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Act of 1921.

(1) Such a portion of a tax computed at the rates specified in subdivision (a) of section 301 of the Revenue Act of 1918, as the part of the net income attributable to such Government contract or contracts bears to the entire net income. In computing such tax the excess-profits credit and the war-profits credit which would be applicable to such calendar year under the Revenue Act of 1918 if it had been continued in force, shall be used;

(2) Such a portion of a tax computed at the rates specified in subdivision (a) of this section as the part of the net income not attributable to such Government contract or contracts bears to the entire net income.

For the purpose of determining the part of the net income attributable to such Government contract or contracts, the proper apportionment and allocation of the deductions with respect to gross income derived from such

Government contract or contracts, and from other sources, respectively, shall be determined under rules and regulations prescribed by the Commissioner with the approval of the Secretary.

Act of 1918.

(1) Such a portion of a tax computed at the rates specified in subdivision (a) as the part of the net income attributable to such Government contract or contracts bears to the entire net income. In computing such tax the excess-profits credit and the war-profits credit applicable to the taxable year shall be used;

(2) Such a portion of a tax computed at the rates specified in subdivision (b) as the part of the net income not attributable to such Government contract or contracts bears to the entire net income.

For the purpose of determining the part of the net income attributable to such Government contract or contracts, the proper apportionment and allocation of the deductions with respect to gross income derived from such Government contract or contracts and from other sources, respectively, shall be determined under rules and regulations prescribed by the Commissioner with the approval of the Secretary.

SEC. 301. (d) In any case where the full amount of the excess-profit credit is not allowed. under the first bracket of subSEC. 301. (c) In any case division (a) or (b), by reason where the full amount of the ex- of the fact that such credit is cess-profits credit is not allowed in excess of 20 per centum of the under the first bracket of sub-invested capital, the part not so division (a), by reason of the fact that such credit is in excess of 20 per centum of the invested capital, the part not so allowed shall be deducted from the amount in the second bracket.

SEC. 302. That the tax imposed by subdivision (a) of section 301 shall in no case be more than 20 per centum of the amount of the net income in ex

allowed shall be deducted from the amount in the second bracket.

SEC. 301. (e) For the purposes of the Act approved March 21, 1918, entitled 'An Act to provide for the operation of transportation systems while under Federal control, for the just compensation of their owners, and for other purposes," the tax imposed by this title shall be treated as levied by an Act in amendment of Title II of the Revenue Act of 1917.

SEC. 302. That the tax imposed by subdivision (a) of section 301 shall in no case be more than 30 per centum of the amount of the net income in excess of

Act of 1917.

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cess of $3,000 and not in excess $3,000 and not in excess of $20,-
of $20,000, plus 40 per centum 000, plus 80 per centum of the
of the amount of the net income amount of the net income in
in excess of $20,000; and the excess of $20,000; the tax im-
limitations imposed by section posed by subdivision (b) of sec-
302 of the Revenue Act of 1918 tion 301 shall in no case be more
(upon taxes computed under than 20 per centum of the
subdivision (c) of section 301 of amount of the net income in ex-
that Act) are hereby made ap-cess of $3,000 and not in excess
plicable to taxes computed under
subdivision (b) of section 301 of
this Act. Nothing in this sec-
tion shall be construed in such
manner as to increase the tax
imposed by section 301 of this
Act.

of $20,000, plus 40 per centum.
of the amount of the net income
in excess of $20,000; and the
above limitations shall apply to
the taxes computed under sub-
divisions (a) and (b) of section.
301, respectively, when used in
subdivision (c) of that section.
Nothing in this section shall be
construed in such manner as to
increase the tax imposed by sec-
tion 301.

Act of 1917.

SEC. 303. That if part of the SEC. 303. That if part of the net income of a corporation is net income of a corporation is derived (1) from a trade or busi- derived (1) from a trade or ness (or a branch of a trade or business (or a branch of a trade business) in which the employ- or business) in which the emment of capital is necessary, and ployment of capital is necessary, (2) a part (constituting not less and (2) a part (constituting not than 30 per centum of its total less than 30 per centum of its net income) is derived from a total net income) is derived separate trade or business (or from a separate trade or busidistinctly separate branch of the ness (or a distinctly separate trade or business) which if con- branch of the trade or busistituting the sole trade or business) which if constituting the ness would bring it within the sole trade or business would class of "personal service bring it within the class of "percorporations," then (under reg-sonal service corporations," then ulations prescribed by the Com- (under regulations prescribed missioner with the approval of by the Commissioner with the the Secretary) the tax upon the approval of the Secretary) the first part of such net income tax upon the first part of such shall be separately computed (al- net income shall be separately lowing in such computation only computed (allowing in such comthe same proportionate part of putation only the same proporthe credits authorized in section tionate part of the credits of this title every corporation 312), and the tax upon the authorized in sections 311383 and or partnership not exempt under second part shall be the same 312),383 and the tax upon the sec- the provisions of this section percentage thereof as the tax so ond part shall be the same per- shall be deemed to be engaged in computed upon the first part is centage thereof as the tax so business, and all the trades and of such first part: Provided, computed upon the first part is businesses in which it is engaged That the tax upon such second of such first part: Provided, shall be treated as a single trade part shall in no case be less than That the tax upon such second or business, and all its income 20 per centum thereof, unless part shall in no case be less than from whatever source derived the tax upon the entire net 20 per centum thereof, unless the shall be deemed to be received income, if computed without tax upon the entire net income, from such trade or business. benefit of this section, would con- if computed without benefit of This title shall apply to al stitute less than 20 per centum this section, would constitute trades or businesses of whatever of such entire net income, in less than 20 per centum of such description, whether continuwhich event the tax shall be de- entire net income, in which ously carried on or not, except

SEC. 201. [2] For the purpose

Act of 1921.

termined upon the entire net income, without reference to this section, as other taxes are determined under this title. The total tax computed under this section shall be subject to the limitations provided in section 302.384 SEC. 304. (a) That the corporations enumerated in section 231386 shall, to the extent that they are exempt from income tax under Title II, be exempt from taxation under this title.

SEC. 304. (b) Any corporation whose net income for the taxable year is less than $3,000 shall be exempt from taxation under this title.

SEC. 304. (c) In the case of any corporation engaged in the mining of gold, the portion of the net income derived from the mining of gold shall be exempt from the tax imposed by this title or any tax imposed by Title II of the Revenue Act of 1917, and the tax on the remaining portion of the net income shall be the same proportion of a tax computed without the benefit of this subdivision which such remaining portion of the net income bears to the entire net income.

SEC. 305. That if a tax is computed under this title for a period of less than twelve months, the specific exemption of $3,000, wherever referred to in this title, shall be reduced to an amount which is the same proportion of

384 Sec. 302, p. 321.

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event the tax shall be determined SEC. 201. (a) In the case of
upon the entire net income, officers and employees385 under
without reference to this section, the United States, or any State,
as other taxes are determined Territory, or the District of Co-
under this title. The total tax lumbia, or any local subdivision
computed under this section thereof, the compensation or fees
shall be subject to the limita- received by them as such officers
tions provided in section 302.384 or employees;
SEC. 304. (a) That the cor- SEC. 201. (b) Corporations ex-
porations enumerated in section empt from tax under the pro-
231386 shall, to the extent that visions of section elevenss
386 of
they are exempt from income Title I of such Act of Septem-
tax under Title II, be exempt ber eighth, nineteen hundred
from taxation under this title. and sixteen, as amended by this
SEC. 304. (b) Any corporation Act, and partnerships and indi-
whose net income for the taxable viduals carrying on or doing the
year is less than $3,000 shall be same business, or coming within
exempt from taxation under this the same description; and
title.

SEC. 201. (c) Incomes derived
SEC. 304. (c) In the case of from the business of life, health,
any corporation engaged in the and accident insurance combined
mining of gold, the portion of the in one policy issued on the
net income derived from the min- weekly premium payment plan.
ing of gold shall be exempt from SEC. 202. That the tax shall
the tax imposed by this title, not be imposed in the case of the
and the tax on the remaining trade or business of a foreign
portion of the net income shall corporation or partnership or a
be the proportion of a tax com- nonresident alien individual, the
puted without the benefit of this net income of which trade or
subdivision which such remain- business during the taxable year
ing portion of the net income is less than $3,000.
bears to the entire net income.

SEC. 305. That if a tax is computed under this title for a period of less than twelve months, the specific exemption of $3,000, wherever referred to in this title, shall be reduced to an amount which is the same pro

385 (a) The officers and employees' of any state or local subdivision thereof, as contemplated by Sec. 201 (a) of the Act of 1917, were regular officers and employees, and not persons whose services were made use of as consultants and were not in any sense a part of the regular forces of such state or subdivision. Metcalf et al. v. Mitchell (Col.), (D. C., D. Mass. 1924) 299 Fed. 812.

385 (b) Compensation received by a firm of consulting engineers, who advised various states, municipalities, and water and sewer districts throughout the country as to the installation of water works and sewer systems, for services rendered to a water district and a sewer district which were local subdivisions of states, was not exempt under Sec. 201 (a) of the Act of 1917, where the members of such firm were not employed as officers or employees of such subdivisions, regardless of whether such services were rendered to such subdivisions when acting in a governmental or

non-governmental capacity. Metcalf et al. v. Mitchell (Col.), (D. C., D. Mass. 1924) 299 Fed. 812.

385 (c) One member of a firm of consulting engineers who advised various states, municipalities, and water and sewer districts throughout the country as to the installation of water works and sewer systems, was the regularly appointed Chief Engineer of a certain water district, which was a local subdivision of a state, and which was established to provide a healthful water supply for the inhabitants thereof, and another member of the firm was a regularly appointed Member of the Board of Engineers of a certain sanitary district, which was a local subdivision of a state. The income received by them, respectively, was exempt as income received by officers of a local subdivision of a state under Sec. 201 (a) of the Act of 1917. Metcalf et al. v. Mitchell (Col.), (D. C., D. Mass. 1924) 299 Fed.

812.

386 Sec. 231, p. 182; Sec. 11, p. 183.

Act of 1921. $3,000 as the number of months in the period is of twelve months.

Act of 1918.

portion of $3,000 as the number
of months in the period is of
twelve months.

PART III-CREDITS.
SEC. 311. (a) That the war-
profits credit shall consist of the
sum of:

(1) A specific exemption of
$3,000; and

Act of 1917.

SEC. 203. That for the purposes of this title the deduction shall be as follows, except as otherwise in this title provided—

(a) In the case of a domestic corporation, the sum of (1) an amount equal to the same percentage of the invested capital for the taxable year which the average amount of the annual net income of the trade or business during the prewar period

(2) An amount equal to the average net income of the corporation for the prewar period, plus or minus, as the case may be, 10 per centum of the difference between the average invested capital for the prewar period and the invested capital was of the invested capital for for the taxable year. If the tax is computed for a period of less than twelve months such amount shall be reduced to the same proportion thereof as the number of months in the period is of twelve months.

SEC. 311. (b) If the corpora

tion had no net income for the
prewar period, or if the amount
computed under paragraph (2)
of subdivision (a) is less than 10
per centum of its invested capi-
tal for the taxable year, then the
war-profits credit shall be the
sum of:

(1) A specific exemption of
$3,000; and

(2) An amount equal to 10 per centum of the invested capiper centum of the invested capital for the taxable year.

SEC. 311. (e) A foreign corporation shall not be entitled to a specific exemption of $3,000.

the prewar period (but not less than seven or more than nine per centum of the invested capital for the taxable year), and (2) $3,000;

SEC. 203. (b) In the case of citizen or resident of the United a domestic partnership or of a States, the sum of (1) an amount the invested capital for the taxequal to the same percentage of amount of the annual net income able year which the average

of the trade or business during the prewar period was of the invested capital for the prewar period (but not less than seven or more than nine per centum of the invested capital for the taxable year), and (2) $6,000;

SEC. 203. (c) In the case of a foreign corporation or partnership, or of a nonresident alien individual, an amount ascertained in the same manner as provided in subdivisions (a) and (b) without any exemption of $3,000 or $6,000.

SEC. 203. (d) If the Secretary of the Treasury is unable satisfactorily to determine the average amount of the annual net income of the trade or business during the prewar period, the deduction shall be determined in the same manner as provided in section two hundred and five.

SEC. 205. (a) That if the Secretary of the Treasury, upon complaint finds either (1) that

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Act of 1917.

during the prewar period a domestic corporation or partnership, or a citizen or resident of the United States, had no net income from the trade or business, or (2) that during the prewar period the percentage, which the net income was of the invested capital, was low as compared with the percentage, which the net income during such period of representative corporations, partnerships, and individuals, engaged in a like or similar trade or business, was of their invested capital, then the deduction shall be the sum of (1) an amount equal to the same percentage of its invested capital for the taxable year which the average deduction (determined in the same manner as provided in section two hundred and three, without including the $3,000 or $6,000 therein referred to) for such year of representative corporations, partnerships, or individuals, engaged in a like or similar trade or business, is of their average invested capital for such year plus (2) in the case of a domestic corporation $3,000, and in the case of a domestic partnership or a citizen or resident of the United States $6,000.

The percentage which the net income was of the invested capital in each trade or business shall be determined by the Commissioner of Internal Revenue, in accordance with regulations prescribed by him, with the approval of the Secretary of the Treasury. In the case of a corporation or partnership which has fixed its own fiscal year, the percentage determined by the calendar year ending during such fiscal year shall be used.

SEC. 205. (b) The tax shall be assessed upon the basis of the deduction determined as provided in section two hundred and three,387 but the taxpayer claiming the benefit of this section may at the time of making the

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