not be deducted are income taxes, paid or accrued, imposed by the United States and so much of the income and profits taxes imposed by any foreign country or possession of the United States as is allowed as a credit under section 238; taxes assessed against local benefits; donations; decrease during the year due to adjustments in book value of capital assets; decrease in liabilities during the year on account of reinsurance treaties; dividends paid to stockholders; remittances to home office of a foreign insurance company by United States branch; and borrowed money repaid.

PART III

ADMINISTRATIVE PROVISIONS

RETURNS OF PAYMENTS OF DIVIDENDS

SEC. 254. Every corporation subject to the tax imposed by this title shall, when required by the Commissioner, render a correct return, duly verified under oath, of its payments of dividends, stating the name and address of each shareholder, the number of shares owned by him, and the amount of dividends paid to him.

ART. 1060. Return of information as to payments of dividends.— When directed by the Commissioner, either specially or by general regulation, every domestic or resident foreign corporation shall render a return on Form 1097 of its payments of dividends and distributions to shareholders for such period as may be specified, stating the name and address of each shareholder, the number and class of shares owned by him, the date and amount of each dividend paid him, and when the surplus out of which it was paid was accumulated.

Dividends on the stock of domestic corporations or resident foreign corporations are prima facie the income of the record owner of the stock. The record owner will be liable for any tax based thereon, unless a disclosure to the Commissioner of the actual ownership is made on Form 1087. Returns of information (Form 1097) and ownership certificates (Form 1087) should be forwarded to the Commissioner of Internal Revenue, Sorting Section, Washington, D. C.

RETURNS OF BROKERS

SEC. 255. Every person doing business as a broker shall, when required by the Commissioner, render a correct return duly verified under oath, under such rules and regulations as the Commissioner, with the approval of the Secretary, may prescribe, showing the names of customers for whom such person has transacted any business, with such details as to the profits, losses, or other information which the Commissioner may require, as to each of such customers, as will enable the Commissioner to determine whether all income tax due on profits or gains of such customers has been paid.

ART. 1065. Return of information by brokers.—When directed by the Commissioner, either specially or by general regulation, every person doing business as a broker shall render a return on Form 1100, showing the names and addresses of customers to whom payments were made or for whom business was transacted during the calendar year or other specified period next preceding, and giving the other information called for by the form.

INFORMATION AT SOURCE

SEC. 256. All persons, in whatever capacity acting, including lessees or mortgagors of real or personal property, fiduciaries, and employers, making payment to another person, of interest, rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income (other than payments described in sections 254 and 255), of $1,000 or more in any taxable year, or, in the case of such payments made by the United States, the officers or employees of the United States having information as to such payments and required to make returns in regard thereto by the regulations hereinafter provided for, shall render a true and accurate return to the Commissioner, under such regulations and in such form and manner and to such extent as may be prescribed by him with the approval of the Secretary, setting forth the amount of such gains, profits, and income, and the name and address of the recipient of such payment. Such returns may be required, regardless of amounts, (1) in the case of payments of interest upon bonds, mortgages, deeds of trust, or other similar obligations of corporations, and (2) in the case of collections of items (not payable in the United States) of interest upon the bonds of foreign countries and interest upon the bonds of and dividends from foreign corporations by persons undertaking as a matter of business or for profit the collection of foreign payments of such interest or dividends by means of coupons, checks, or bills of exchange.

When necessary to make effective the provisions of this section the name and address of the recipient of income shall be furnished upon demand of the person paying the income.

The provisions of this section shall not apply to the payment of interest on obligations of the United States.

ART. 1071. Return of information as to payments of $1,000.-All persons making payment to another person of fixed or determinable income of $1,000 or more in any calendar year must render a return thereof to the Commissioner for such year on or before March 15 of the following year, except as specified in articles 1073, 1074, 1075, 1076, and 1079. The return shall be made in each case on Form 1099, accompanied by a letter of transmittal on Form 1096 showing the number of returns filed. The street and number where the recipient of the payment lives should be stated, if possible. Where no present address is available, the last known post-office address must be given. Although to make necessary a return of information the income must be fixed or determinable, it need not be annual or periodical. See article 362.

ART. 1072. Return of information as to payments to employees.-The names of all employees to whom payments of $1,000 or over a year are made, whether such total sum is made up of wages, salaries, commissions, or compensation in any other form, must be reported. Heads of branch offices and subcontractors employing labor, who keep the only complete record of payments therefor, should file returns of information in regard to such payments directly with the Commissioner. When both main office and branch office have ade

quate records, the return should be filed by the main office. In case an employer has a large number of employees and the computation of exact amounts paid during the calendar year will result in an undue hardship, careful estimates may be made on the basis of any representative month, and unless the yearly payment based on this estimate in the case of any employee amounts to $1,000 or more, no return of payments to such employee is required.

ART. 1073. Cases where no return of information required.-Payments of the following character, although over $1,000, need not be reported in returns of information on Form 1099: (a) Payments of interest on obligations of the United States; (b) payments by a broker to his customers; (c) payments of any type made to corporations; (d) bills paid for merchandise, telegrams, telephone, freight, storage, professional services, and similar charges; (e) payments of rent made to real estate agents (but the agent must report payments to the landlord if they amount to $1,000 or more annually); (ƒ) payments made by branches of business houses located in foreign countries to alien employees serving in foreign countries; and (g) payments made by the United States Government to sailors and soldiers and to its civilian employees.

ART. 1074. Return of information as to interest on corporate bonds.In the case of payments of interest, regardless of amount, upon bonds and similar obligations of domestic or resident foreign corporations, the original ownership certificates, when duly filed, shall constitute and be treated as returns of information. If a bondholder files no ownership certificate in the case of payments of interest on registered bonds, if such bonds contain a tax-free covenant clause, or if such bonds are owned by a nonresident alien (individual or fiduciary), a partnership not engaged in trade or business within the United States and not having any office or place of business therein and composed in whole or in part of nonresident aliens, or a foreign corporation not engaged in trade or business within the United States and having no office or place of business therein, the withholding agent shall make out such a certificate in each instance and file it with the monthly return. See sections 221 and 237 of the statute and articles 361-376 and 601.

ART. 1075. Return of information as to payments to nonresident aliens. In the case of payments of fixed or determinable annual or periodical income to nonresident aliens (individual or fiduciary), to partnerships not engaged in trade or business within the United States and not having any office or place of business therein, and composed in whole or in part of nonresident aliens, or to foreign corporations not engaged in trade or business within the United States and not having any office or place of business therein, the returns

filed by withholding agents on Form 1042 shall constitute and be treated as returns of information. See sections 221 and 237 of the statute and articles 361-376 and 601.

ART. 1076. Foreign items.-The term "foreign item," as here used, means any dividend upon the stock of a nonresident foreign corporation or any item of interest upon the bonds of foreign countries or nonresident foreign corporations, whether or not such dividend or interest is paid in the United States or by check drawn on a domestic bank. (a) Wherever a foreign country or nonresident foreign corporation issuing bonds has appointed a paying agent in this country, charged with the duty of paying the interest upon such bonds, such paying agent shall be the source of information. If such foreign country or foreign corporation has no such agent, then the last bank or collecting agent in this country shall be the source of information. (b) In the case of dividends on the stock of a nonresident foreign corporation, however, the first bank or collecting agent accepting such item for collection shall be the source of information. No return of information is required with respect to foreign items unless the amount thereof is $1,000 or more in any taxable year except as otherwise provided in articles 1077 and 1078, and then only if the owner of the item is a citizen or resident of the United States (individual or fiduciary) or a resident partnership. No return of information is required with respect to foreign items owned by a nonresident alien (individual or fiduciary), a partnership not engaged in trade or business within the United States and having no office or place of business therein and composed in whole or in part of nonresident aliens, or a foreign corporation not engaged in trade or business within the United States and having no office or place of business therein, provided the first bank or collecting agent is satisfied as to such ownership. In the latter case the foreign item may be stamped "foreign owner."

ART. 1077. Ownership certificates for foreign items.-When bonds of foreign countries or of nonresident foreign corporations contain a tax-free covenant clause and are owned by citizens or residents of the United States, the foreign country or nonresident foreign corporation having a fiscal or paying agent in the United States, such agent is required to withhold a tax of 2 per cent from the interest on such bonds. Ownership certificate, Form 1000, modified to show the name and address of the fiscal agent or the paying agent, should be used unless the owner (if so entitled) desires to claim exemption, in which case Form 1001 should be filed. See article 361.

ART. 1078. Foreign items presented for collection unaccompanied by ownership certificates. If the foreign item is an interest coupon detached from bonds containing a tax-free covenant clause, issued by