CHAPTER III.

I.

WHAT PERSONS MUST PAY THE INCOME TAX. 1. EVERY CITIZEN OF THE UNITED STATES,Whether residing at home or abroad who has gains, profits, and income in excess of $4000 per annum estimated as hereinafter stated.

2. EVERY

RESIDENT

STATES,

OF THE UNITED

Who has gains, profits, and income in excess of $4000 per annum estimated as hereinafter stated.

3. EVERY NON-RESIDENT,

On gains, profits, and income from all property owned and from every business, trade, or profession carried on in the United States, estimated as hereinafter stated, unless a list is filed as provided for by Section 31.

II.

For what gains, profits, and incomes of persons must be included, and what can be deducted, see Chapter X.

III.

WHAT THE STATUTE STATES CANNOT BE

DEDUCTED.

1. Estimated depreciation of values. Forbidden by Sec. 28 (page 187).

2. Losses on sales of real estate purchased within two years previous to the year for which income is estimated.

The blanks state otherwise. See page 97.

3. Amount paid out for new buildings, permanent improvement or betterments. Forbidden by Sec. 28. See page 187.

4. Expense of growth or production of live stock or agricultural products consumed by family.

See page 186.

5. For deductions which the Courts or the Department have held inadmissible see "Deductions" in Chapter X.

IV.

WHAT PERSONS MUST MAKE RETURNS. EVERY PERSON OF LAWFUL AGE having an income of more than $3500, computed as herein directed.

All GUARDIANS,

TRUSTEES,

EXECUTORS,

ADMINISTRATORS,

AGENTS,

RECEIVERS,

All PERSONS ACTING IN ANY FIDUCIARY CAPACITY.

(Of the last named probably only those having over $3500 income. See Chapter V.)

Any person will be permited to make oath that he or his beneficiary or ward had not a taxable income of $4000 or has paid the tax elsewhere and if the proof is satisfactory he will be exempt from the tax.

V.

For what returns must contain see Chapter X.

VI.

WHEN, WHERE AND TO WHOM RETURNS MUST BE MADE.

Returns for 1894 must be made on or before April 15, 1895, according to the Resolves of Feb. 21, 1895.

Returns for all subsequent years must be made on or before the first Monday of March of each year.

Returns by persons for themselves must be made to the collector, or deputy collector, of the district in which the persons resides. Sec. 29.

Returns by persons acting in any fiduciary capacity must be made to the collector, or a

deputy collector, of the district in which the person resides or does business.

Sec. 29. Perhaps this part of the section will be construed distributively, so that persons must make returns where they reside and corporations where they do business.

Returns by non-residents may be made in any district. Sec. 31.

VII.

PENALTY FOR NEGLECT OR REFUSAL OF PERSONS TO MAKE RETURNS AND FOR FALSE OR FRAUDULENT RETURNS.

1. In case of willful neglect or refusal the collector will make a list and add fifty per cent to it. See page 140.

2. In case of a willfully false or fraudulent list the collector will add 100 per cent to the amount ascertained to be due. See page 140.

The penalty for failure to make a return or for fraudulent return must invariably be imposed, and officers have no discretion in the matter. 2 Int. Rev. Rec., 36.

Even if a person makes a return within 10 days from date of the note or memorandum given under Section 3173, he may be liable for the penalty, since it was ruled under the former Acts, where the words were similar to these in the present Act, that the omission of a collector

to serve a notice did not discharge the delinquent taxpayer from the penalties prescribed by law for his delinquency. 1 Int. Rev. Rec., 113; 3 Int. Rev. Rec., 151.

The Regulations, page 157, state: "But the failure by persons or corporations to receive such blanks, or the failure to receive any notice that such returns should be made or that any act enjoined by law should be complied with, cannot be deemed a valid excuse for not making such return or not complying with the provisions of law in the time and manner prescribed, and will not prevent or reduce the penalties imposed by law for such failure or neglect. Persons or corporations not supplied with blank forms for annual returns should apply for them to the collector.

Under the provisions of Section 5292 of the Revised Statutes, the Secretary of the Treasury can remit penalties. He has entire discretion in this matter, and his action cannot be reviewed in any court. Dorsheimer v. U. S., 7 Wallace, 175.

Under the old law it was held that the penalty in case of fraudulent or underrated returns was to be assessed on the deficiency of the tax withheld, and not on the whole amount of the tax. 3 Int. Rev. Rec., 60.