that the four thousand dollars exempt from the payment of the income tax should be applied to the above-enumerated expenses, and all personal expenses for the maintenance of the family and household of the taxpayer receiving the benefit of the exemption.

IO. The national, state, county, school, and municipal taxes deductible from incomes comprise such internal-revenue taxes as have not been included in the expenses of the business, and all such state, county, school, and municipal taxes as are assessed ratably upon all persons liable to such assessment: but assessments made upon the real estate of a particular locality on account of street improvements, sewerage, street grade, or other improvements intended to benefit the particular property included in said locality, are not considered as taxes which may be deducted from incomes.

II. The interest on all bonds of the United States shall be returned as income by the person, corporation, company, or association owning or holding such bonds, except the interest on bonds of the funded loan of 1891, continued at two per cent; and the bonds of the four per cent funded loan of 1907; and the bonds of the five per cent funded loans of 1904, all of which are by the law of their issuance exempt, both as to principal and interest, from all federal taxation.

12. In estimating the amount of taxable income, only such losses as shall have been actually suffered, and the amount of which has been definitely ascertained during the year covered by the return, can be deducted from the gross profits for that year. No deduction will be allowed for any losses not specific

ally described and set forth in the annual return of the person or corporation claiming the deduction.

13. Nonresidents are not entitled to the exemption of four thousand dollars, or to any exemption whatever, unless they make out their annual returns, duly verified by oath or affirmation, and deliver the same to the Deputy or Collector of the district wherein. their property or business from which income is derived is situated, in the time prescribed in the case of residents. In preparing returns, nonresidents may, when necessary, use two forms, No. 365 —one for income from all sources, and one for income derived from business or any other source in the United States.

14. Persons receiving fees or emoluments for professional or other services, as in the case of physicians or lawyers, should include all actual receipts for services rendered in the year for which return is made, together with all unpaid accounts, charges for services, or other income due for that year, if good and collectible.

15. The annual return of merchants and manufacturers of their gains, profits, or income, should cover the business of the year, from the first day of January to the 31st day of December in the year for which return is made; and their books of account, stock records, and inventories should be kept and taken at such time and in such manner as to clearly show the gross profits, business expenses, net profits, or income for the year ending at the close of business hours on the 31st day of December.

16. The interest accrued during the year on notes, bonds, or other evidences of indebtedness, if good and collectible at the end of the year, should

be returned as income, whether actually collected or not. Dividends payable in 1894 should be returned as income for that year, no matter when declared.

17 Debts which were contracted during the year 1894, but found in said year to be absolutely worthless, may be deducted from the income of the creditor in his annual return for said year, but such debts can not be considered or returned as worthless until after legal proceedings to recover the same have proved fruitless, or it clearly appears that the debtor is insolvent, and that proceedings to collect the debt would avail nothing. In making the deduction for worthless debts, the person claiming the same must state in his return that one of the facts as above set forth exists in connection with the debt returned as worthless.

18. Where the salary or compensation paid to any person in the service of the United States does not exceed the rate of $4,000 per annum, or will not reach that sum in the calendar year, or is paid in fees, or is uncertain or irregular in amount or in the time during which the same was earned or has accrued, such salary or compensation shall be included in estimating the annual gains or income of the person to whom the same was paid, and shall be entered on his annual return (Form No. 365) to the Collector with his other sources of income. All salaries or compensation paid to officers or persons in the employ of the Government of the United States in and for the calendar year 1894 shall be included in the annual returns to Collectors, on Form 365, of such officers and persons, in statements of gains, profits, and incomes subject to income tax for that year.

CHAPTER X.

EXPLANATIONS OF BLANKS FOR

PERSONS.

I.

1. "Gross receipts, credits, earnings, and gains from any business, or any interest therein, wherever carried on."

The first item of the blank for return of income of the year 1862 was as follows: 1. "Income of a resident of the United States from profits on any trade, business, or vocation, or any interest therein, wherever carried on." (Boutwell, page 156.) And the first item of the blank for return of year 1866 was as follows: "1. From profits in any trade, business, or vocation, from which income is actually derived, or any interest therein, wherever carried on." (5 Int. Rev. Record, 82.)

Therefore, after this first item on those blanks would be placed the profits of a person from

his business.

The blank under the present law differs from the old blanks. Under Item 1. the " gross receipts, credits, earnings, and gains" are included, and deduction is made under Deductions for the cost of material and other

expenses. Therefore, after this item 1, the gross profits should not be placed, but the gross receipts, credits, earnings, and gains."

66

The following is the rule made March, 1895, under this clause in regard to timber land:

"If a person sells timber standing, the profits are to be ascertained by taking the value of the land after removal of the timber and adding thereto the amount received for the timber, and from the sum thus obtained deducting the actual value of the land at the time of the sale of the timber."

The old ruling was to deduct the estimated value of the land on the first day of January, 1862, or on the day of purchase, if purchased since that date. 7 Int. Rev. Rec. 58.

"Gross Receipts."

"Receipts," states Anderson's Dictionary of the law, are Ce moneys received."

These include all receipts from the business of 1894. The cost of the material bought and sold in 1894 would be deducted under item 5 of Deductions; the cost of the material bought before 1894 and sold in 1894 would be deducted under item 9 of Deductions. Or (see p. 49) perhaps both would be deducted under item 9.

If "

gross receipts" include receipts from credits, earnings and gains before 1894 the