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It would not have been practicable for me to have revised satisfactorily the 1918 edition of this book without a great deal of help. This I found in my friend and colleague at Columbia University, Professor Robert Murray Haig. A considerable part of the matter in the 1918 edition had to be rearranged or condensed or this book would have been too large. Professor Haig rearranged and rewrote and improved so much of it that it has become partly his book, and I wish to testify to the tremendous amount of work and intelligent thought which were required to prevent this edition from being a volume half again as large. The introductory chapter in this edition is almost wholly the work of Professor Haig. It is a difficult matter to present an historical summary of the progress of the income tax within the bounds of one chapter, but in a book on procedure more space cannot be allotted. Having this limitation in mind it will be found that the subject is adequately covered.

As was the case with former editions, I again have reason to be grateful to my partner, Walter A. Staub, C. P. A.,who read the manuscript and who made many helpful suggestions. I am also indebted to Mr. James Rattray of the Guaranty Trust Company of New York, who wrote the following chapters: "Information at the Source," "Payment of Tax at the Source," "Non-Resident Aliens," "Fiduciaries."

The ma

terial in these chapters is almost entirely technical and it is necessary that it should be authoritative. I think this desired object has been attained. I also express my appreciation of the authoritative material contained in the Income and War Tax Services of the Corporation Trust Company, New York, which I used very freely, with the company's kind permission.

If readers fail to find in this book solutions of their problems, or if the new arrangement is not as satisfactory as it might be, I shall be glad to receive criticisms and suggestions. I cannot promise to answer all questions bearing on special problems. This time will not permit, and such problems more

properly should be referred to local accountants and lawyers familiar with income tax procedure. I shall, however, be grateful for the help which the criticisms of others always afford, and as far as feasible I shall reply to the letters I receive.

As it is necessary for this book to go to press before the end of February it has not been possible to incorporate comments on Regulations No. 45, relating to the income tax, nor the regulations relating to the excess and war profits tax, nor to include explanations of the new forms. A cursory study of the forms and regulations which have appeared since the book was written does not indicate any substantial change in my interpretation of the new law. It will, however, again be necessary, although annoying and regrettable, to issue a supplement to this book, which will be forthcoming during March.

55 Liberty Street, New York,

February 28, 1919.

ROBERT H. MONTGOMERY.

CONTENTS

THE DEVELOPMENT OF INCOME TAXATION: Extent of adoption.

Income as a test of faculty. Income taxation in England.

PAGE

Part I-Application and Administration

CHAPTER II APPLICATION OF THE LAW-EXEMPTIONS

INCOME EXEMPT FROM NORMAL TAX ONLY-"CREDITS": The

personal exemptions-wife and dependents. ("Head of a family"

defined. Exemptions to be calculated by months. What consti-

tutes "living with husband or wife"? Husband and wife living

apart. Individual's fiscal year-personal exemption not deductible

twice. Personal exemption valid for normal tax only. Personal

exemptions of non-resident aliens. Personal exemptions of

wards, beneficiaries and estates.) Specific credit to corporations.

Dividends which are exempt from normal tax. Interest which is

exempt from normal tax.

INCOME EXEMPT FROM BOTH NORMAL AND SURTAXES: Life

insurance-extent to which exempt. Accident and health insur-

ance exempt. Gifts and inheritances exempt. Interest which is

exempt from both normal and surtaxes. Compensation for active

war service exempt. Income of states, etc., from public utilities,

etc., exempt. Income of foreign governments exempt. Compen-

sation of the President, judges, and state employees no longer

exempt. Alimony not taxable.

EXEMPT CORPORATIONS: Types of corporations exempt.

(Labor and agricultural organizations. Mutual savings banks.
Fraternal beneficiary societies. Building and loan associations.
Certain cemetery companies. Religious, charitable, educational,
etc., societies. Chambers of commerce, etc. Civic leagues. Social
clubs. Local mutual insurance companies, etc. Co-operative
societies, etc. Corporations serving exempt corporations. Federal

ANNUAL RETURNS BY INDIVIDUALS: Return may be filed by

agent-when. Separate returns of husband and wife--when de-

sirable. Returns by minors. Returns by fiduciaries. Returns by

soldiers and sailors.

ANNUAL RETURNS BY PARTNERSHIPS AND PERSONAL SERVICE

CORPORATIONS: Income from partnerships included in individual

returns of partners. Partnerships with fiscal years must file ex-

cess profits tax returns.

ANNUAL RETURNS BY CORPORATIONS: "Corporation" defined.

Return sworn to by two officials. Return of foreign corporation

filed by agent. Returns by receivers, trustees in bankruptcy or

assignees. Returns of mergers, reorganizations and corporations

with changed names. Corporations "not doing business" may have

to make returns. (Holding companies with income only from

dividends must make returns. Incomplete corporations must file

returns unless specifically relieved.) Consolidated returns. (“Af-

filiated corporations" defined. Only one $2,000 credit permitted

in a consolidated return. Distribution of the tax among the sub-

sidiaries. New "government contract" corporations must make

separate returns.)

MISCELLANEOUS "INFORMATION" RETURNS: Corporation re-

turns of dividends paid. Brokers' returns of customers' profits

and losses. Copies of government contracts. Returns under

systems of "information at source" and "payment at source."

Other returns.

AMENDED RETURNS: Tax adjustment when amended returns
for 1913-1916 are filed. Amended returns necessary for corpora-
tions reporting on fiscal year basis in 1917. (Criticism of regu-
lation.)

EXTENSIONS OF TIME FOR FILING RETURNS: Certain 1918 ex-

tensions illegally conditioned upon prepayment of taxes. Exten-

sion of time for filing 1919 returns. Application for thirty-day

extension in case of absence or sickness. Applications to commis-

sioner for other extensions.

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