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affected by very recent decisions but notes have been appended in connection therewith in order to apprise the reader of the latest rulings, and the text of such decisions have been added to Chapter V on the Excess Profits Tax.

Professional contact with the officials and officers of Internal Revenue of the Treasury Department at Washington, including the Commissioner, himself, and with such members of the Advisory Board as the writer has had the pleasure of meeting, has impressed him with their profound and unanimous desire to grant to the taxpayer every right and fair concession possible to be drawn from a most liberal interpretation of the law that will ensure an equitable administration of it. With this significant assurance, not inconsistent with a positive duty, the taxpayer should dismiss from his mind that sense of antagonism that so often exists toward tax departments of the Government, and should seek to coöperate with them for the procurement of the necessary revenue of which the present extraordinary taxes are expected to contribute a vital part.

The writer wishes to express his gratitude to those of his friends who by suggestions and helpful recommendations and counsel have made possible the treatment of a variety of problems that will present themselves under the new laws; he also takes occasion to express his grateful acknowledgment of the helpfulness of the Income and War Tax Services of the Corporation Trust Company, which contain the rulings and decisions of the Treasury Department upon these laws.

On account of the difficulty of arrangement, the subjects are not coördinately grouped. The index, however, has been made especially copious in order to afford a ready reference to the subject of inquiry.

52 Broadway, New York City, January 2, 1918.

GODFREY N. NELSON.

PREFACE TO FIRST EDITION

Since the enactment of the Corporation Excise Tax of 1909, and the Federal Income Tax Law, applicable to both individuals and corporations, effective March 1, 1913, the writer has prepared, and advised with regard to, many income tax returns of corporations and individuals. The preparation of returns almost invariably necessitated the analysis and subdivision of book accounts as commonly kept in order to conform them to the classification prescribed by these laws. To obviate the necessity of analyzing and rearranging accounts and to facilitate the preparation of returns was the first thought that actuated the writing of this book. To make it more helpful there have been included rulings of the Treasury Department and court decisions on the most important items of income and expenses.

The writer makes no pretense at having produced a law book and at no time had that aim in view. This is intended merely to serve the purpose of a practical guide to those who, either for themselves or others, are called upon to prepare returns. Statements contained herein are predicated: first, upon the Income Tax Law enacted September 8, 1916, which was retroactive and took effect as of January 1, 1916; second, upon rulings by the Treasury Department thereon; and third, upon such rulings and court decisions under the Excise Tax of 1909 and the Income Tax Law of 1913, which are consistent and not in conflict with the requirements of the present law.

An expression of gratitude is due to various officials and officers of Internal Revenue of the Treasury Department at Washington and New York for the courtesies shown to the writer in matters submitted to them, but this acknowledgment should not be construed as an endorsement by them of the contents of this book. The writer also acknowledges the helpfulness of the Income Tax Service of the Corporation Trust Company, the index to which was especially useful as a ready

reference to Treasury Decisions. Mention should also be made of Mr. Henry Campbell Black's treatise on the law of "Income Taxation" under Federal and State laws, to which the writer has referred.

The arrangement of subjects is not co-ordinate throughout, but the order of the statute and the returns of net income have been followed as nearly as practicable.

52 Broadway, New York City, December 16th, 1916.

GODFREY N. NELSON.

TABLE OF CONTENTS

V. Returns of Individuals: Combined Return-Who is Required to

make return-Return Form-Return by Husband and Wife

Fiduciaries-Agent-Private Banks-Citizen residing abroad

-To whom Return is made-Verification-Returns by persons

in Military Service-Due date of filing-Extension of Time-

Penalty for Failure to file Return-False Return-When In-

ternal Revenue Officer may prepare Return-Due date of

Payment-Penalty, delayed Payment-*Claims for Refund

of Taxes-Advance Instalment Payments-Forms of Pay-

ment-Porto Rico, Philippines....
.11-19

VI. Income of Individuals: Income Defined—Undivided Surplus of
Corporations-Dividends, Life Insurance Policies-Principal,
Life Insurance Policies-Accident Insurance-Damages, In-
juries-Dividends-Dividends earned prior to March 1, 1913—
Stock Dividends-Payable in Securities-Paid out of Reserves
-Purchases and Sales of Stock-Exchange of Stock-Stock
received in Reorganization-Sale of Stock Rights-Scrip
Dividends-Dividends Received from Foreign Corporations-
Return of Capital, not Income-Profits of Limited Partner-
ships-Salaries, when Returnable-Salary paid by Stock-
Salary received of Exempt Corporation-Living Quarters,

PAGE

part of Compensation-Board, Lodging, etc., in lieu of Cash-
Bonuses-Salesmen's Commissions-Professional Fees, when
Returnable-Clergymen-Compensation of Trustees-Profit
on Sales of Capital Assets-Profit or Loss on Securities ac-
quired prior to March 1, 1913-Profit Defined-Sales of Real
Estate Cost of Property-Appreciation not Income-
Promissory Notes-Gifts, Legacies-Income of Estates-
Heirs and Legatees-Legacies, Vested Interest-Profit re-
turnable by Legatee-Trust Estate undistributed for Period of
Years-Insurance Agents-Rentals Received-Interest, Gov-
ernment Obligations - Political Subdivision - Contractor
Working for State-Liberty Bonds, 31⁄2%-4%-Income and
Expenses of Government Employees-Rates of Exchange-
Foreign Investments-Interest, Bank Account-Pensions-
Alimony-License required by Collectors of Foreign Income-
Foreign Income, Non-Resident Aliens-Record Owner not
Actual Owner of Stock.....

.19-48

Amended Law-Nonresident Alien Individuals-Nonresident
Foreign Corporations-Dividends to Nonresident Alien Com-

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