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INCOME FROM SOURCES WITHIN THE POSSESSIONS OF THE

UNITED STATES

SEC. 262. (a) In the case of citizens of the United States or domestic corporations, satisfying the following conditions, gross income means only gross income from sources within the United States

(1) If 80 per centum or more of the gross income of such citizen or domestic corporation (computed without the benefit of this section), for the three-year period immediately preceding the close of the taxable year (or for such part of such period immediately preceding the close of such taxable year as may be applicable) was derived from sources within a possession of the United States; and

(2) If, in the case of such corporation, 50 per centum or more of its gross income (computed without the benefit of this section) for such period or such part thereof was derived from the active conduct of a trade or business within a possession of the United States; or

(3) If, in the case of such citizen, 50 per centum or more of his gross income (computed without the benefit of this section) for such period or such part thereof was derived from the active conduct of a trade or business within a possession of the United States either on his own account or as an employee or agent of another.

(b) Notwithstanding the provisions of subdivision (a) there shall be included in gross income all amounts received by such citizens or corporations within the United States, whether derived from sources within or without the United States.

(c) As used in this section the term “possession of the United States” does not include the Virgin Islands of the United States.

ART. 1135. Citizens of the United States deriving income from sources within a possession of the United States. The gross income of a citizen of the United States (1) 80 per cent or more of whose gross income (computed without the benefit of this article) for the three-year period immediately preceding the close of the taxable year (or for such part of such period immediately preceding the close of such taxable year as may be applicable) was derived from sources within a possession of the United States, and (2) 50 per cent or more of whose gross income (computed without the benefit of this article) for such period or such part thereof was derived from the active conduct of a trade or business within a possession of the United States, either on his own account or as an employee or agent of another, means only gross income from sources within the United States. For a determination of the income from sources within the United States, see section 217 and articles 317–331. A citizen entitled to the benefits of this article is required to file with his individual return the schedule on Form 1040 E.

ART. 1136. Domestic corporation deriving income from sources within a possession of the United States.—The gross income of a domestic corporation (1) 80 per cent or more of the gross income of which (computed without the benefit of this article) for the three-year period immediately preceding the close of the taxable year (or for such part of such period immediately preceding the close of such taxable year as may be applicable) was derived from sources within a possession of the United States, and (2) 50 per cent or more of the gross income of which (computed without the benefit of this article) for such period or such part thereof was derived from the active conduct of a trade or business within a possession of the United States, means only gross income from sources within the United States. See section 217 and articles 317–331.

ART. 1137. Income received within the United States.-Notwithstanding the provisions of articles 1135 and 1136, there shall be included in gross income of citizens and domestic corporations therein specified all amounts, whether derived from sources within or without the United States, which are received by such citizens or corporations within the United States. From the amounts so included in gross income there shall be deducted only the expenses properly apportioned or allocated thereto. The term “ United States herein includes only the States, the Territories of Alaska and Hawaii, and the District of Columbia. The term “ possession of the United States” as used in articles 1135, 1136, and this article includes Porto Rico, the Philippine Islands, the Panama Canal Zone, Guam, Tutuila, Wake, and Palmyra; it does not include the Virgin Islands.

CHINA TRADE ACT CORPORATIONS

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SEC. 263. (a) For the purpose only of the tax imposed by section 230 there shall be allowed, in the case of a corporation organized under the China Trade Act, 1922, a credit of an amount equal to the proportion of the net income derived from sources within China (determined in a similar manner to that provided in section 217) which the par value of the shares of stock of the corporation owned on the last day of the taxable year by individual citizens of the United States or China, resident in China, bears to the par value of the whole number of shares of stock of the corporation outstanding on such date: Provided, That in no case shall the amount by which the tax imposed by section 230 is diminished by reason of such credit exceed the amount of the special dividend certified under subdivision (b) of this section.

(b) Such credit shall not be allowed unless the Secretary of Commerce has certified to the Commissioner

(1) The amount which, during the year ending on the date fixed by law for filing the return, the corporation has distributed as a special dividend to or for the benefit of such individuals as on the last day of the taxable year were citizens of the United States or China, resident in China, and owned shares of stock of the corporation;

(2) That such special dividend was in addition to all other amounts, payable or to be payable to such individuals or for their benefit, by reason of their interest in the corporation; and

(3) That such distribution has been made to or for the benefit of such individuals in proportion to the par value of the shares of stock of the corporation owned by each ; except that if the corporation has more than one class of stock, the certificate shall contain a statement that the articles of incorporation

provide a method for the apportionment of such special dividend among such individuals, and that the amount certified has been distributed in accordance with the method so provided.

(c) For the purposes of this section shares of stock of a corporation shall be considered to be owned by the person in whom the equitable right to the income from such shares is in good faith vested.

(d) As used in this section the term “China” shall have the same meaning as when used in the China Trade Act, 1922.

ART. 1141. Income of China Trade Act corporations. The items of gross income to be included in the return of a corporation organized under the China Trade Act and the deductions allowable are the same as in the case of other domestic corporations.

ART. 1142. Credits allowed China Trade Act corporations.—In addition to the credits allowed under section 236, a China Trade Act corporation is, under certain conditions, allowed an additional credit for the purpose of computing the tax imposed by section 230. This credit is an amount equal to the proportion of the net income derived from sources within China (determined in a similar manner to that provided in section 217) which the par value of the shares of stock of the corporation owned on the last day of the taxable year by individual citizens of the United States or China, resident in China, bears to the par value of the whole number of shares of stock of the corporation outstanding on that date. The decrease in tax by reason of such credit must not, however, exceed the amount of the special dividend referred to in subdivision (b) of section 263, and is not allowable unless the special dividend has been certified to the Commissioner by the Secretary of Commerce. A China Trade Act corporation is not entitled to the credit for taxes paid to foreign countries and possessions of the United States allowed to domestic corporations under the provisions of section 238 of the statute. See articles 611 and 612.

ART. 1143. Meaning of terms used in connection with China Trade Act corporations.-A China Trade Act corporation is one organized under the provisions of the China Trade Act, 1922.

The term “ China ” means (1) China, including Manchuria, Thibet, Mongolia, and any territory leased by China to any foreign government, (2) the Crown Colony of Hongkong, and (3) the Province of Macao.

The term “special dividend” means the amount which during the year ending on March 15 succeeding the close of the corporation's taxable year is distributed as a special dividend to or for the benefit of such individuals as on the last day of the taxable year were citizens of the United States or China, resident in China, and owned shares of stock of the corporation. Such special dividend does not include any other amounts payable or to be payable to such individuals or for their benefit by reason of their interest in the corporation and must be made in proportion to the par value of the shares of stock of the corporation owned by each.

For the purposes of section 263 the shares of stock of a China Trade Act corporation are considered to be owned by the person in whom the equitable right to the income from such shares is in good faith vested.

A corporation organized under the China Trade Act shall not be deemed to be affiliated with any other corporation within the meaning of section 240 of the statute. See article 632.

“ Net income derived from sources within China," for the purpose of computing the special dividend, consists of the sum of the net income from sources wholly within China and that portion of the net income from sources partly within and partly without China which may be allocated to sources within China. The method of computing this income is similar to that described in articles 317-330.

ART. 1144. Withholding by a China Trade Act corporation.—Dividends paid by a China Trade Act corporation to persons other than individuals who are citizens of China, residing in China, are subject to both normal tax and surtax. Accordingly, tax should be withheld from such dividends when paid to nonresident alien individuals (other than citizens of China, resident in China), and to foreign corporations not engaged in trade or business in the United States and having no office or place of business therein, unless the dividends are exempt under section 217(a)(2)(A). In the case of an individual shareholder the rate of withholding is 6 per cent and in the case of a corporation 1212 per cent. A Filipino shareholder of a China Trade Act corporation, when resident without the United States, is treated as a nonresident alien for the purpose of the income tax and withholding is required from taxable dividends paid to such shareholder.

DATE ON WHICH TAX SHALL BE PAID

SEC. 270. (a) Except as provided in subdivisions (b), (c), and (d) of this section the total amount of tax imposed by this title shall be paid

(1) In the case of a taxpayer, other than a nonresident alien individual, and other than a foreign corporation not having an office or place of business in the United States, on or before the fifteenth day of March following the close of the calendar year, or, if the return should be made on the basis of a fiscal year, then on or before the fifteenth day of the third month following the close of the fiscal year; and

(2) In the case of a nonresident alien individual, and of a foreign corporation not having an office or place of business in the United States, on or before the fifteenth day of June following the close of the calendar year, or, if the return should be made on the basis of a fiscal year, then on or before the fifteenth day of the sixth month following the close of the fiscal year.

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(b) (1) The taxpayer may elect to pay the tax in four equal installments, in which case the first installment shall be paid on or before the latest date prescribed in subdivision (a) for the payment of the tax by the taxpayer, the second installment shall be paid on or before the fifteenth day of the third month, the third installment on or before the fifteenth day of the sixth month, and the fourth installment on or before the fifteenth day of the ninth month, after such date.

(2) If any installment is not paid on the date fixed for its payment, the whole amount of the tax unpaid shall be paid upon notice and demand from the collector.

(c) (1) At the request of the taxpayer, the Commissioner may extend the time for payment of the amount determined as the tax by the taxpayer, or any installment thereof, for a period not to exceed six months from the date prescribed in subdivision (a) or (b) for the payment of the tax or an installment thereof. In such case the amount in respect of which the extension is granted shall be paid on or before the date of the expiration of the period of the extension,

(2) If the time for payment is thus extended there shall be collected, as a part of such amount, interest thereon at the rate of 6 per centum per annum from the date when such payment should have been made if no extension had been granted, until the expiration of the period of the extension.

(d) The provisions of this section shall not apply to the payment of a tax required to be withheld at the sourée under section 221 or 237.

ART. 1201. Date on which tax shall be paid.—The tax, unless it is required to be withheld at the source or unless it is to be paid by a nonresident alien individual or a foreign corporation not having an office or place of business in the United States, is to be paid on or before the 15th day of March following the close of the calendar year, or, where the return is made on the basis of a fiscal year, on or before the 15th day of the third month following the close of such fiscal year. In the case of a nonresident alien individual, and of a foreign corporation not having an office or place of business in the United States, the tax is to be paid on or before the 15th day of June following the close of the calendar year, or, where the return is made on the basis of a fiscal year, on or before the 15th day of the sixth month following the close of the fiscal year. The tax may, at the option of the taxpayer, be paid in four equal installments instead of in a single payment, in which case the first installment is to be paid on or before the date prescribed for the payment of the tax as a single payment; the second installment on or before the 15th day of the third month; the third installment on or before the 15th day of the sixth month; and the fourth installment on or before the 15th day of the ninth month after such date.

The Commissioner, at the request of the taxpayer, may extend the time for payment of the amount determined as the tax by the taxpayer, or any part or installment thereof, for a period not to exceed six months from the date prescribed for the payment of such amount, part, or installment. A request by the taxpayer for

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