by the Commissioner with the approval of the Secretary, the period for which such return is made. The first taxable year, to be called the taxable year 1924, shall be the calendar year 1924 or any fiscal year ending during the calendar year 1924.

(Section 200—1924 Act) In business, a fiscal year is an accounting period of twelve months ending on any date, but for income tax purposes, a fiscal year is an accounting period of twelve months ending on the last day of any month other than December. If the period ends on the last day of December, it constitutes a calendar year.

A taxable year may be either a calendar year or a fiscal year depending upon the basis on which the net income of the taxpayer is computed. If a taxpayer computes his net income on a basis of an accounting period of twelve months ending on June 30 or the last day of any other month excepting December, his taxable year is a fiscal year. If, however, he computes his net income on a basis of an accounting period of twelve months ending on the last day of December, his taxable year is a calendar year.

(c) If a taxpayer changes his accounting period from fiscal year to calendar year, from calendar year to fiscal year, or from one fiscal year to another, the net income shall, with the approval of the Commissioner, be computed on the basis of such new accounting period, subject to the provisions of section 226.

(Section 212—1924 Act) (a) If a taxpayer, with the approval of the Commissioner, changes the basis of computing net income from fiscal year to calendar year a separate return shall be made for the period between the close of the last fiscal year for which return was made and the following December 31. If the change is from calendar year to fiscal year, a separate return shall be made for the period between the close of the last calendar year for which return was made and the date designated as the close of the fiscal year. If the change is from one fiscal year to another fiscal year a separate return shall be made for the period between the close of the former fiscal year and the date designated as the close of the new fiscal year.

(Section 226–1924 Act) Under no circumstances can a return be made for an accounting period of more than twelve months. Whenever there is a change in the basis of computing net income from one taxable year to another taxable year, it is necessary to file a separate return for a fractional part of a year. Thus, if a taxpayer changes his taxable year from a calendar year ending on December 31 to a fiscal year ending on June 30, it would be necessary for him to file a separate return for the accounting period between December 31 and June 30 or for a period of six months.

Likewise, if a taxpayer changes his taxable year from a fiscal year ending on June 30 to a calendar year ending on December 31, it will be necessary for him to file a separate return for the accounting period between June 30 and December 31 for a period of six months.

In the event a taxpayer changes his taxable year accounting period of twelve months ending on June 30 to a

from an

taxable year ending on August 31, it will be necessary for him to file a separate return for the accounting period between June 30 and August 31, or for a period of two months.

Cash or Accrual Basis. The individual may report his income on either a cash or accrual basis, whichever he prefers; that is, if an individual has earned income in one year which is nột payable until the following year, he may include it in the return of the year when earned, or he may wait and include it in the return of the year in which it is received. For instance, an individual who is making a return, upon the basis of the calendar year 1924, may have earned a salary of $300.00 for the month of December, 1924, but this may not be paid to him until sometime during the following month of January. In making his return for 1924, he may include this amount in his return for that year, or he may wait and include it in the return for the calendar year of 1925. However, he must follow a consistent policy and report all income on the same basis; that is, he cannot report part of his income on the accrual basis and part of it on the cash basis. He must also report his expenses on the same basis as his income.

(b) The net income shall be computed upon the basis of the taxpayers' annual accounting period (fiscal year or calendar year, as the case may be) in accordance with the method of accounting regularly employed in keeping the books of such taxpayer; but if no such method of accounting has been so employed, of if the method employed does not clearly reflect the income, the computation shall be made in accordance with such method as in the opinion of the Commissioner does clearly reflect the income. If the taxpayer's annual accounting period is other than a fiscal year as defined in section 200 or if the taxpayer has no annual accounting period or does not keep books, the net income shall be computed on the basis of the calendar year.

(Section 212—1924 Act) Approved standard methods of accounting will ordinarily be regarded as clearly reflecting income. A method of accounting

not, however, be regarded as clearly reflecting income unless all items of gross income and all deductions are treated with reasonable consistency. All items of gross income shall be included in the gross income for the taxable year in which they are received by the taxpayer, and deductions taken accordingly, unless in order clearly to reflect income such amounts are to be properly accounted for as of a different period. For instance, in any case in which it is necessary to use an inventory, no accounting in regard to purchases and sales will correctly reflect income except an accrual method.

Whenever in the opinion of the Commissioner the use of inventories is necessary in order clearly to determine the income of any taxpayer, inventories shall be taken by such taxpayer upon such basis as the Commissioner, with the approval of the Secretary, may prescribe as conforming as nearly as may be to the best accounting practice in the trade or business and as most clearly reflecting the income.

(Section 205—1924 Act)

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