gross income, any dividends paid or credited to policy holders from whom it did not receive any premium during that year; and as to such policyholders as it did receive premiums from that year it is entitled to exclude only such part of the dividends paid to those policyholders as did not exceed the amount received from them, respectively, by way of premiums during that year. 2. DIVIDENDS CONSISTING OF REDUNDANCIES MENTS. IN PREVIOUS PREMIUM PAY None of the cash dividends paid by a life insurance company to its policyholders which represent redundancies in previous premium payments are deductible from gross income in annual tax returns as "sums other than dividends paid within the year on policy. contracts." The decision of the United States circuit court of appeals for the third circuit in the case of Lederer, collector, v. Penn Mutual Life Insurance Co., is published for the information of internal revenue officers and others concerned. (T. D. 2901, July 29, 1919) Excess-profits tax, revenue act of 1917 Modification of paragraph F of T. D. 2662 Paragraph F of T. D. 2662, which reads as follows: Assets of affiliated or subsidiary corporations which have to be adjusted to meet the statutory limitations prescribed by section 207 shall be valued as of conditions existing at the dates when such assets were acquired by the respective affiliated or subsidiary corporations and not as of the date when the stock in such affiliated or subsidiary corporations was acquired by the parent or controlling corporation, is hereby amended to read as follows: When all, or substantially all, of the stock of a subsidiary corporation was acquired for cash, the cash so paid shall be the basis to be used in determining the value of the property acquired. Where stock of a subsidiary company was acquired with the stock of the parent company, the amount to be included in the consolidated invested capital in respect of the company acquired shall be computed in the same manner as if the net tangible assets and the intangible assets had been acquired instead of the stock. If in accordance with such acquisition a paid-in surplus is claimed, such claim shall be subject to the provisions of articles 55 and 63 of regulations 41. (T. D. 2903, July 30, 1919) Information contained in returns Laws relating to the giving out, by employees of the bureau of internal revenue, of information contained in returns filed by taxpavers or in reference to office procedure with respect to the auditing of returns, handling of claims, and similar lines of work. Your attention is directed to the following legislation relating to the divulging of information contained in the returns of taxpayers. Section 257 of the revenue act of 1918 provides That returns upon which the tax has been determined by the commissioner shall constitute public records; but they shall be open to inspection only upon order of the president and under rules and regulations prescribed by the secretary and approved by the president: provided, that the proper officers of any state imposing an income tax may, upon the request of the governor thereof, have access to the returns of any corporation, or to an abstract thereof showing the name and income of the corporation, at such times and in such manner as the secretary may prescribe: provided further, that all bona fide stockholders of record owning 1 per centum or more of the outstanding stock of any corporation shall, upon making request of the commissioner, be allowed to examine the annual income returns of such corporation and of its subsidiaries. Section 3167, Revised Statutes, as amended by section 1317 of the said revenue act of 1918, provides: It shall be unlawful for any collector, deputy collector, agent, clerk, or other officer or employee of the United States, to divulge or to make known in any manner whatever not provided by law to any person the operations, style of work, or apparatus of any manufacturer or producer visited by him in the discharge of his official duties, or the amount or source of income, profits, losses, expenditures, or any particular thereof, set forth or disclosed in any income return, or to permit any income return or copy thereof or any book containing any abstract or particulars thereof to be seen or examined by any person except as provided by law; and it shall be unlawful for any person to print or publish in any manner whatever not provided by law any income return, or any part thereof, or source of income, profits, losses, or expenditures appearing in any income return; and any offense against the foregoing provision shall be a misdemeanor and be punished by a fine not exceeding $1,000 or by imprisonment not exceeding one year, or both, at the discretion of the court; and if the offender be an officer or employee of the United States he shall be dismissed from office or discharged from employment. Section 3152, Revised Statutes, as amended by the act of March 1, 1879, authorizing the employment of internal revenue agents, also provides : And all provisions of sections thirty-one hundred and sixty-seven, of the Revised Statutes shall apply to internal revenue agents as fully as internal revenue officers. Section 3173 of the revenue act of 1918 provides that It shall be the duty of any person, partnership, firm, or association, or corporation, made liable to any duty, special tax, or other tax imposed by law, when not otherwise provided for, (1) in case of a special tax, on or before the thirty-first day of July in each year, and (2) in other cases before the day on which the taxes accrue to make a list or return provided, that if any person liable to pay any duty or tax, or owning, possessing, or having the care or management of property, goods, wares, and merchandise, articles, or objects liable to pay any duty, tax, or license, shall fail to make and exhibit a list or return required by law, but shall consent to disclose the particulars of any and all the property, goods, wares, and merchandise, articles, and objects liable to pay any duty or tax, or any business or occupation liable to pay any tax as aforesaid, then, and in that case, it shall be the duty of the collector or deputy collector to make such list or return. Section 3176, Revised Statutes, as amended by said section 1317, revenue act of 1918, further provides: If any person, corporation, company or association fails to make and file a return or list at the time prescribed by law or by regulation made under authority of law, or makes willfully or otherwise, a false or fraudulent return or list, the collector or deputy collector shall make the return or list from his own knowledge and from such information as he can obtain through testimony or otherwise. In any such case the commissioner may from his own knowledge and from such information as he can obtain through testimony or otherwise make a return or amend any return made by a collector or deputy collector. Reading these provisions of law together, it is evident that any collector, deputy collector, agent, clerk, or other officer or employee of the bureau of internal revenue, including internal-revenue agents, who divulges or makes known in any manner whatsoever not provided by law the amount or source of income, profits, losses, expenditures, or any particulars thereof set forth or disclosed in any income return made by any taxpayer, or by a collector or deputy collector, or by the commissioner of internal revenue, or who permits any income return or copy thereof, or any book containing any abstract or particulars thereof, to be seen or examined by any person, except as provided by law, or who prints or publishes in any manner whatever, not provided by law, any income return or any part thereof, or source of income, profits, losses, or expenditures appearing in any income return, is guilty of a misdemeanor and subject to a fine not exceeding $1,000 or to imprisonment not exceeding one year, or both, at the discretion of the court, and if he be an officer or employee of the United States, to be dismissed from office or discharged from employment. The only provisions of law authorizing the making known of any income return under the revenue act of 1918 are those contained in section 257 of said act, above quoted. Similar provisions to those contained in section 257, revenue act of 1918, and sections 3173 and 3176, as amended by said revenue act of 1918 were also contained in the act of October 3, 1914, and the act of September 8, 1916. Amending article 307, resident alien (T. D. 2906, August 5, 1919) Income Tax. final edition of regulations 45, dealing with non- The final edition of regulations 45 is amended by changing article 307 to read as follows: ART. 307. When nonresident alien individual entitled to personal exemption (a) The following is an incomplete list of countries which either impose no income tax or in imposing an income tax allow both a personal exemption and a credit for dependents which satisfy the similar credit requirement of the statute: Argentina, Belgium, Bolivia, Bosnia, Brazil, Canada, Carinthia, China, Chile, Cuba, Dalmatia, Denmark, Ecuador, Egypt, France, Herzegovina, Istria, Mexico, Montenegro, Morocco, Newfoundland, Nicaragua, Norway, Panama, Persia, Peru, Portugal, Roumania, Russia (including Poles owing allegiance to Russia), Santo Domingo, Serbia, Siam, Spain, Union of South Africa, Venezuela. (b) The following is an incomplete list of countries which in imposing an income tax allow a personal exemption which satisfies the similar credit requirement of the statute, but do not allow a credit for dependents: Bachka, Banat of Temesvar, Croatia, El Salvadore, India, Italy, Slavonia. (c) The following is an incomplete list of countries which in imposing an income tax do not allow to citizens of the United States not residing in such country either a personal exemption or a credit for dependents and, therefore, fail entirely to satisfy the similar credit requirement of the statute: Australia, Costa Rica, Great Britain and Ireland, Japan, The Netherlands, New Zealand. The former names of certain of these territories are here used for convenience, in spite of an actual or possible change in name or sovereignty. A nonresident alien individual who is a citizen or subject of any country in the first list is entitled for the purpose of the normal tax to such credit for a personal exemption and for dependents as his family status may warrant. If he is a citizen or subject of any country in the second list he is entitled to a credit for a personal exemption, but to none for dependents. If he is a citizen or subject of any country in the third list he is not entitled to credit for either a personal exemption or for dependents. If he is a citizen or subject of a country which is in none of the lists, then to secure credit for either a personal exemption or for dependents he must prove to the satisfaction of the commissioner that his country does not impose an income tax or that in imposing an income tax it grants the similar credit required by the statute. (T. D. 2907, August 7, 1919.) Income and profits taxes. Instructions relative to acceptance of treasury certificates of indebtedness for income and profits taxes, supplementing articles 1731 and 1732, regulations 45. Collectors of internal revenue are directed to receive at par United States treasury certificates of indebtedness of series T4, dated June 3, 1919, maturing September 15, 1919, and series T6, dated July 1, 1919, maturing September 15, 1919, in payment of income and profits taxes payable on September 15, 1919, and to receive at par United States treasury certificates of indebtedness of series T5, dated June 3, 1919, maturing December 15, 1919, and series T7, dated July 1, 1919, maturing December 15, 1919, in payment of income and profits taxes payable on December 15, 1919. Collectors are authorized to receive such certificates in payment of such taxes, respectively, prior to the dates when the certificates, respectively, mature. The certificates of said series have one interest coupon attached, payable at the maturity of the certificates, respectively, but such coupons must in all cases be detached by the taxpayer and collected in ordinary course when due. The amount, at par, of the treasury certificates of indebtedness presented by any taxpayer in payment of income and profits taxes must not exceed the amount of the taxes to be paid by him, and collectors shall in no case pay interest on the certificates nor accept them for an amount other or greater than their face value. Deposits of treasury certificates of indebtedness received in payment of income and profits taxes must be made by collectors with the federal reserve banks of the districts in which the respective collectors' offices are located, unless otherwise specifically instructed by the Secretary of the Treasury. Specific instructions may be given in certain instances for the deposit of the certificates with federal reserve banks of other districts and with branch federal reserve banks, and the term "federal reserve bank," where it appears herein, includes such branches. Treasury certificates accepted by the collectors prior to the dates when the certificates, respectively, mature should be forwarded by the collector to the federal reserve bank to be held for account of the collector until the date of maturity, and for deposit on such date. Certificates of indebtedness should in all cases be stamped as follows by the collector, and when so stamped forwarded to the federal reserve bank by registered mail, uninsured. 191.... This certificate has been accepted in payment of income and profits taxes and will not be redeemed by the United States except for credit of the undersigned. Collector of internal revenue for the .... district of Collectors of internal revenue are not authorized, unless otherwise notified by the secretary of the treasury, to receive in payment of income or profits taxes interim receipts issued by federal reserve banks in lieu of definite certificates of the series herein described. Collectors should make in tabular form a schedule in duplicate of the certificates of indebtedness to be forwarded to the federal reserve bank, showing the serial number of each certificate, the date of issue and maturity, and face value. Certificates of indebtedness accepted prior to the date of maturity must be scheduled separately. At the bottom of each schedule there should be written or stamped "Income and profits taxes, $....," which amount must agree with the total shown on the schedule. One copy of this schedule must accompany certificates sent to the federal reserve bank and the other be retained by the collector. Such income and profits tax deposits must in all cases be shown on the face of the certificate of deposit (national bank form 15) separate and distinct from the item of miscellaneous internal-revenue collections (formerly called "ordinary"), but it is not necessary to give the separation into corporation income, individual income, and profit taxes. Until certificates of deposit are received from the federal reserve banks, the amounts represented by the certificates of indebtedness forwarded must be carried by collectors as cash on hand, and not credited as collections, as the dates of certificates of deposit determine the dates of collections. For the purpose of saving taxpayers the expense of transmitting such certificates as are held in federal reserve cities to the office of the collector in whose district the taxes are payable, taxpayers desiring to pay income and profits taxes by Treasury certificates of indebtedness acceptable in payment of such taxes, should communicate with the collector of the district in which the taxes are payable and request from him authority to deposit such certificates with the federal reserve bank in the city in which the certificates are held. Collectors are authorized to permit deposits of treasury certificates of indebtedness in any federal reserve bank with the distinct understanding that the federal reserve bank is to issue a certificate of deposit in the collector's name covering the amount of the certificates of indebtedness at par and to state on the face of the certificate of deposit that the amount represented thereby is in payment of income and profits taxes. The federal reserve bank should forward the original certificate of deposit to the treasurer of the United States, with its daily transcript, and transmit to the collector the duplicate and triplicate, accompanied by a statement giving the name of the taxpayer for whom the payment is made in order that the collector may make the necessary record and forward the duplicate to the office of the commissioner of internal revenue. This treasury decision amends and supplements the provisions of articles 1731 and 1732 of regulations 45. |