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PART I

INCOME TAX ON INDIVIDUALS

NORMAL TAX

SEC. 210. (a) in lieu of the tax imposed by section 210 of the Revenue Act of 1921, there shall be levied, collected, and paid for each taxable year upon the net income of every individual (except as provided in subdivision

(b) of this section) a normal tax of 6 per centum of the amount of the net income in excess of the credits provided in section 216, except that in the case of a citizen or resident of the United States the rate upon the first $4,000 of such excess amount shall be 2 per centum, and upon the next $4,000 of such excess amount shall be 4 per centum;

(b) In lieu of the tax imposed by subdivision (a), there shall be levied, collected, and paid for each taxable year upon the net income of every nonresident alien individual, a resident of a contiguous country, a normal tax equal to the sum of the following:

(1) 2 per centum of the amount by which the part of the net income attributable to wages, salaries, professional fees, or other amounts received as compensation for personal services actually performed in the United States, exceeds the credits provided in subdivisions (d) and (e) of section 216; but the amount taxable at such 2 per centum rate shall not exceed $4,000;

(2) 4 per centum of the amount by which such part of the net income exceeds the sum of (A) the credits provided in subdivisions (d) and (e) of Section 216, plus (B) $4,000.; but the amount taxable at such 4 per centum rate shall not exceed $4,000; and

(3) 6 per centum of the amount of the net income in excess of the sum of (A) the amount taxed under paragraphs (1) and (2), plus (B) the credits provided in section 216.

Art. 1. Income tax on individuals.—Title II of the statute, which is effective January 1, 1924, imposes an income tax on individuals, including a normal tax (section 210) and a surtax (section 211).

The tax is upon net income as defined in the statute, which is determined by subtracting the allowable deductions from gross income as defined in the statute. See sections 212, 213, 214, and 215. In certain cases credits are allowed against net income (section 216) and against the amount of the tax (sections 209 and 222). Special provisions of the statute deal with nonresident alien individuals (section 217), partnerships (section 218), estates and trusts (section 219), and corporations formed or availed of for the purpose of preventing imposition of surtax upon their shareholders (section 220). See section 208 and articles 1651–1654 for special provisions relative to the taxation of capital gains and the deduction of capital losses. The tax is payable upon the basis of returns rendered by persons fiable thereto,

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except that in some instances it is to be paid at the source of the income. See sections 221 and 223–227. The statute also imposes an income tax on corporations at a fixed rate (section 230). See Part II of these regulations. For administrative provisions and for definitions and general provisions, see Parts III and IV of the regulations.

ART. 2. Normal tax.--The normal tax on individual citizens or residents of the United States upon the amount of the net income in excess of the credits provided in section 216 is at the rate of 2 per cent upon the first $4,000, 4 per cent upon the next $4,000, and 6 per cent upon the remainder of the net income. In the case of nonresident alien individuals, residents of countries other than Canada and Mexico, the normal tax is 6 per cent, there being no reduction in the rate upon any part of the net income subject to tax. In the case of nonresident alien individuals, residents of Canada or Mexico, the normal tax is (1) 2 per cent of that part of the net income attributable to compensation for personal services actually performed in the United States in excess of the credits provided in subdivisions (d) and (e) of section 216, but not in excess of $4,000; (2) 4 per cent of the amount by which such part of the net income exceeds the sum of (a) the credits provided in subdivisions (d) and (e) of section 216 plus (6) $4,000, but the amount taxable at 4 per cent shall not exceed $4,000; (3) 6 per cent of the amount of the net income in excess of the amounts taxed at 2 per cent and 4 per cent plus the credits provided in section 216. In order to determine the income to which the normal tax'is applied, the net income, as defined in section 212, is first entitled to the credits and exemptions specified in section 216 and articles 301–306.

The rates of normal tax are shown below in tabular form:

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Compensation for services rendered in the United States in excess of

credits under section 216 (d) and (e) (total not over $4,000). Compensation for services rendered in the United States in excess of

credits under section 216 (d) and (e) plus $4,000 (total not over

$4,000). Net income in excess of amounts taxed at 2 per cent and 4 per cent

plus credits under section 216..

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NONRESIDENT ALIEN--RESIDENT OF FOREIGN COUNTRY OTHER THAN

CANADA OR MEXICO

Net income in excess of credits under section 216..

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ART. 3. Persons liable to tax.-Citizens of the United States, except those entitled to the benefits of section 262 (see articles 1135– 1137), wherever resident, are liable to the tax. It makes no difference that they may own no assets within the United States and may receive no income from sources within the United States. Every resident alien individual is liable to the tax, even though his income is wholly from sources outside the United States. Every nonresident alien individual is liable to the tax on his income from sources within the United States. (See section 213 (c) and articles 92 and 93.) Estates and trusts are also subject to the tax. (See section 219 and articles 341-347.)

ART. 4. Who is a citizen.-Every person born or naturalized in the United States, and subject to its jurisdiction, is a citizen. When any naturalized citizen has left the United States and resided for two years in the foreign country from which he came, or for five years in any other foreign country, it is presumed that he has ceased to be an American citizen. This presumption does not apply, however, to residence abroad while the United States was at war, nor does it apply in the case of individuals born in the United States subject to its jurisdiction. For example, if a Swede, after being naturalized in the United States, returned to Sweden and resided there for two years prior to April 6, 1917, he is presumed once more to be an alien. However, even though an individual born in the United States, subject to its jurisdiction, of either citizen or alien parents, resided in a foreign country for a number of years, he would still be a citizen of the United States, unless he had become naturalized in or taken an oath of allegiance to the foreign country of residence or some other foreign state. A foreigner who has filed his declaration of intention of becoming a citizen of the United States, but who has not yet received his final citizenship papers, is an alien. (See articles 311-314 for distinction between a resident alien individual and a nonresident alien individual.)

SURTAX

SEC. 211. (a) In lieu of the tax imposed by section 211 of the Revenue Act of 1921, but in addition to the normal tax imposed by section 210 of this Act, there shall be levied, collected, and paid for each taxable year upon the net income of every individual a surtax as follows:

Upon a net income of $10,000 there shall be no surtax; upon net incomes in excess of $10,000 and not in excess of $14,000, 1 per centum of such excess.

$40 upon net incomes of $14,000; and upon net incomes in excess of $14,000 and not in excess of $16,000, 2 per centum in addition of such excess.

$80 upon net incomes of $16,000; and upon net incomes in excess of $16,000 and not in excess of $18,000, 3 per centum in addition of such excess.

$140 upon net incomes of $18,000; and upon net incomes in excess of $18,000 and not in excess of $20,000, 4 per centum in addition of such excess.

$220 upon net incomes of $20,000; and upon net incomes in excess of $20,000 and not in excess of $22,000, 5 per centum in addition of such excess.

$320 upon net incomes of $22,000; and upon net incomes in excess of $22,000 and not in excess of $24,000, 6 per centum in addition of such excess.

$440 upon net incomes of $24,000; and upon net incomes in excess of $24,000 and not in excess of $26,000, 7 per centum in addition of such excess.

$580 upon net incomes of $26,000; and upon net incomes in excess of $26,000 and not in excess of $28,000, 8 per centum in addition of such excess.

$740 upon net incomes of $28,000; and upon net incomes in excess of $28,000 and not in excess of $30,000, 9 per centum in addition of such excess.

$920 upon net incomes of $30,000; and upon net incomes in excess of $30,000 and not in excess of $34,000, 10 per centum in addition of such excess.

$1,320 upon net incomes of $34,000; and upon net incomes in excess of $34,000 and not in excess of $36,000, 11 per centum in addition of such excess.

$1,540 upon net incomes of $36,000; and upon net incomes in excess of $36,000 and not in excess of $38,000, 12 per centum in addition of such excess.

$1,780 upon net incomes of $38,000; and upon net incomes in excess of $38,000 and not in excess of $42,000, 13 per centum in addition of such excess.

$2,300 upon net incomes of $42,000; and upon net incomes in excess of $42,000 and not in excess of $44,000, 14 per centum in addition of such excess.

$2,580 upon net incomes of $44,000; and upon net incomes in excess of $44,000 and not in excess of $46,000, 15 per centum in addition of such excess.

$2,880 upon net incomes of $46,000; and upon net incomes in excess of $46,000 and not in excess of $48,000, 16 per centum in addition of such excess.

$3,200 upon net incomes of $48,000; and upon net incomes in excess of $48,000 and not in excess of $50,000, 17 per centum in addition of such excess.

$3,540 upon net incomes of $50,000; and upon net incomes in excess of $50,000 and not in excess of $52,000, 18 per centum in addition of such excess.

$3,900 upon net incomes of $52,000; and upon net incomes in excess of $52,000 and not in excess of $56,000, 19 per centum in addition of such excess.

$4,660 upon net incomes of $56,000; and upon net incomes in excess of $56,000 and not in excess of $58,000, 20 per centum in addition of such excess.

$5,060 upon net incomes of $58,000; and upon net incomes in excess of $58,000 and not in excess of $62,000, 21 per centum in addition of such excess.

$5,900 upon net incomes of $62,000; and upon net incomes in excess of $62,000 and not in excess of $64,000, 22 per centum in addition of such excess.

$6,340 upon net incomes of $64,000; and upon net incomes in excess of $64,000 and not in excess of $66,000, 23 per centum in addition of such excess.

$6,800 upon net incomes of $66,000; and upon net incomes in excess of $ 66,000 and not in excess of $68,000, 24 per centum in addition of such excess.

$7,280 upon net incomes of $68,000'; and upon net incomes in excess of $68,000 and not in excess of $70,000, 25 per centum in addition of such excess.

$7,780 upon net incomes of $70,000; and upon net incomes in excess of $70,000 and not in excess of $74,000, 26 per centum in addition of such excess.

$8,820 upon net incomes of $74,000 ; and upon net incomes in excess of $74,000 and not in excess of $76,000, 27 per centum in addition of such excess.

$9,360 upon net incomes of $76,000; and upon net incomes in excess of $76,000 and not in excess of $80,000, 28 per centum in addition of such excess.

excess.

$10,480 upon net incomes of $80,000; and upon net incomes in excess of $80,000 and not in excess of $82,000, 29 per centum in addition of such excess.

$11,060 upon net incomes of $82,000; and upon net incomes in excess of $82,000 and not in excess of $84,000, 30 per centum in addition of such excess.

$11,660 upon net incomes of $84,000; and upon net incomes in excess of $84,000 and not in excess of $88,000, 31 per centu in addition of su

$12,900 upon net incomes of $88,000; and upon net incomes in excess of $88,000 and not in excess of $90,000, 32 per centum in addition of such excess.

$13,540 upon net incomes of $90,000; and upon net incomes in excess of $90,000 and not in excess of $92,000, 33 per centum in addition of such excess.

$14,200 upon net incomes of $92.000; and upon net incomes in excess of $92,000 and not in excess of $94,000, 34 per centum in addition of such excess.

$14,880 upon net incomes of $94,000; and upon net incomes in excess of $94,000 and not in excess of $96,000, 35 per centum in addition of such excess.

$15,580 upon net incomes of $96,000; and upon net incomes in excess of $96,000 and not in excess of $100,000, 36 per centum in addition of such excess,

$17,020 upon net incomes of $100,000; and upon net incomes in excess of $100,000 and not in excess of $200,000, 37 per centum in addition of such excess.

$54,020 upon net incomes of $200,000; and upon net incomes in excess of $200,000 and not in excess of $300,000, 38 per centum in addition of such excess.

$92,020 upon net incomes of $300,000; and upon net incomes in excess of $300,000 and not in excess of $500,000, 39 per centum in addition of such excess.

$170,020 upon net incomes of $500,000; and upon net incomes in excess of $500,000, in addition 40 per centum of such excess.

(b) In the case of a bona fide sale of mines, oil or gas wells, or any interest therein, where the principal value of the property has been demonstrated by prospecting or exploration and discovery work done by the taxpayer, the portion of the tax imposed by this section attributable to such sale shall not exceed 16 per centum of the selling price of such property or interest.

Art. 11. Surtax.-In addition to the normal tax imposed by section 210 a surtax is imposed at the rates specified in the statute upon the net income of every individual, resident or nonresident. See articles 2-4. In determining the taxable net income, for the purpose of the surtax, thé credits provided by section 216 of the statute in the case of the normal tax are not applicable. (See section 208 and articles 1651-1654 for special rates of tax in cases of capital gains or losses.)

Art. 12. Computation of surtax.—The following table shows the surtax due for 1924 and subsequent years upon certain specified amounts of net income. In each instance the first figure of the net income in the net income column is to be excluded and the second figure included. The percentage given opposite applies to the excess of income over the first figure in the net income column, and the sum in the next column is the surtax on the entire difference between the first figure and the second figure in the net income column. The final column gives the total surtax on a net income equal to the second figure in the net income column.

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