You are on page 1of 312

G

e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
SPPr T TTFNTTON drected to the cautonary notce on ths page that pub-
armm f hbc o thc ureau do not have the force and effect
of Treasury Decsons and that they are appcabe ony to facts presented n the pubshed case
Treasury Department : : : : : ureau of Interna Revenue
Interna Revenue uetn
Cumuatve uetn 19 0-1
NU RY- UN 19 0
IN T IS ISSU
ntroductory Notes
Contents
Rungs Nos. 13267-133 1
Ta Court of thc Unted States, The 1-
Income Ta
Part 1 (Interna Revenue Code) 9-12
Part II (Revenue ct of 193 and pror Revenue
cts). 129-131
state and Gft Ta es 133
mpoyment Ta es 13 -139
Msceaneous Ta es
cse Ta es, Stamp Ta es, etc 1 1-1 7
Msceaneous Rungs 1 9-2 7
Legsaton 2 9-293
Inde 29 -30
The rungs reported n the Interna Revenue uetn are (or the nformaton of ta payers and (her counse as
stowng (he trenu of offca opnon n the admnstraton of the ureau of Interna Revenue; the rungs other than
Treasury Decsons have none of the force or effect of Treasury Decsons and do not commt the Department to
awry nterpretaton of the aw whch has not been formay approved and promugated by thc Secretary of the
Treasury. ach rung embodes (he admnstratve appcaton of (he aw and Treasury Decsons to the entre
atatc of facts upon whch a partcuar case rests. It s especay to be no(ed tha (he same resut w not neces-
sary be reached n another case uness n the matera facts arc dentca wth those of the reported case. s t s
svet aways feasbe to pubsh a compete statement of the facts underyng each rung, there can be no assurance
that amy new case s dentca wth the reported case. s bearng out ths dstncton, t may be observed (hat the
rung pubshed from (me to tme may appear to reverse rungs prevousy pubshed.
Off ccrs of (he ureau of Interna Revenue are especay cautoned aganst reachng a concuson n any casts
averrry on the bass of smarty to a pubshed rung, and shoud base ther |udgment on thc appcaton of a
certrceot provsons of the aw and Treasury Decsons to a the facts n each case. These rungs shoud be used
bb ade n studyng the tew and ts forma constructon as made n the reguatons and Treasury Decsons pre-
voas y ssued.
In addton to pubshng a Interna Revenue Treasury Decsons, t s the pocy of the ureau of Interna
Revenue to pubsh a rungs and decsons, ncudng opnons of (he Chef Counse for (he ureau of Interna
cvenne, whch, because they announce a rung or decson upon a nove queston or upon a queston n regard
to whch there e sts no prevousy pubshed rung or decson, or for other reasons, are of such mportance as
to be of genera nterest. It s aso the pocy of the ureau to pubsh a rungs or decsons whch revoke,
modfy amend, or affect n any manner whatever any pubshed rung or decson. In many nstances opnon
of thc Chef Counse for the ureau of Interna Revenue are not of genera nterest because they announce no
Dew rung or new constructon of the revenue aws but smpy appy rungs aready made pubc to certan
stuatons of fact whch are wthout speca sgnfcance. It s not thc pocy of the ureau to pubsh such opnons.
Therefore, the numbers assgned to the pubshed opnons of the Chef Counse for the ureau of Interna
cvenne arc not consecutve. No unpubshed rung or decson wU be cted or reed upon by any offcer or
empoyee of the ureau of Interna Revennc as a precedent n the dsposton of other cases. Uness otherwse
specfcay ndcated, a pubshed rung and decsons have receved the consderaton and approva of the
Chef Counse for the ureau of I
UNIT D ST T S GO RNM NT PRINTING OFFIC : W S INGTON : 19 0
For sae by Superntendent of Documents, C. S. Government Prnt/nf, Offce, Washngton. 2 , L . C,
See back of tte for prces
LI R RY
UNI RSITY OF C LIFORNI
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
The Interna Revenue uetn servce conssts of buetns ssued
every other week and semannua cumuatve buetns.
The buetns contan the rungs and decsons whch are made
pubc and a Treasury Department decsons (known as Treasury
Decsons) pertanng to Interna Revenue matters. The semannua
cumuatve buetns contan a rungs and decsons (ncudng
Treasury Decsons) pubshed durng the prevous 6 months.
The compete uetn servce may be obtaned, on a subscrpton
bass, from the Superntendent of Documents, Government Prntng
Offce, Washngton 2 , D. C, for 2. 0 per year; foregn, 3.7 . Snge
copes of the uetn, 10 cents each.
Certan ssues of cumuatve buetns are out of prnt and are,
therefore, not avaabe. Persons desrng avaabe cumuatve bue-
tns may obtan them from the Superntendent of Documents at prces
as foows:
Year
Frst 6 months
Cumuatve uetn
Second 6 months
1920
2
0. 2
3
0. 30
192
II-1
. 3
I1-2
. 0
1929
III-1
. 0
III-2
.
1930
I -1
. 0
I -2
. 0
1932 - -
I-1
. 30
1936
-1
.
-2
.
1939
1939-1
1939-2
. 60
Part 1
. 0

Part 2
L 00
19 0
19 0-1
. 30
19 0-2
. 60
19 1-1
.
19 1-2
. 60
19 2
19 2-1
. 0
19 2-2
. 60
19 3 2
1. 2
19
2. 2
19 2
L 0
19 6
19 6-1
. 0
19 6-2
.7
19 7-1
. 0
19 7-2
.7
19 -1
. 7
19 -2
L 00
19 9-1
. 7
19 9-2
.7
19 0-1
.7
19 0-1
.7
Contans ony neomc ta runcs.
1 ouse, Senate, and conference reports on revenue bs enacted as the ct of October 3,
1913, the ct of October 22, 191 , and tho Revenue cts of 191 to 193 , ncusve, and on
amendments to such cts.
a Prnted n one voume.
Persons desrngto obtan the servce n dgest form may do so at
prces as foows: Dgest No. 19 (ncome ta rungs onv, pr, 1919,
to December, 1921, ncusve), 0 cents; Dgest No. 13 (1922-2 ), 60
cents; Dgest No. 22 (192 -27), 3 cents; and Dgest (ncome ta
rungs ony, pr, 1919, to December, 1930, ncusve), 1. 0.
nqures n regard to these pubcatons and subscrptons shoud
be sent to the Superntendent of Documents, Government Prntng
Offce, Washngton 2 , D. C.
()
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
INTRODUCTORY NOT S
Interna Revenue Cumuatve uetn 19 0-1, n addton to a
decsons of the Treasury Department (caed Treasury Decsons)
pertanng to Interna Revenue matters, contans opnons of the Chef
Counse for the ureau of Interna Revenue, rungs and decsons
pertanng to ncome, estate, gft, saes, e cess profts, empoyment,
soca securty, and msceaneous ta es, and egsaton affectng the
revenue statutes, as ndcated on the tte page of ths uetn, pub-
shed n uetns 1 to 13, ncusve, for the perod anuary 1 to une
30, 19 0. It aso contans a cumuatve st of announcements reat-
ng to decsons of The Ta Court of the Unted States, pubshed
n the Interna Revenue uetn Servce from anuary 1 to une 30,
19 0.
Income ta rungs are prnted n two parts. The rungs under
the Interna Revenue Code are prnted as Part I, the aw headngs
correspondng wth the sectons of the Code, as amended, and the
reguatons headngs correspondng wth the secton headngs of Regu-
atons 111 or 103. Rungs under the Revenue ct of 193 and pror
revenue acts are prnted as Part II, the aw headngs correspondng
wth the secton headngs of those revenue acts and the reguatons
headngs correspondng wth the artce headngs of the appcabe
reguatons.
Rungs under Ttes III and I of the Soca Securty ct and
under Subchapters and C, Chapter 9, of the Interna Revenue Code
n force pror to anuary 1, 19 0, are pubshed under artce headngs
of Reguatons 91 and 90, respectvey; rungs under Subchapters
and C, Chapter 9, of the Code n force on or after anuary 1, 19 0, are
pubshed under the secton headngs of Reguatons 106 and 107,
respectvey; rungs under the Carrers Ta ng ct of 1937 and under
Subchapter , Chapter 9, of the Code for perods pror to anuary 1,
19 9, are pubshed under the artce headngs of Reguatons 100, and
rungs under Subchapter , Chapter 9, of the Code for perods subse-
quent to December 31, 19 , w be pubshed under the secton head-
ngs of Reguatons 11 .
R I TIONS
The foowng abbrevatons are used throughout the uetn.
, , C, etc. The names of ndvduas.
. R. M. Commttee on ppeas and Revew memorandum.
. R. R. Commttee on ppeas and Revew recommendaton.
. T. coho Ta Unt.
. T. . oard of Ta ppeas.
C. . Cumuatve uetn.
Ct. D. Court decson.
C. S. T Capta Stock Ta Dvson.
C. T. Ta es on mpoyment by Carrers.
D- C. Treasury Department crcuar.
m. T. Ta es mposed by the Soca Securty ct, the Carrers Ta ng ct of
1937, and Subchapters , and C of the Interna Revenue Code.
1 . P. C. cess Profts Ta Counc rung or memorandum.
. T. state and Gft Ta Dvson.
(n)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
I
G. C. M. Genera Counse s, ssstant Genera Counse s, or Chef Counse s
memorandum.
I. It. . Interna Revenue uetn.
I. R. C. Interna Revenue Code.
I. T. Income Ta Unt.
M, N, , Y, Z, etc. The names of corporatons, paces, or busnesses, accordng
to conte t.
Mm. Mmeographed etter.
MS. or M. T. Msceaneous Dvson.
O. or L. O. Soctor s aw opnon.
O. D. Offce decson.
Op. . G. Opnon of the ttorney Genera.
P. T. Processng Ta Dvson.
S. T. Saes Ta Dvson.
S. Sver Ta Dvson.
S. M. Soctor s memorandum.
So. Op. Soctor s opnon.
S. R. Soctor s recommendaton.
S. S. T. Ta es on mpoyment by others than carrers.
T. Tobacco Dvson.
T. . M. dvsory Ta oard memorandum.
T. . R. dvsory Ta oard recommendaton.
T. C Ta Court of the Unted States.
T. D. Treasury Decson.
and y are used to represent certan numbers, and when used wth the word
doars represent sums of money.
NNOUNC M NT R L TING TO D CISIONS OF T T COURT OF T UNIT D
ST T S
In order that ta payers and the genera pubc may be nformed
whether the Commssoner has acquesced n a decson of The Ta
Court of the Unted States dsaowng a defcency n ta determned
by the Commssoner to be due. announcement w be made n the
Interna Revenue uetn at the earest practcabe date. Notce
that the Commssoner has acquesced or nonacquesced n a decson
of the Ta Court reates ony to the ssue or ssues decded adversey
to the Government. Decsons so acquesced n shoud be reed upon
by offcers and empoyees of the ureau of Interna Revenue as
precedents n the dsposton of other cases.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
CUMUL TI CONT NTS
Rung
Treasury Decsons:
767
76
76
770
771
772
773
77
77
776
777
77
779
7 0
7 1
Court decsons:
1726
1727
172
1729
1730
1731
Chef Counse s memoranda:
26 19.__
20 .
Unted States Ta Court:
60
3033
337111.:
921
9212.
11 19
12120..
Rung No.
19 0-2-13276
19 0-2-13277
19 0-1-13293
19 0- -13303
19 0- -13307
19 0- -13301
19 0- -1330
19 0- -1330
19 0- -13306
19 0-6-13316
19 0-7-13326
19 0-7-13327
19 0- -133 0
19 0- -13337
19 0- -1333
19 0- -13336
19 0- -13339
19 0-10-133
19 0-10-133
19 0-10-133 6
19 0-10-133 7
19 0-12-13371
19 0-12-13372
19 0-12-13373
19 0-12-1337
19 0-13-133 2
19 0-1-13271
19 0-3-132 1
19 0-3-132S6
19 0- -13300
19 0-6-1331
19 0-12-13367
19 0- -13297
19 0-10-113 3
1 0-11-1336
19 0-12-13370
19 0-3-132 0
19 0- -13296
19 0- -13296
19 0- -13296
19 0- -13296
19 0- -13296
19 0- -13296
19 0- -13296
19 0- -13296
19 0- -13290
19 0-11-13360
19 0-11-13300
19 0-11-13360
19 0-11-13360
19 0-11-13300
19 0-11-13360
19 0-11-13360
19 0-11-13360
1910-11-13360
19 0-7-13320
19 0- -13330
19 0-9-133
19 0-9-133
19 0-9-133
19 0-9-133
19 0-9-133
19 0- -13330
19 0-13-13379
19 0-13-13379
19 0-13-13379
19 0-13-13379
19 0-13-13379
19 0-13-13379
19 0-13-13379
19 0-13-13379
19 0-13-13379
19 0-13-13379
19 0-10-133 1
19 0-9-133
Page
-11
23
2
126
207
117
199
211
217
26
76
92
271
2 9
2 3
226
270
21
220
221
227
1 1
20
21
27
203
1 3
1

111
70
2
6
12
11
2
7

1
1
3,7
,7
3,7
1,7
6,
Rung
Unted States Ta Court-
Contnued
12121
121 3.
121 .
12192.
12193.
1219 .
1219 .
12231.
12232.
122 0.
122 3.
122 .
122 .
122 6.
122 7.
122 .
122 9.
12260.
12261.
12262.
1226 .
12612.
12613.
12767.
1276 .
12 17.
12 1 .
12 77.
12 79.
12 0.
12 1.
12 1 ,.
;n:sn_
13167.
1316 .
13169.
13170.
1331 .
13 29.
13 79.
1 20 .
1 209.
1 321.
1 .
1 7 9.
1 760..
1 90..
1 91..
1 92..
1 91 ..
1 9 6..
1610 ..
101 ..
1622 ..
16299..
1630 ..
16 2..
16 67..
16 6 ..
1661 ..
1661 ..
16610..
16617..
1661 ..
16619..
16621..
1660 ..
1671 -
16729..
16731..
16732..
1673 ..
16771..
16772..
16773..
1677 ..
167SO..
Rung No.
19 0-9-133
19 0-9-133
19 0-9-133
19 0-9-133
19 0-9-133
19 0-9-133
19 0-9-133
19 0-9-133
19 0-9-133
19 0-9-133
19 0-9-133
19 0-9-133
19 0-9-133
10 0-9-133
19 0-9-133
19 0-9-133
19 0-9-133
19 0-9-133
19 0-9-133
19 0-9-133
19 0-9-133
19 0-2-13273
19 0-2-13273
19 0-9-133
19 0-9-133
19 0-6-13310
19 0-6-13310
19 0- -13296
19 0- -13296
19 0- -13296
19 0- -13290
19 0- -132
19 0-6-13310
19 0- -13330
19 0- -13330
19 0- -13330
19 0- -13330
19 0- -13296
19 0-6-13310
19 0-2-13273
19 0-2-13273
19 0-2-13273
19 0-9-133
19 0-11-13360
19 0-2-13273
19 0-6-13310
19 0-2-13273
19 0-2-13273
19 0-2-13273
19 0- -132
19 0-7-13320
19 0-2-13273
19 0-2-13273
19 0-9-133
19 0- -132
19 0-2-13273
19 0-7-13320
19 0-9-133
19 0-9-133 1
19 0-9-133
19 0-9-133
19 0-9-133
19 0-9-113
19 0-9-133
19.10-10-113 1
19 0- -13296
19 0-9-1331
19 0-9-133
19 0-1M33
19 0-9-133
19 0-9-133
19 0-9-133
19 0-9-133
19 0-9-133
19 0-9-133
19 0-9-133
19 0-9-1331
( )
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
I
3unn
ON n t
noo snospop mu|o
66
SI-S-0S6I
C9
gs
06Z I-6-0S6I
W
666
S0SSI- -0S61
m
ooot
ZIS I-9-0S6I
IZ
OOt
1 I-9-0S6I
U
zoo
Z I--0S6I
9
OOt
I I-S-0S I
01
Z I-S-0 61
9S
CI-S-0 01

900
I-S-OSO
st
sfce-a-oso
n
00t
gtee-o-ova
9:
aoot
ZS I-01-0S6I
e
oot
19 1-11-0 61
oe
not
Z9 I-II-OS6I
zs
99 1-Z1-0661
es
IW
9 I-ZT-0S 1
99
not
09 1- 1-0 61
9
SIM
0 I- I-0S6I
Z
:( uo|spop oo||o
ez
tZ I-Z-OSe
en
:( , ) suos| p oo|o

tS I-S-0S6I
t
Of
ste-e-oso
m
:CSID snosaap uobo
6Z -Z-t)b 6
ta
s . t- -oso
uz
tte
61 1-9-0661
sts
Z : - -0S6I
- - - |(
6SSSI-0I-0SUI
osz
I
I-ZI-0S6
I Z
:f ) suosoop oDO
OSZ
Z S I-1-0S6I
SSZ
19
sacs-z-om
ZSZ
ZSZ
SC I- -0S6I
SZ
SZ
t b-MC I
c-SZ
Z
60St:I-S-OS6I
ssz
9SZ
SI--OSCI
CSS
9SZ
SI--OS
3SZ
SZ
snre-s-096
Z
6Z
etm-a-oso
9 Z
ass
0S I-6-0S6I
zsz
09Z
S I 01-0 61
tsz
I9Z
Sm-Z-OSOI
Z
Z9Z
9 I-ZI-0 tI
9SZ
9Z
Z I-Z OI
tsz
tOZ
SS SI-SI-0S6I
s
99
MSSI-SI-OSOI
9 Z
6 1-9
SSZS-f-O OI
m
I9W
S Z I-S-OS6I
u
6 Z 1- -0S6I

Z t9
nee-9-ose
SI
SW
1 1-9-0661
09
tzm--0S6I
S
un
I-9-0S6I
n
zm
f I--0S6I
6S
9St9
SI-1-0S6I
OSI
06t9
Z I-Z-096I

aw
S I- -0 6I
W
saw
t -6-0 SI
LSI
099
eom--ot
9
60 I-S-OS6I 1
6
I I-9-0S 1
6SZ
Itm-S-0 6I )
m
0 1
11-1
9S
:
f
fvr
9
I


I
Z
I

C
t
s

I
I

;
z
z

I z
t o
I- z
t 7.
S S
s

I
I
I
t

I
1
Z

z
I
I

9
t

e
9
9

Z
I


Z I-f-0 6
I Z I-t-0S6
oez -t-ose
t Z I- -060I
Z Z I- -066I
SZ I-Z-OSOI
0 I-I-O 6I
9Z I-I-000I
69Z I-T-06 I
9Z --0S0I
oee-9-ocb
0T I-9-0S6I
0 tI-T-0 6I
09 I-n-09 I
I- I-0S6I
m- I-OUO
Z I-t-O 0I
99 I-ZI-OS 1
S9 I-ZI-0 6I
S9 I-ZI-OS I
9 I-ZI-0 6T
S9C I-ZT-OC6T
99 I-ZI-09 I
9 :-ZI-O90I
I- -09 I
SI- -096I
IZ T-z-ose
W I-S-096I
0 SI-S-O 61
O I-s-OS
9 Z I- -0S I
9 Z I-S-OS I
96Z I-9-OS I
9 Z I- -OS6I
0 I- -036I
0 S61-S-0S6I
OZ W-0 1
osee- -osa
0 I- -OS61
I- I-0 1
Zt-Z-OSO
OZfc-S-OSf
Z I-Z-OSOI
Z I-e-SGT
09 I-II-O . 6I
Z I-Z-Ot
Z -S-OSft
0Z I-:-O I
Z I-6-O 0I
MS I- I-OS6I
0ISSI-9-OS 1
ws-a-oss
Z -t-O 0I
IS I-0I-0S6I
f;:-6-090
IS SI-01-0S61
OZ SI--OMI
2 L-Z-0 I
I-O-OSOI
SSZ -MM
0 I- -0S I
/Z I-Z-0 . 6I
-ttI-f-09 1
OZ I- 0S I
S9 I-ZI-036I
ON 3u n
S66
teas
OCS
Z666
I0
O O
6S
0S
S
:( L I) sao|s|oap go
Z0III
SOSOII
St Z
S 1- Z
ZOZZZ
IS Z
6 1 IZ
ZZOZ
touz
oaz
ZOOZ
o:oz
OOOZ
6690Z
nm
I )Z
OOOZ 690UZ
ao
9e:g
0Z96I
61961
1961
19 1
ZOS6I
Z 6I
6 1
I9SSI
09 1
ts
LZ t
S6 I
O- 1
t- 1
OZtT
SSI
6ZSSI
SZSI
I 1
OSI
SSu I
aw
U
6

09
9 UI
Z 9
tU9I
sosn

0 69I
6ZS91
9Z 9I
9 9I
pamt|ao
au n||
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
CONT NTS OF CUMUL TI ULL TINS (I. T.) 1 TO ; S. T. FOR 1920 ND 1921: INT RN L
R NU 1-1.1-2, II-, II-2, UI-1, III-2. I -1.1 -2, -. -2, I-1, I-2. II-I. TI-2, III-1, III-2.
1 -I. I -2, -. -2, I-1. I-2. II-1, II-2. III-1. III-2. I -1. I -2. -1, -2, 1937-1, 1937-2.
1S3S-1. 193S-2, 1939-1 (P RT 1 ND P RT 2). 1939-2, 19 0-1. 19 0-2. 19 1-1, 19 1-2. 19 2-1. 19 2-2; N-
NU L ULL TINS FOR 19 3. 19 , ND 19 ; S MI NNU L ULL TINS 19 6-1. 19 6-2, 19(7-1.
19 7-2. 19 -1. 19 -2. 19 9-1, 19 9-2, ND 1960-1.
Cumuatve uetn
Rung Nos.
Income Ta:
December, 1919 (No. 1)
anuary- une, 1920 (No. S)...
uy-December, 1620 (No. 3).
anuary- une, 1921 (No. )...
uy-December, 1921 (No. 6).
SbTr
1920 (S. T. 1-20)
anuary- une, 1921.
uy-December, 1921
Interna Revenue uetn;
anuary- une, 1922 (No. 1-1)
uy-December. 1922 (No. 1-2)
anuary- une, 1923 (No. II-)
uy-December. 1923 (No. II-2)
anuary- une, 192 (No. 1II-1)
uy-December, 192 (No. III-2)
anuary- une, 192 (No. I -1)
uy-December. 192 (No. I -2)
anuary- une. 1926 (No. -)
uy-December, 1926 (No. -2)
anuary- une, 1927 (No. I-1)
uy-December, 1927 (No. I-2)
anuary- une, 192 (No. II-1)
uy-December, 192 (No. II-2)
anuary- une, 1929 (No. III-1)
uy-December, 1929 (No. III-2)
anuary- une, 1930 (No. I -1)
uy-December. 1630 (No. I -2)
anuary- une, 1931 (No. -) _
uv-Dcccmbcr. 1931 (No. -2)
anuary- une, 1932 (No. I-1)
uy-December. 1932 (No. I-2)
anuary- une, 1933 (No. II-1)
uy-December. 1933 (No. II-2)
anuary- une, 193 (No. III-1)
uy-December. 193 (No. III-2)
anuary- une, 193 (No. I -1)
ny-Decembcr. 193 (No. I -2)
anuary- une, 1936 (No. -1)
uy-December, 1936 (No. -2)
anuary- une, 1937 (1937-1)
uy-December. 1937 (1937-2)
anuary- une, 193 (193 -1)
uy-December. 193 (193 -2)
anuary- une, 1939 (1939-1 Part 1 and Part 2).
uy-December, 1939 (1939-2)
anuary- une, 19 0 (19 0-1)
ny-Deeember. 19 0 (19 0-2)
anuary- une. 19 1 (19 1-1)
uy-December, 19 1 (19 1-2)
anuary- une. 19 2 (19 2-1)
uy-December. 19 2 (19 2-2)
anuary-December, 19 3 (12 months)
anuary-December, 19 (12 mouths)
anuary-December, 19 (12 months)
anuary- une, 19 0 (19 6-1)
uy-December. 19 6 (19 6-2)....
nuary- une, 19 7 (19 7-1)
uy-December. 19 7 O M)....
anuary- une, 19 (19 -1)
uy-December, 19 (19 -2).
anuarv- une. 19 9 (19 9-1)...
ny-Deeember. 19 9 (19 9-2)
19 0 (19 0-1)
1-66
6 6-1033
103 -136
1369-1710
1711-1990
1-112
113-26
266-3 6
1-3 1
3S -66
666-9 6
9 7-1276
1277-16 1
16 2-19 9
19 0-22 1
22 2-2 23
2 2 -2 13
2 1 -3026
3027-3291
3292-3 7
3 -37
37 - 0 2
0 3- 2
2 9- S7
W 6 3
6 - 7
s ..-.12(
12 - 33
339- 31
.-,32-.W,I
962-6262
6263-6 1
6 S2-6 71
6S72-7221
722 -7 63
7 6 -7
7SN -M
1 0- 9
I60-WU2
793-911
0119-9 2
9 2 -96
P6 -9S96
9 97-10126
10127-1030
1 30 -10
10 111 1(1761
10762-100 3
109 -1113S
11139-11302
11303-11 90
11 91-11916
11917-12200
12201-12332
12333-12 6
12 66-12 0
12 1-12721
12722-12 1
12. 2-1299
129 9-13119
13120-13266
13207-133
( II)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
ent : : : ureau of Interna Revenue
Interna Revenue uetn
Cumuatve
NU RY- UN 19 0
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
2
cquescences Contnued
Ta payer
Camp, . Gordon
Camp, Tc ., estate of
Ctzens Natona ank of Washngton, The, successor
trustee
Cooper Foundaton
Cooper, Staney M., asserted transferee of The Steu-
ben vc rdge Co
D
Daas Downtown Deveopment Co. (dssoved)1
Daas Natona ank, ndependent e ecutor and
trustee of estate of Ivor zabeth O Connor
Morgan 1
Daas Natona ank, trustee of trust under w of
ames Chares O Connor 1
Dechamps, . F
Dechamps, O.
Depue, dna ., e ecutr of estate of Frederck .
Depue
Depue, Frederck ., estate of
:
mpre Trust Co., trustee of Natona Securtes
Seres Industra Stocks Seres, Natona Secur-
tes and Research Corporaton
mpre Trust Co., trustee of Natona Securtes
Seres Low-Prced ond Seres, Natona Secu-
rtes and Research Corporaton
mpre Trust Co., trustee of Natona Securtes
Seres Preferred Stock Seres, Natona Securtes
and Research Corporaton
mpre Trust Co., trustee of Natona Securtes
Seres Stock Seres, Natona Securtes and
Research Corporaton
F. P. . Notehoders Corporaton -
Farnham Manufacturng Co., successor by merger
to Paragon Research, Inc
Farry, Neson
Farry, ema R
Frst Natona ank of Daas, trustee of Cec .
eatng Trust 1
Gage rothers Co
Genshaw Gass Co., Inc
Gobe Mortgage Co. (formery Securtes Mortgage
Co.)
Grace, Nora, Trust under deed of trust dated pr ,
1930, by oseph P. Grace
Grace et a., ospeh P., trustees of Nora Grace Trust
under deed of trust dated pr , 1930, by oseph
P. Grace
Docket No.
oume
122 9
12262
1219
1 09
9210
1061
16 6
16 67
12613
12612
16621
16621
19617
19020
1961
10019
2 C
10299
1010
20069
16100
20070
16S29
17273
1 9 6
1 0
22202
1 329
1 329
1 Nonacnuoscenco pubshed n Cumuatve uetn 10 9-1, pare . wthdrawn.
s Nonacr|uescence pubshed u Cumuatve uetn 19 , page , w tdrawn.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
cquescences Contnued
Greer et u ., Mard M
Gussow, ahn Co., Inc
II
armon, W. F
ton et u ., Conrad N
opkns Trust, Mary
untneton Natona ank of Coumbus, Oho, The 1
uth, oseph G
uth, P. mery
vman, S. ., asserted transferee of The Steubcnve
rdge Co
efferson et u ., Foyd Y_
unor Mss Co
ahn, . M., estate of 1
awncer Co., The
eatng Trust, Cec . ..
eham, Grace .
ng, zabeth rant
Lab states Inc
Lang, Otto ., estate of
Lang, W. ., ndependent e ecutor of estate of Otto
. Lang
Lcedy Co., Inc. (Deaware), W. ., transferee
Lecdy-Gover, Inc. (Deaware), transferee
Lccdy-Gover Reaty Insurance Co., Inc
M
Mar , my
Matuszewsk, Zygmunt
McCarty, ustn
McDermott, rthur -
McDonad, Chares Conway -
McDonad, dward
McDonad, . Nesbt...
Mc unkn Trust, Mna G. and Fred, r.
McRcynods, . O., estate of .
Meador, arry L.
Mddebrook, r., oseph
Mms ote Corporaton
Mon|ar, ugh
Moore, s M. --
Morgan, Ivor zabeth O Connor, estate of .
Morrs, ohn
Murphy, era Rose
Murphy, Warren L T.
10 0
16970
17 0
1 2 7
12 1
17736
122
122 3
920
1
1 99
1671
16619
16 29
333
12 1
1 9
1673
1673
1 92
1 91
1 90
19736
21199
16616
1 3
122
12121
12120
1666
1622
16729
13 79
19327
110 0
11102
9
16 6
19779
20702
20701
1 1
13
13
13
13
13
11
11
11
13
1 1
12
13
12
13
13
13
12
12
13
13
13
13
13
12
13
11
1 1
1 1
12
12
12
13
13
13
13
12
13
1 1
1
136
0
373
623
9 2
760
7 9
7 9
7 9
1092
1
11
336
11
9
712
11
11
11
9
9
9
1099
73
11
6
7 9
7 9
7 9
11
11
11
3
901
7
9
11
1020
162
162
1 state ta decson.
oraescence reates ony to the ssue whether a specfc devse to Maron County Federaton of Women s
,0s 1 deductbe for estate ta purposes.
| Nonaequcsecnec pubshed n Cumuatve uetn 19 9-1, pace , wthdrawn.
cquescence reates ony to the ssue whether stock ssued n consderaton of canceaton of notes
cqu
reduced
pubshed n Cumuatve uetn 1019-1, page C, wthdrawn.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
cquescbnces Contnued
Ta payer
N
Natona Securtes Seres Industra Stocks Seres,
Natona Securtes and Resear h Corporaton
Natona Securtes Seres Low-Prced ond Seres,
Natona Securtes and Research Corporaton
Natona Securtes Seres Preferred Stock Seres,
Natona Securtes and Research Corporaton
Natona Securtes Seres Stock Seres, Natona Se-
curtes and Research Corporaton
Nea, George I., estate of, asserted transferee of The
Steubenve rdge Co
Nea, r., et a., George I., e ecutors of estate of
George I. Nea, asserted transferee of The Steuben-
ve rdge Co
Ne, Lea .1
New ngand Lme Co
O Connor, ames Chares, trust under w of2
Ogden, ohn G
Over Iron Mnng Co
Overton, r., . .2
Overton, r., et a., . W., qudatng trustee of
Daas Downtown Deveopment Co. (dsso.ved|2
Patno, Crstna do ourbon
Porter Co., Inc., . W., and subsdary
Putnam, Samue ., estate of
Putnam, r., Samue
Putnam, r., Samue ., e ecutor of estate of Samue
. Putnam
R
Repubc Natona ank of Daas, trustee of Mna G.
Mc unkn nnd Fred Mc.Iunkn, r., trust under w
of Fred Mc unkn 2
Roosovet ote Co
S
Schntzer, Sam
Schumacher, Cfford M
Schumacher, Lyda M
Seay, Chares .2
Seay, George .2
Seay, ohn M. _
Seay, Paune . --
Seay et a., Paune ., trustees of Paune .
Trust under w of Dcro . Seay.2.
Seay Trust, Paune .
Seay
Docket No.
19617
19620
1961
19619
9211
9211
33
1 0
16 67
1 627
12S 6
16617
1661
16 26
17773
12192
12193
1219
12192
12193
1666
13030
1 20
20703
2070
16773
1677
16772
16771
167 0
167 0
oume Page
cquescence reates ony to the ssue whether stock ssued n consderaton of canceaton of notes
reduced the operatng defct.
1 Nonacqucscenco pubshed n Cumuatve uetn 19 9-1, pace G, wthdrawn.
1 cquescence reates ony to the ssue whether faure to te a tmey ncome a return for 19 was due
to reasonabe cnt se.
cquescence reates ony to the ssue nvovng the deductbty of an addton to a reserve for bad
debts.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
cquescences Contnued
Ta payer
Snte, Fred .
Sntc, Lorctto M.1
Specaty ngneerng Co
Stannv et a., Norbert F., trustees of . L. Wegand
Trust No. 1
Stanny ct a., Norbert F., trustees of . L. Wegand
Trust No. 2
Stannv et a., Norbert F., trustees of . L. Uegand
Trust No. 3
Stanny et a., Norbert F., trustees of . L. Wegand
Trust No.
Steubenve rdge Co., The
Stfe, Ncoaus Co., Inc
Tat, my St. ., estate of
Tennessee, abama Georga Raway Co
Te as ank Trust Co. of Daas
Thayer et us., dward C
Tompkns, Ray ., estate of3
Tompkns, Stea, e ecutr of estate of Ray
Tompkns s
Tourteot et u ., Fred I
Trust under w of ames Chares O Connor
ockenng Inc.
M.
W
Wegeforth, Le S.s
We Cothng Co --
Wesberg et a., e , trustees of estate of .
ahn
Wes Fargo ank Unon Trust Co., trustee of Mary
. opkns Trust
West Penn Raways Co
Wegand, . P
Wegand, dwn L
Wegand Trust No. 1, . L
Wegand Trust No. 2, . L
Wegand Trust No. 3, . L
Wegand Trust No. , . L
Wson, C. Dudey, estate of3 --
Wson et a.. era Spencer, e ecutors of estate of C.
Dudey Wson1
Wtche, Frank O.
Wtche, Frank O., ndependent e ecutor of estate of
Moe I. Wtche
Wtthe, Moe I., estate of
Wof, arry ., estate of
Wof, Monte L., e ecutor of estate of arry . Wof..
Woodhu, mma
Docket No.
oport
oume
Page
12767
10
23
1276
10
23
1 133
12
1173
10 1
1
136
10 2
1
136
10 3
1
136
10
1
136
9212
11
7 9
1 91
13
7
1630
11
731
11 19
13
6
1061
12
11
176 2
12
79
2072
13
10
2072
13
10
11123
1
136
16 67
12
11
17 9
13
723
60
13
9
1331
13
73
1671
12
11
12 1
13
9 2
1226
11
7 9
10 39
1
136
10 36
1
136
10 1
1
136
10 2
1
136
10 13
1
136
10
1
136
19 02
13
69
19 02
13
69
10731
12
11
16732
12
11
16732
12
11
1 209
13
3
1 209
13
3
12232
11
7 9
N.
acquescence pubshed In Cumuatve uetn 19 -2, paee , wthdrawn.
I onactmcsccncc pubshed In Cumuatve uetn 19 9-1, page 6, wthdrawn.
( stat ta decson.
Nonaequescenec pubshed In Cumuatve uetn 19 9-1, page 7, wthdrawn.
uCSC(.nce rentcs ony to the ssue whether stock Issued n consderaton ot canceaton ot notes ro-
u ( the opera tne dc/ct.
/ Wtao-ncc reates to a ssues e cept that nvovng the ncus|n n gross estate, under the provsons
113- 100611 (c) and (d) ot the Interna Revenue Code, ot the vaue of two trusts created by decedent In
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
6
cqt|epcbnces Contnued
Ta payor
Docket No.
oume Page
Woods, L. F., ancary admnstrator of estate of
my St. . Tat -
Wozencraft, Mary ctora McRcynods
Wozencraft, Mary ctora McReynods, ndependent
e ecutr and soe her of estate of . O. Mc-
Reynods 1
Wrght, Robert Mc - -
Wurtsbaugh, . T., transferee
Y
Yost, Marguerte M
Yost, Water M - -
1630
1760
1622
121 3
121
1 321
12260
12261
12
11
11
7 9
13
10 9
11
7 9
11
7 9
1 Nonacquescence pubshed n Cumuatve uetn 10 9-1, page 7, wthdrawn.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
The Commssoner does NOT acquesce n the foowng decsons:
Ta payer
Docket No.
oume Page
echer, arret .1
rch Ranch O Co.

Carman, Wam
Chander, Maran Ots
Chander, Norman
Chander, Php
Crowe, Constance Chander.
G
Garand, een Chander
Goodan, May Chander
II
ogg, Thomas
opkns, Lyda
untngton Natona ank of Coumbus, Oho, The 2 3.
eham, Grace .

Lansng Communty ote Corporaton.


M
Marsha, der W
Marsha et u ., der W
Moore, Lts M.1
Myers, dward C.
Ne, Lea .
Nubar, Zareh.
N
Patno, Crst na de ourbon
Pearson, een es
Pearson, r., . Chares
Porter Co., Inc., . W., and subsdary _
9
720
1679C
3036
3037
303
303 )
30 0
3033
17903
12 17
17730
333
17760
23 32
23 33
9
0037
33
99
16 26
20 1
20 13
17773
It
Rosckrans et u ., ohn N 67
1 onocqucaccnce reates ony to the ssue whether operatng defcts as of March 1,1013, must be restored
n determnng earnngs or profts accumuated after February 2 ,1913.
1 state ta decson.
1 Nonacquesccncc reates ony to the ssue concernng the vauaton of the fe estate of decedent s wdow.
cquescence pubshed n Cumuatve uetn 19 6-1, page 3, as t reates to the ssue whether the
raymmts nvoved were ta abe as gan from the sae of property, wthdrawn.
onacquescencc reates ony to the ssue concernng the cost bass of stock sod n 19 .
1 Nonacqucscence reates ony to the ssue nvovng the ta abty of gan reazed from the sae of pet-
|w|er s own stock to ts stockhoders and empoyees, whch stock had been acqured and hed n ts
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

Non acquescence s Contnued


Ta payer
S
Sa ton, ugene F., estate of
Sa ton, Martha P., ndvduay and as soe e ecutr ,
of the ast w and testament of ugene F. Sa ton 11
Spreckes, doph
Spreckes, Dorothy C
Spreckcs-Rosekrans Investment Co
Staney Co. of merca
T
Theurkauf, dward -
W
Wegeforth, Le S.s
Wamson, Ruth C-- -- -
Wson, C. Dudey, estate of
Wson et a era Spencer, e ecutors of estate of
C. Dudey Wson 1
Docket No.
16 2
16 2
62
629
677
1 760
1 7 9
60
30 1
19 02
19 02
oume Pago
1 state ta decson.
cquescence pubshed n Cumuatve uetn 19 9-2, page 3, wthdrawn.
Nonacquescence reates ony to the ssue whether operatng defcts as of March 1,1913, must be restored
n determnng earnngs or profts accumuated after February 2 .1913.
Nonacquescence reates ony to the ssue nvovng the ncuson n gross estate, under the provsons of
scctof (c) and (d) of the Interna Revenue Code, of the vaue of two trusts created by decedent n 1937.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
INCOM T RULINGS. P RT I
INT RN L R NU COD
C PT R 1. INCOM T
SU C PT R . G N R L PRO ISIONS
P RT II. COMPUT TION OF N T INCOM
S CTION 22(a). GROSS INCOM : G N R L
D FINITION
Secton 29.22 (a)-: What ncuded n gross 19 0-1-13267
ncome. L T. 39 7
INT RN L R NU COD
The far market vaue of przes receved by an ndvdua takng
part n a contest s ncudbe n gross ncome for Federa ncome
ta purposes.
dvce s requested reatve to the ta abty, for Federa ncome
ta purposes, of the vaue of przes awarded n connecton wth a
ta payer s partcpaton n a rado quz contest. In the case under
consderaton, the ta payer, as a resut of answerng the prncpa
queston correcty, was awarded varous przes consstng of merchan-
dse.
It s the poston of the ureau that where an ndvdua takes part
n a contest, compes wth the condtons thereof, and as a resut wns
a prze, he derves ta abe ncome, for Federa ncome ta purposes,
to the e tent of the far market vaue of the prze on the date t s
acqured by hm. (See L T. 16 1, C. . II-, (1923), and I. T. 1667,
C. . -, 3 (1923); see aso I. T. 39C0, C. . 19 9-2, 13.) The
far market vaue of the merchandse receved by the ta payer n the
nstant case s, therefore, ncudbe n hs gross ncome for Federa
ncome ta purposes.
Secton 29.22 (a)-1: What ncuded n gross 19 0-7-1: 32
ncome. Mn. G 90
dward C. Myers v. Commssoner (6 T. C. 2 )
Treasury Department,
Offce of Commssoner of Interna Revf.nue,
Washngton 2 , D. C, March 20, 10 0.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
and Others Concerned:
1. The Ta Court of the Unted States hed n dward C. Myers v.
Commssoner (6 T. C. 2 ) that under the terms of the e cusve
cense agreement between the pet toner and the . F. Goodrch Rub-
ber Co. the pettoner sod hs nventon to Goodrch. The Conms-
93 0 0 2
(0)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.22(a)- .
10
soner s acquescence C. . 19 6-1, 3 n the Myers decson was pub-
shed n Interna Revenue uetn No. 12 dated une 17,19 6.
2. Further consderaton has been gven to the queston as to whether
the decson n the Myers case shoud be accepted as a precedent n the
determnaton of ncome ta abtes of other ta payers wth respect
to contracts contanng essentay the same provsons.
3. The e cusve cense agreement consdered n the Myers case pro-
vded, among other tngs, that the censor s to receve from the
censee, n return for the e cusve rght to manufacture, use, and se
the patented artce, annua payments equa to percent of the seng
prce of the artces manufactured and sod, such annua payments,
however, not to be ess than a specfed mnmum annua amount.
. The ureau has reached the concuson that where the owner of
a patent enters nto an agreement whereby, n consderaton of the as-
sgnment of the patent, or the cense of the e cusve rght to make,
use, and se a patented artce, the assgnee or censee agrees to pay
to the assgnor or censor an amount measured by a f ed percentage
of the seng prce of the artce so manufactured and sod, or amounts
per unt based upon unts manufactured or sod, or any other method
measured by producton, sae, or use ether by assgnee or censee, or
amounts payabe perodcay over a perod generay cotermnous
wth the transferee s use of the patent, such agreement, for ncome ta
purposes, s to be regarded as provdng for the payment of royates
ta abe as ordnary ncome.
. cquescence n the decson of The Ta Court of the Unted
States n dward C. Myers v. Commssoner (6 T. C. 2 ), as t re-
ates to the ssue whether the payments nvoved theren were ta -
abe as gan from the sae of property, s hereby wthdrawn and non-
acquescence substtuted.
6. It s hed, under authorty contaned n secton 3791(b) of the
Interna Revenue Code, that ths rung sha not be apped wth re-
spect to royates receved from such e cusve cense agreements for
ta abe years begnnng pror to une 1,19 0.
7. Inqures regardng ths mmeograph shoud refer to ts number
and the symbos IT: IM.
Geo. . Schoeneman,
pproved March 20, 19 0. Commssoner.
Thomas . Lynch,
ctng Secretary of the Treasury.
Secton 29.22(a)-: What ncuded n gross 19 0- -13331
ncome. I. T. 003
INT RN L R NU COD
ssgnments of n-o payment rghts
dvce has been requested wth respect to the phrase short-ved
n-o payment rghts, as used n G. C. M. 2 9 (C. . 19 6-1, 66)
and I. T. 393 (C. . 19 9-1, 39).
G. C. M. 2 9, supra, e presses the opnon that consderaton re-
ceved for the assgnment of a short-ved n-o payment rght carved
out of any type of depetabe nterest n o and gas n pace s
ordnary ncome to the assgnor uness such consderaton s pedged
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
11
19.22(a)- .
for use n further deveopment. s a precauton, pendng further
consderaton of the feasbty of dstngushng between short-ved
and ong-ved n-o payment rghts, the statement was made n
G. C. M. 2 9 that: No opnon s e pressed wth respect to the
status of n-o payment rghts e tendng over a substanta porton of
the fe of the depetabe economc nterests from whch such rghts
are carved.
fter carefu study and consderabe e perence wth the appca-
ton of G. C. M. 2 9, supra, t s now concuded that there s no
ega or practca bass for dstngushng between short-ved and
ong-ved n-o payment rghts. It s, therefore, the present pos-
ton of the ureau that the assgnment of any n-o payment rght
(not pedged for deveopment), whch e tends over a perod ess
than the fe of the depetabe property nterest from whch t s
carved, s essentay the assgnment of e pected ncome from such
property nterest. Therefore, the assgnment for a consderaton of
any such n-o payment rght resuts n the recept o ordnary ncome
by the assgnor whch s ta abe to hm when receved or accrued, de-
pendng upon the method of accountng empoyed by hm. Where
the assgnment of the n-o payment rght s donatve, the transacton
s consdered as an assgnment of future ncome whch s ta abe to
the donor at such tme as the ncome from the assgned payment rght
arses.
Notwthstandng the foregong, G. C. M. 2 9, supra, and I. T.
393 , svpra, do not appy where the assgned n-o payment rght
consttutes the entre depetabe nterest of the assgnor n the property
or a fracton e tendng over the entre fe of the property.
Secton 19.22(a)-: What ncuded n gross, 19 0-9-133
ncome. I. T. 007
INT RN L R NU COD
Dvdends payabe on or before December 31, 19 0, to stock-
hoders of record on November 27, 19 0, whch dvdends were re-
ceved and dstrbuted on December 31, 19 0, by the e ecutor of an
estate n process of admnstraton to a chartabe foundaton pur-
suant to an assgnment on December 30, 19 0, by the fe ncome
benefcary of the resduary estate are ncudbe n the beuefcary s
gross ncome for Federa ncome ta purposes.
dvce s requested wth respect to the treatment for Federa ncome
ta purposes of dvdends receved on December 31, 19 0, by the e ec-
utor of an estate n process of admnstraton, whch dvdends were,
pursuant to an assgnment on December 30, 19 0, by the fe ncome
benefcary of the resduary estate, dstrbuted to a chartabe foun-
daton on December 31,19 0.
The resdue of the estate of a decedent who ded on November 2,
19 0, was bequeathed to a trustee to pay the ncome to the ta payer
for fe and at her death to dever the resdue to a foundaton to be
organzed. On November 27, 19 0, dvdends were decared on cer-
tan stock owned by the estate, payabe on or before December 31,
19 0, to stockhoders of record on November 27,19 0. The dvdends
were receved by the e ecutor of the estate on December 31,19 0. On
December 30,19 0, whe the estate was n process of admnstraton,
the ta payer assgned a he rght, tte, and nterest n the bequest
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
19.22(a)- .
12
made to her, namey, her fe nterest n the resduary estate, to an
e stng ta -e empt chartabe foundaton. On December 31, 19 0,
the e ecutor dstrbuted the dvdend ncome to whch the ta payer
woud otherwse have been entted to the e empt foundaton named
n the ta payer s assgnment.
It s the ta payer s contenton that the dvdends dstrbuted to
the assgnee are not ta abe to her under the prncpe of the dec-
son n dward T. ar v. Commssoner (300 U. S. ; Ct. D. 120 ,
C. . 1937-1,17 ) wheren t was hed that certan ncome was ta abe
to the ta payer s chdren, and not to the ta payer-assgnor. In that
case, the ta payer, a fe ncome benefcary of a testamentary trust,
n 1923 and ater years assgned to certan of hs chdren specfed
amounts of the ncome whch he was then or mght thereafter be en-
tted to receve durng hs fetme, and the ncome was accordngy
dstrbuted by the trustees drecty to the assgnees. though t s
not specfed n the opnon whether any of the dstrbuted ncome was
produced, . e., had arsen as ncome, before assgnment of the rght
to receve t, presumaby ony ncome whch was produced or arose as
such after the assgnment was nvoved snce the Court sad, nter
aa, that The one who s to receve the ncome as the owner of the
benefca nterest s to pay the ta . That the Court consders the
decson appcabe ony to ncome produced or arsng as such after
assgnment of the ncome-producng res s confrmed by ts statement
n everng v. Pau R. G. orst (311 U. S. 112; Ct. D. 1 72, C. .
19 0-2, 206) that the ncome of the trust was regarded as no more
the ncome of the donor than woud be the rent from a ease or a crop
rased on a farm after the easehod or the farm had been gven away.
Itacs supped.
decson whch, f foowed, woud be of consderabe pertnence
here n favor of the ta payer s Frankn . Matchette v. everng
( 1 Fed. (2d) 73, reversng 32 . T. . 9, certorar dened, 29 U. S.
677). In that case, dvdends were decared by a hote corporaton
on anuary 23,1923, payabe on February 10,1923, to stockhoders of
record on anuary 26,1923. On February 3, 1923, the ta payer, who
was a stockhoder of record on anuary 26,1923, subscrbed for 11,19
shares of a tota ssue of 11,20 shares n an nvestment corporaton
whch he organzed, agreeng to pay therefor by seng, assgnng,
transferrng, and settng over to such corporaton hs shares n the
hote corporaton together wth any dvdends whch may be pad
hereafter upon sad stock pror to the certfcates therefor beng trans-
ferred upon the books of sad compan|-, whch book transfer occurred
on February 13,1923, the books havng been cosed therefor from an-
uary 26 (e -dvdend date) to February 10 (payment date). On
February 10,1923, the hote corporaton maed a check n the amount
of 127, 00 for dvdends to the ta payer (as stockhoder of record
on anuary 26) whch he receved not ater than February 12 and
whch he deposted to hs order on February 16. On February 20,
1923, he ssued and devered to the nvestment corporaton hs cert-
fed check for the amount of such dvdends. The Unted States
oard of Ta ppeas hed that the dvdends were ta abe to the
ta payer, but the Unted States Crcut Court of ppeas for the
Second Crcut reversed that decson. It s the opnon of ths offce
that the decson of the crcut court s nconsstent wth the decson
of the Unted States Supreme Court n the orst case, supra, wheren
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
13 29.22(a)-.
the Court sad, nter aa: The power to dspose of ncome s the
equvaent of ownershp of t. The e ercse of that power to procure
the payment of ncome to another s the en|oyment and hence the
reazaton of the ncome by hm who e ercses t. Therefore, the
decson of the crcut court n the Matchette case w not be foowed
by the ureau n ths and smar cases.
The decsons n Commssoner v. mercan Lght Tracton Co.
(1 6 Fed. (2d) 39 ; Ct. D. 167 , C. . 19 6-2,13 ) and Tar Products
Corporatons. Commssoner (130 Fed. (2d) 66) are not appcabe to
the nstant case because they reate to the queston when dvdends
become ta abe as ncome, rather than the queston (here presented)
who s the owner of the ncome.
In vew of the foregong, t s hed that the dvdends whch were
dstrbuted by the e ecutor of the estate pursuant to the assgnment by
the fe ncome benefcary are ncudbe n the benefcary s gross
ncome for Federa ncome ta purposes.
19 0-10-133 2
I. T. 009
INT RN L R NU COD
Ta abty to the essor of vaue of mprovements paced upon rea
property by a essee.
dvce s requested as to the ta abty, for Federa ncome ta pur-
oses, of the vaue of mprovements paced upon rea property by a
essee under the crcumstances herenafter set forth.
Under the terms of a -year ease of an 0-acre tract of and, the
essee s not requred to pay rent, but, n eu thereof, he agrees to nsta
on the premses a compete rrgaton system. The essee further
agrees to cear and eve the and, dg dtches, dr a we, nsta a
pump wth motor and brng eectrcty thereto, spread gypsum on the
and, pant afafa on a certan part thereof, and pay certan ta es,
a mprovements to become the property of the essor at the termna-
ton of the ease.
Under secton 22(a) of the Interna Revenue Code, rent s specf-
cay ncuded n the term gross ncome. Secton 22(b) (11) of the
Code provdes as foows:
(b) cusons from Gross Income. The foowng tems sha not be
ncuded n gross ncome and sha be e npt from ta aton under ths chapter
Chapter 1 of the Code :

(11) Improvements by essee on essor s property. Income, other
than rent, derved by a essor of rea property upon the termnaton of a
ease, representng the vaue of sue h property attrbutabe to budngs erected
or other mprovements made by the essee. Itacs supped.
Secton 29.22(b) ()- of Reguatons 111 provdes n part as
foows:
Sec. 29.22(b) ()-. cuson from Gross Income of Lessor of Rea Prop-
erty of aue of Improvements rected by Lessee. Income derved by a essor
of rea property upon the termnaton, through forfeture or otherwse, of the
ease of such property and attrbutabe to budngs erected or other mprove-
Secton 29.22(a)-: What ncuded n gross
ncome.
( so Secton 22 (b), Secton 29.22 (b) (11)-1;
Secton 2, Secton 29. 2-1.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.22(a)-2.
1
merts made by the essee upon the eased property Is e cuded from gross Income.
owever, where the facts dscose that such budngs or mprovements represent
In whoe or n part a qudaton n knd of ease rentas, the e cuson from gross
ncome sha not appy to the e tent that such budngs or mprovements rep-
resent such qudaton. The e cuson appes ony wth respect to the ncome
reazed by the essor upon the termnaton of the ease and has no appcaton
to ncome, f any, n the form of rent, whch may be derved by a essor durng
the perod of the ease and attrbutabe to budngs erected or other mprovements
made by the essee. It has no appcaton to ncome whch may be reazed by
the essor upon the termnaton of the ease but not attrbutabe to the vaue of
such budngs or mprovements. Nether does t appy to ncome derved by
the essor subsequent to the termnaton of the ease ncdent to the ownershp
of such budngs or mprovements.
The above-stated provsons of the reguatons show that secton
22(b) (11) of the Interna Revenue Code does not appy to ncome
receved other than upon termnaton of a ease, or to ncome whch
represents, n whoe or n part, a qudaton n knd of ease rentas.
Secton 22(b) (11) of the Code, added by secton 11 (a) of the Revenue
ct of 19 2, was apparenty ntended to obvate the effect of the de-
cson of the Supreme Court of the Unted States n everng v.
ruun (309 U. S. 61, Ct. D. 1 0, C. . 19 0-1, 112), wheren t was
hed, under the crcumstances stated, that upon termnaton of a ease
ta abe gan was reazed by a essor from mprovements erected by
a essee. (See ouse of Representatves Report No. 2333, Seventy-
seventh Congress, second sesson, C. . 19 2-2, 372, at page 2 , and
Senate Report No. 1031, Seventy-seventh Congress, second sesson,
C. . 19 2-2, 0 , at page 0 .) There was no contenton n the ruun
case that the vaue of the mprovements consttuted rent. The n-
stant case s, therefore, governed by the anguage used n the opnon
of the Supreme Court n M. . att Co. v. Unted States (30 U. S.
267, Ct. D. 1373, C. . 1939-1 (Part 1) 221), wheren the Court, n
hodng that certan mprovements dd not resut n the reazaton
of gan to the essor durng the term of the ease (for the reason,
among others, that ther added vaue coud not be consdered as rent
accrung over the term of the ease), ndcated that whether the vaue
of mprovements erected by the essee s to be .deemed rent depends
upon the ntenton of the partes. In the opnon of ths offce, such an
ntenton may be dscosed ether by the terms of the ease or the
surroundng crcumstances.
In the nstant case, the terms of the ease, under whch t was agreed
that n eu of rent certan mprovements of such a nature as to resut
n mmedate beneft to the essor when competed or partay com-
peted woud be paced upon the and, ndcate an ntenton that the
addton of such mprovements shoud be deemed to be rent. ccord-
ngy, t s hed that ncome w resut to the essor to the e tent of the
far market vaue, sub|ect to the ease, of the mprovements paced
upon the and n any ta abe year. (See W. M. Scott et u . v. Com-
mssoner, 27 . T. . 9 1.)
Secton 29.22(a)-2: Compensaton for persona
servces,
INT RN L R NU COD
Contrbutons requred of empoyees under artce 9 of the New York
workmen s compensaton aw, assumed and pad by empoyers. (See
I. T. 010, page 30.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
1
29.22(a)-3.
Secton 29.22(a)-3: Compensaton pad other 19 0-6-13311
than n cash. Mm. 6 72
( so Secton 1621 (a), Secton 0 .101, Regua-
tons 116.)
Ta abty of compensaton pad other than n cash Lvng
quarters or mess furnshed empoyees.
Mmeograph 023 (C. . 19 0-1, 1 ) and Mmeograph 6 7 (C. .
19 , 0) modfed.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Yashngton 2 , D. C, February 1 , 19 0.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
and Others Concerned:
1. Secton 22(a) of the Interna Revenue Code defnes gross ncome
as ncudng gans, profts, and ncome derved from saares, wages,
or compensaton for persona servce of whatever knd and
n whatever form pad, Secton 29.22(a)-3 of Reguatons
111. reatng to compensaton pad other than n cash, provdes n part
as foows:
If a person receves as compensaton for servces rendered a saary
and n addton thereto vng quarters or meas, the vaue to such person of the
quarters and meas so furnshed consttutes ncome sub|ect to ta . If, however,
vng quarters or meas are furnshed to empoyees for the convenence of the
empoyer, the vaue thereof need not be computed and added to the compensaton
otherwse receved by the empoyees.
Smar anguage s contaned n secton 0 .101 of Reguatons 116,
reatng to wages sub|ect to wthhodng of ncome ta at the source.
2. The frst sentence of the above-quoted reguaton adheres cosey
to the defnton of gross ncome ncuded n secton 22(a) of the
Interna Revenue Code and estabshes the genera rue that every
person recevng vng quarters or meas as compensaton for servces
rendered must ncude n gross ncome the vaue to hm of such
quarters or meas. The second sentence quoted above must be con-
strued n the ght of the frst sentence to avod beng nconsstent
therewth and to prevent voaton of the statutory defnton of gross
ncome. The convenence of the empoyer rue s smpy an admn-
stratve test to be apped ony n cases n whch the compensatory
character of such benefts s not otherwse determnabe. It foows
that the rue shoud not be apped n any case n whch t s evdent
from the other crcumstances nvoved that the recept of quarters or
meas bv the empoyee represents compensaton for servces rendered.
Ths poston s n accord wth I. T. 2692 (C. . II-1, 2 (1933))
and the decson of the Unted States oard of Ta ppeas (now
The Ta Court of the Unted States) n erman Martn v. Comms-
soner ( . T. . 1 ).
3. For e ampe, a State cv servce empoyee s empoyed at an
nsttuton n whch the condtons of empoyment requre hm to ve
at the nsttuton and be avaabe for duty at any tme. In connecton
wth hs empoyment, he s furnshed vng quarters and meas.
Under the appcabe State statute, the cv servce rues and regua-
tons of the State, or the ndvdua contract of empoyment, the vaue
of the vng quarters and meas s consdered as part of the empoyee s
compensaton. Regardess of whether vng quarters and meas are
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.22(a)-3.
If)
furnshed n addton to the cash saary, or the vaue thereof s de-
ducted from the tota saary, estabshed for the partcuar poston,
t s evdent that the vng quarters and rheas are furnshed as com-
pensaton for servces rendered. Consequenty, the vaue of the vng
quarters and meas s ncudbe n hs gross ncome and s sub|ect to
wthhodng of ncome ta at the source by the empoyer, notwth-
standng the fact that the empoyee s requred to ve at the nsttuton
and be avaabe for dutv at any tme.
. Mmeograph 023 (C. . 19-10-1,1 ) and Mmeograph 6 7 (C. .
19 , 0) are hereby modfed to the e tent they mpy that the con-
venence of the empoyer rue s appcabe to stuatons n whch t
s otherwse evdent that vng quarters or meas are furnshed to an
empoyee as compensaton for servces rendered. Smary, O. D. 26
(C. . 1.71 (1919)), O. D. 1 (C. . . (1921)). O. DT 91 (C. .
, (1921)), and I. T. 22 3 (C. . -, 32 (1926)) shoud not be
reed upon as precedents n any case n whch vng quarters or meas
are determned to be compensatory wthout reference to the conven-
ence of the empoyer rue.
. Under the authorty contaned n secton 3791(b) of the Interna
Revenue Code, the provsons of ths mmeograph w be apped
wthout retroactve effect from anuary 1,19 9, n cases n whch vng
quarters or meas are determned to be compensatory wthout reference
to the convenence of the empoyer rue, e cept that any ta es whch
have been wthhed or pad on the vaue of such vng quarters or
meas w not be refunded.
6. Correspondence reatng to ths mmeograph shoud refer to ts
number and the symbos IT: IM.
Geo. . Schoeneman,
Commssoner.
pproved February 1 , 19 0.
Thomas . Lynch,
ctng Secretary of the 2 reasury.
Secton 29.22(a)-3: Compensaton pad other 19 0-0-13317
than n cash. Mn. 6 77
( so Secton 1 7, Secton 29.1 7-2; Secton
1622, Secton 0 .201, Reguatons 116.)
Incuson n gross Income of premums pad by an empoyer
for permanent forms of nsurance on the ves of hs empoyees under
group-permanent fe nsurance poces.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 2 , D. C, Febnary 23, 19 0.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
Deads of Fed Dvsons of the Technca Staff, and Others Con-
cerned:
1. The ureau has receved a number of nqures as to whether the
provson n secton 29.22(a)-3 of Reguatons 111 reatng to group
fe nsurance s appcabe to permanent forms of nsurance under
group nsurance poces generay known as group-permanent fe
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
17
29.22(a)-3.
nsurance poces. The purpose of ths mmeograph s to state the
treatment to be accorded such tems.
2. Secton 29.22 (a)-3, supra, provdes that Premums pad by an
empoyer on poces of group fe nsurance coverng the ves of hs
empoyees, the benefcares of whch are desgnated by the empoyees,
are not ncome to the empoyees. Ths rue had ts orgn n Law
Opnon 101 (C. . 2, (1920)) and frst appeared n artce 33 of
Reguatons (1920 ed.). So-caed group-permanent fe nsurance
dffers from that consdered n the cted aw opnon n that the per-
manent nsurance provdes substanta economc benefts usuay n-
cudng ncreasng vaues of pad-up contnued nsurance or other
benefts for empoyees. Thus, under permanent forms of nsurance,
empoyees are provded wth somethng more than current term nsur-
ance whch does not have pad-up or other substanta vaues and
whch s deat wth n the above-quoted provson of the reguatons.
It w, therefore, be the poston of the ureau that premums pad
by an empoyer for permanent forms of nsurance on the ves of hs
empoyees under group-permanent fe nsurance poces may not be
e cuded from gross ncome under such provson, but consttute
addtona ncome whch s requred to be ncuded n the gross ncome
of such empoyees.
3. nsurance provded on a typca eve premum form s con-
sdered a permanent form, and a of each premum pad wth re-
spect to an empoyee under such a form, ess any empoyee contrbu-
tons on account of the premum, s requred to be ncuded n the n-
come of the empoyee for the year n whch the premum s pad.
. Where a porton of the nsurance s provded by unts of pad-
up nsurance on a typca snge premum form or s on a typca eve
premum form and the baance s provded on a typca current term
form wth separate premums specfed n the pocy for each
porton, ony the pad-up or eve premum nsurance s consdered a
permanent form, and a of each premum pad for pad-up or eve
premum nsurance wth respect to an empoyee under such a pan, ess
anv empoyee contrbutons on account of such premum, s requred
to be ncuded n the ncome of the empoyee for the year n whch the
premum s pad. Thus, f each premum for pad-up or eve pre-
mum nsurance for an empovee s provded from empoyee contrbu-
tons on account of t, no premums are consdered pad by the empoyer
for a permanent form ot nsurance under such a pan.
. Where a premum for nsurance woud be requred to be ncuded
n the ncome of an empoyee n accordance wth the foregong rues
but the rght of the empoyee to permanent nsurance or equvaent
benefts, other than current term nsurance, provded by the premum s
forfetabe n case of subsequent separaton from servce, the nsurance
s not consdered a permanent form when the premum s pad, and
nothng s requred to be ncuded n the empoyee s ncome on account
of the premum payment. The vaue of any permanent nsurance or
equvaent benefts n whch the rght of an empoyee changes from
forfetabe to nonforfetabe n case of subsequent separaton from
servce s consdered a premum pad for a permanent form of nsur-
ance at the tme of the change, and such vaue, ess any empoyee con-
trbutons on account of the change, s requred to be ncuded n hs
ncome for the year n whch the change occurs.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
19.22(a)-21, Regs. 103.
1
6. s used above, a premum wth respect to an empoyee s the gross
premum wthout ad|ustment on account of any credts such as dv-
dends whch are determned wth respect to the premums under the
group pocy as a whoe or wth respect to premums other than that
partcuar premum.
7. Group-permanent fe nsurance premums requred to be ncuded
n the ncome of an empoyee are sub|ect to wthhodng under secton
1622(a) of the Interna Revenue Code.
. Ths rung does not appy to a premum pad by an empoyees
trust e empt under secton 16 (a), as amended. So much of a pre-
mum so pad as s used for current fe nsurance protecton for an
empoyee and s pad from contrbutons of the empoyer or earnngs
thereon consttutes ncome to the empoyee for the year when pad and
must be reported on Form 1099, but no part of the premum s sub|ect
to wthhodng. (See sectons 29.16 -6 and 29.1 7-2 of Reguatons
111, as amended, and secton 0 .101 () of Reguatons 116, as
amended.)
9. Pursuant to authorty contaned n secton 3791(b) of the Inter-
na Revenue Code, paragraphs 1 through 7 of ths rung w not be
apped to premums due and pad pror to uy 1,19 0, n accordance
wth group-permanent fe nsurance poces n effect on the date of
approva hereof.
10. Correspondence from the foowng regardng ths mmeograph
shoud refer to ts number and to the symbos ndcated: Coectors of
nterna revenue, C: Co; nterna revenue agents n charge,
IT: IM; heads of fed dvsons of the Technca Staff, TS: RM.
Geo. . Schoeneman,
Commssoner.
pproved February 23, 19 0.
Thomas . Lynch,
ctng Secretary of the Treasury.
Secton 29.22(a)- : Gross ncome from busness.
INT RN L R NU COD
Dstrct of Coumba gross saes ta coected by vendor from pur-
chasers. (See I. T. 00 , page 3 ).
Secton 19.22 (a) -21, Reguatons 103: Gross 19 0-3-132 1
ncome of corporaton n qudaton. Ct. D. 1727
ncome ta nterna revenue code decson op supreme court
1. Gkoss Income Corporaton n Lqudaton Dstrbuton op
ssets n nd Subsequent Sae by Sharehoders.
cosey hed corporaton engaged In the busness of generatng
and dstrbutng eectrc power transferred ts transmsson and ds-
trbuton equpment to ts sharehoders as a qudatng dvdend n
knd. The remanng assets were sod, and the corporaton was ds-
soved. The sharehoders then e ecuted a sae of the equpment to a
purchaser, the atter havng prevousy offered to buy such equp-
ment from the corporaton. The corporaton had re|ected the offer
because of the heavy capta gans ta for whch t woud have been
abe.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
19
19.22(a)-21, Regs. 103.
ed: Ths Court accepts the utmate fndngs of fact of the tra
court based on adequate subsdary .ndngs, that the sae was made
by the stockhoders rather than by the corporaton. The Govern-
ment s argument that the sharehoders acted as a mere condut for
a sae must fa before ths fndng. The subsdary fndng that the
ma|or motve of the sharehoders was to reduce ta es does not bar
ths concuson. Whatever the motve and however reevant t may
be In determnng whether the transacton was rea or a sham, saes
of physca propertes by sharehoders foowng a genune quda-
ton dstrbuton cannot be attrbuted to the corporaton for ta
purposes.
2. Decson Dstngushed.
Court odng Co. v. Commssoner, 32 U. S. 331 (Ct. D. 1636, C. .
19 , ), dstngushed.
Supreme Court of the Unted States
The Unted States, pettoner, v. Cumberand Pubc Servce Co.
On wrt of certorar to the Court of Cams
anuary 9, 19 0
OPINION
Mr. ustce ack devered the opnon of the Court.
corporaton seng ts physca propertes s ta ed on capta gans resutng
from the sae.1 There s no corporate ta , however, on dstrbuton of assets n
knd to sharehoders as part of a genune qudaton. The respondent corpora-
ton transferred property to ts sharehoders as a qudatng dvdend n knd.
The sharehoders transferred t to a purchaser. The queston s whether, despte
contrary fndngs by the Court of Cams, ths record requres a hodng that the
transacton was n fact a sae by the corporaton sub|ectng the corporaton to
a capta gans ta .
Detas of the transacton are as foows. The respondent, a cosey hed
corporaton, was ong engaged n the busness of generatng and dstrbutng
eectrc power n three entucky countes. In 1936 a oca cooperatve began
to dstrbute Tennessee aey uthorty power n the area served by respondent.
It soon became obvous that respondent s Dese-generated power coud not
compete wth T power, whch respondent had been unabe to obtan. Re-
spondent s sharehoders, reazng that the corporaton must get out of the power
busness uness t obtaned T power, accordngy offered to se a the cor-
porate stock to the cooperatve, whch was recevng such power. The cooperatve
refused to buy the stock, but countered wth an offer to buy from the corporaton
ts transmsson and dstrbuton equpment. The corporaton re|ected the offer
because t woud have been compeed to pay a heavy capta gans ta . t the
same tme the sharehoders, desrng to save payment of the corporate capta
gans ta , offered to acqure the transmsson and dstrbuton equpment and
then se to the cooperatve. The cooperatve accepted. The corporaton trans-
ferred the transmsson and dstrbuton systems to ts sharehoders n parta
qudaton. The remanng assets were sod and the corporaton dssoved. The
sharehoders then e ecuted the prevousy contempated sae to the cooperatve.
Upon ths sae by the sharehoders, the Commssoner assessed and coected
a 17,000 ta from the corporaton on the theory that the sharehoders had been
used as a mere condut for effectuatng what was reay a corporate sae. Re-
spondent corporaton brought ths acton to recover the amount of the ta . The
Conrt of Cams found that the method by whch the stockhoders dsposed of
the propertes was avowedy chosen n order to reduce ta es, but that the
qudaton and dssouton genuney ended the corporaton s actvtes and
e stence. The court aso found that at no tme dd the corporaton pan to make
the sae tsef. ccordngy t found as a fact that the sae was made by the
sharehoders rather than the corporaton, and entered |udgment for respondent.
26 . S. G, secton 22(a) ; Treasury Refatons 103. secton 19.22(a)- .
|0 an or oss S reazed by a corporaton from the mere dstrbuton of
Ur assets In knd In parta or compete qudaton, however they may have apprecated
or deprecated In vaue snce ther acquston Treasury Reguatons 103,
secton 19.22 ta-21.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
19.22(a)-21, Regs. 103.
20
One udge dssented, beevng that our opnon n Court odng Co. v. Comms-
soner, 32 O. S. 331 Ct. D. 1636, C. . 19 , , requred a fndng that the
sae had been made by the corporaton. Certorar was granted to cear up
doubts arsng out of the Court odng Co. case.
Our Court odng Co. decson rested on fndngs of fact by the Ta Court
that a sae had been made and gans reazed by the ta payer corporaton. There
the corporaton had negotated for sae of ts assets and had reached an ora
agreement of sae. When the ta consequences of the corporate sae were
beatedy recognzed, the corporaton purported to ca off the sae at the ast
mnute and dstrbuted the physca propertes n knd to the stockhoders. They
prompty conveyed these propertes to the same persons who had negotated wth
the corporaton. The terms of purchase were substantay those of the prevous
ora agreement. One thousand doars aready pad to the corporaton w s
apped as part payment of the purchase prce. The Ta Court found that the
corporaton never reay abandoned ts saes negotatons, that t never dd
dssove, and that the soe purpose of the so-caed qudaton was to dsguse
a corporate sae through use of mere formasms n order to avod ta abty.
The crcut court of appeas took a dfferent vew of the evdence. In ths court
the Government contended that whether a qudaton dstrbuton was genune
or merey a sham was tradtonay a queston of fact. We agreed wth ths
contenton, and renstated the Ta Court s fndngs and |udgment. Dscussng
the evdence whch supported the fndngs of fact, we went on to say that the
Incdence of ta aton depends upon the substance of a transacton regardess
of mere formasms, and that ta es on a corporate sae cannot be avoded by
usng the sharehoders as a condut through whch to pass tte.
Ths anguage does not mean that a corporaton can be ta ed even when the
sae has been made by ts stockhoders foowng a genune qudaton and dsso-
uton. Whe the dstncton between saes by a corporaton as compared wth
dstrbuton n knd foowed by sharehoder saes may be partcuary shadowy
and artfca when the corporaton s cosey hed, Congress has chosen to recog-
nze such a dstncton for ta purposes. The corporate ta s thus amed pr-
mary at the profts of a gong concern. Ths s true despte the fact that gans
reazed from corporate saes are ta ed, perhaps to prevent ta evasons, even
where the cash proceeds are at once dstrbuted n qudaton. ut Congress
has mposed no ta on qudatng dstrbutons n knd or on dssouton, what-
ever may be the motve for such qudaton. Consequenty, a corporaton may
qudate or dssove wthout sub|ectng tsef to the corporate gans ta , even
though a prmary motve s to avod the burden of corporate ta aton.
ere, on the bass of adequate subsdary fndngs, the Court of Cams has
found that the sae n queston was made by the stockhoders rather than the
corporaton. The Government s argument that the sharehoders acted as a mere
condut for a sae by respondent corporaton must fa before ths fndng. The
subsdary fndng that a ma|or motve of the sharehoders was to reduce ta es
does not bar ths concuson. Whatever the motve and however reevant t may
be n determnng whether the transacton was rea or a sham, saes of physca
propertes by sharehoders foowng a genune qudaton dstrbuton cannot be
attrbuted to the corporaton for ta purposes.
The oddtes n ta consequences that emerge from the ta provsons here
controng appear to be nherent n the present ta pattern. For a corporaton
s ta ed f t ses a ts physca propertes and dstrbutes the cash proceeds
as qudatng dvdends, yet s not ta ed f that property s dstrbuted n knd
and s then sod by the sharehoders. In both nstances the nterest of the
sharehoders n the busness has been transferred to the purchaser. gan, f
these stockhoders had succeeded n ther orgna effort to se n ther stock,
ther nterest woud have been transferred to the purchasers |ust as effectvey.
Yet on such a transacton the corporaton woud have reazed no ta abe gan.
s What we sad In the Court odng Co. case was an approva of the acton of the Ta
Court n ookng beyond the papers e ecuted by the corporaton and sharehoders In order
to determne whether the sae there had actuay been made by the corporaton. We were
but emphaszng the estabshed prncpe that n resovng such questons as who made a
sae, fact fndng trbunas n ta crses can consder motves, ntent, and conduct n add-
ton to what appears n wrtten Instruments used by partes to contro rghts as among
themseves. See. e. g., Ieverng v. Cfford, 309 D. S. 331, 333-337 Ct. D. 1 , C. .
19 0-1. 10 : Commssoner v. Totcer, 327 t . S. 2 0 Ct. D. 1670. C. . 19 6-1. 11 .
It has aso been hed that where corporate qudatons are effected through trustees
or agents, gans from saes are ta abe to the corporaton as though t were a gong
concern. See, e. g.. frst at ank of reccy, Coo., v. Unted States, 0 Fec. (2d)
93 , 9 1; Treasury Reguatons 103, secton 19.22(a)-21.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
21
I 22(b).
Congress havng determned that dfferent ta consequences sha fow from
dfferent methods by whch the sharehoders of a cosey hed corporaton may
dspose of corporate property, we accept ts mandate. It s for the tra court,
upon consderaton of an entre transacton, to determne the factua category
In whch a partcuar transacton beongs. ere as n the Court odng Co.
case we accept the utmate fndngs of fact of the tra trbuna. ccordngy
the |udgment of the Court of Cams s
ffrmed.
Sr. ustce Doug as took no part n the consderaton or decson of ths case.
S CTION 22(b). GROSS INCOM : CLUSIONS
FROM GROSS INCOM 19 0-6-13312
I. T. 000
INT RN L R NU COD
n empoyer s prvate pan for the payment of dsabty benefts
to empoyees pursuant to chapter 21, tte 3 of the Revsed Statutes
f New ersey, as amended and suppemented, s a form of heath
nd accdent nsurance whch meets the requrements of secton
-2b) ( ) of the Interna Revenue Code. mounts receved by em-
poyees under such a pan are e cudabe from gross ncome under
secton 22(b) ( ) of the Code and are not sub|ect to wthhodng of
ncome ta at the source on wages under secton 1622 of the Code.
dvce s requested whether dsabty beneft payments receved
by empoyees under a prvate pan estabshed by an empoyer pur-
suant to chapter 21, tte 3 of the Revsed Statutes of New ersey, as
amended and suppemented, are e cudabe from gross ncome under
secton 22(b)( ) of the Interna Revenue Code and whether such
payments are sub|ect to wthhodng of ncome ta at the source on
wages under secton 1622 of the Code.
Pror to une 1,19 , chapter 21, tte 3 of the Revsed Statutes of
New ersey provded for the payment of unempoyment compensaton
benefts to those unempoyed persons who were abe to work and
avaabe for work. ffectve une 1, 19 , the aw was amended to
provde aso for compensaton to empoyees n cnse of dsabty due
to nonoccupatona sckness or accdent as the resut of whch they
are unavaabe or unabe to work. mpoyees may be covered by
the State pan or by prvate pans. The pertnent provsons of the
ew ersey Revsed Statutes read as foows:
3: 21-2 . Short Tte.
Ths act sha be known and mn| be cted as the Temporary Dsabty enefts
Law.
3:21-26. Purtose.

The pubc pocy of ths State, aready estabshed, s to protect empoyees
aganst the sufferng and hardshp generay caused by nvountary unempoy-
ment. ut the unempoyment compensaton aw provdes beneft payments to
repace wage oss caused by Invountary unempoyment ony so ong as an Ind-
vdua s abe to work, and s avaabe for work, and fas to provde any
protecton aganst wage oss suffered because of nabty to perform the dutes
of a |ob nterrupted by ness. Nor s there any other comprehensve and
systematc provson for the protecton of workng peope aganst oss of earnngs
une to nonoccupatona sckness or accdent.

It has been found that e stng vountary pans for the payment of cash sck-
ness benefts cover ess than one-haf of the number of workng peope of ths
State who are now covered by the unempoyment compensaton aw, and that
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
22(b).
22
even ths degree of vountary protecton affords uneven, unequa and sometmes
uncertan protecton among the varous vountary beneft programs. It Is there-
fore desrabe and necessary to f the gap n e stng provsons for protecton
aganst the oss of earnngs caused by nvountary unempoyment, by e tendng
such protecton to meet the hazard of earnngs oss due to nabty to work
caused by nonoccupatona sckness or accdent.
The foregong facts and consderatons requre that there be a unform mn-
mum program provdng n a systematc manner for the payment of reasonabe
benefts to repace partay such earnngs oss and to meet the contnung need
for benefts where an Indvdua becomes dsabed durng unempoyment. In
order to mantan consumer purchasng power, reeve the serous menace to
heath, moras and wefare of the peope caused by nsecurty and the oss of
earnngs, to reduce the necessty for pubc reef of needy persons, and n the
nterest of the heath, wefare and securty of the peope of ths State, such a
system, enacted under the poce power, s hereby estabshed, requrng the
payment of reasonabe cash benefts to egbe ndvduas sufferng accdent or
ness whch s not compensabe under the workmen s compensaton aw.
3: 21-2 . Coverage.
covered ndvduas sha be entted on and after anuary frst, one thou-
sand nne hundred and forty-nne, to the benefts provded under ether a prvate
pan or the State pan of dsabty benefts,
3:21-29. Compensabe Dsabty.
Dsabty sha be compensabe sub|ect to the mtatons of ths act, where a
covered ndvdua suffers any accdent or sckness not arsng out of and n the
course of hs empoyment or f so arsng not compensabe under the workmen s
compensaton aw (tte 3 of the Revsed Statutes), and resutng n hs tota
nabty to perform the dutes of hs empoyment
3 : 21-32. stabshment of Frvate Pans.
ny covered empoyer may estabsh a prvate pan for the payment of dsabty
benefts n eu of the benefts of the State pan herenafter estabshed. enefts
under such a prvate pan may be provded by a contract of nsurance ssued by an
nsurer duy authorzed and admtted to do busness n ths State, or by an agree-
ment between the empoyer and a unon or assocaton representng hs empoyees,
or by a specfc undertakng by the empoyer as a sef-nsurer. Sub|ect to the
nsurance aws of ths State, such a contract of nsurance may be between the
nsurer and the empoyer; or may be between the nsurer and two or more
empoyers, actng for the purpose through a nomnee, desgnee or trustee; or
may be between the nsurer and the unon or assocaton wth whch the empoyer
has an agreement wth respect thereto.
Secton 22(b) ( ) of the Interna Revenue Code provdes n part as
as foows:
(b) cursons prom Gross Income. The foowng tems sha not be In-
cuded n gross ncome and sha be e empt from ta aton under ths chapter
Chapter 1 of the Code :

( ) Compensaton for n|ures or sckness. cept n the case of
amounts attrbutabe to (and not n e cess of) deductons aowed under
secton 23( ) n any pror ta abe year, amounts receved, through accdent
or heath nsurance as compensaton for persona n|ures or
sckness
It s hed that an empoyer s prvate pan for the payment of ds-
abty benefts to empoyees pursuant to chapter 21, tte 3 of the
Revsed Statutes of New ersey, as amended and suppemented, s a
form of heath and accdent nsurance whch meets the requrements
of secton 22(b) ( ) of the Interna Revenue Code, supra. mounts
receved by empoyees under such a prvate pan are e cudabe from
gross ncome under secton 22(b) ( ) of the Code. Consequenty, such
amounts are not sub|ect to wthhodng of ncome ta at the source
on wages under secton 1C22 of the Code.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
23
22(b).
p
c
19 0-13-133 0
I. T. 01
INT RN L R NU COD
Unempoyment compensaton dsabty benefts receved by em-
poyees pursuant to artce 10 of the Caforna Unempoyment
Insurance ct, as amended, are e eudbe from gross Income under
secton 22(b) ( ) of the Interna Revenue Code.
dvce s requested whether amounts receved by empoyees as unem-
oyment compensaton dsabty benefts pursuant to artce 10 of the
aforna Unempoyment Insurance ct, as amended, are e ehdbe,
from gross ncome under secton 22(b) ( ) of the Interna Revenue
Code.
The Caforna Unempoyment Insurance ct (formery known as
the Unempoyment Reserves ct), as orgnay enacted, provded
for the payment of unempoyment compensaton by the State to nd-
vduas who were unempoyed but abe to work. ffectve May 21,
19 6, the act was amended by the addton of artce 10 whch provdes
for compensaton to empoyees n case of dsabty due to sckness or
accdent. The pertnent provsons of the Caforna Unempoyment
Insurance ct ( 19-19 Pocket Suppement to Deerng s Genera Laws
of the State of Caforna, voume 3) read as foows:
Secton . Weeky eneft mounts. n Indvdua s weeky beneft
amount sha be the amount appearng n Coumn In te tabe set forth n
ths secton on the ne of whch n Coumn of such tabe there appears the wage
bracket contanng the amount of wages pad to such ndvdua for empoyment
by empoyers durng the quarter of hs base perod In whch such wages were
the hghest.

mount of aaget n Weeky beneft
hghest quarter amount
7 .00- 99.99 10
200.00- 219.09 11
220.00-. 239.99 12
2 0.0O- 2. 9.O9 1
S260.00-S270.00 1
2 0.00- 290.99 1
300.00- 310.99 16
320.00- 339.99 - 17
3 0.00- 3 9.90 IS
300.00-S379. )9 19
3S0.00- 19.99 20
20.00- 0.99 21
60.00-S 09.99 22
00.00- 39.00 23
0.00-S 79.99 2
0.00 and over 2

Sec. no. Purpose of rtce : Constructon. The purpose of ths artce
artce 10 of the Caforna Unempoyment Insurance et s to compensate n
Part for the wage oss sustaned by ndvduas unempoyed because of sckness or
In|ury and to reduce to a mnmum the sufferng caused by unempoyment resut-
ng therefrom.

Sec 200. Payment of enefts Generay : Manner of Payment : Mnors.
Unempoyment compensaton dsabty benefts sha be payabe from the unem-
poyment compensaton dsabty beneft fund to ndvduas who are egbe
to receve such beneft payments under ths artce.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
22(b).
2
Sec. 203. Computaton of enefts. The tota amount of unempoyment com-
pensaton dsabty benefts and the weeky beneft amount payabe to an egbe
ndvdua under ths artce durng any one beneft year sha be computed n
accordance wth the provsons of sectons 3 and of ths act

Sec. 300. Unempoyment Compensaton Dsabty Fond stabshed:
dmnstraton : Of What Fund to Consst. There s hereby estabshed as a
speca fund n the State treasury, separate and apart from a other pubc
moneys or funds of ths State, the unempoyment compensaton dsabty fund
(desgnated hereafter n ths artce as the dsabty fund), the moneys and
assets of whch sha be hed In trust by the State treasurer and admnstered
under the drecton of the commsson Caforna mpoyment Stabzaton
Commsson e cusvey for the purpose of ths artce.

Sec. 0. ppcaton fob ppbova of ountaby Pan : Sep abate State-
ment of Unempoyment Compensaton Dsabty enefts. n empoyer, a
ma|orty of the empoyees empoyed n ths State of an empoyer, or both, may
appy to the commsson for approva of a vountary pan for the payment of
dsabty benefts to the empoyees so eectng; the benefts payabe as n-
demnfcaton for oss of wages under any vountary pan sha be separatey
stated and desgnated n the pan unempoyment compensaton dsabty bene-
fts separate and dstnct from other benefts, If any.

Sec. 1. pprova of ountary Pan : Condtons Prerequste. The com-
msson sha approve any vountary pan as to whch t fnds that a of the
foowng e st:
(a) Te rghts afforded to the covered empoyees are greater than those pro-
vded for n Part 2 of ths artce.
(b) The pan has been made avaabe to a of the empoyees of the empoyer
empoyed n ths State e cept that f the empoyer mantans more than one
dstnct separate estabshment n ths State the pan has been made avaabe
to a empoyees of any such estabshment and e cept that as to ndvduas n
parta or other forms of short tme empoyment and as to empoyees not n em-
poyment the pan has been made avaabe to such of those ndvduas or
empoyees as the commsson sha prescrbe by authorzed reguatons.
(c) ma|orty of the empoyees of the empoyer empoyed n ths State have
consented to the pan, e cept that f the empoyer mantans more than one
dstnct, separate estabshment n ths State a ma|orty of the empoyees em-
poyed at any such estabshment have consented to the pan.
(d) If the pan provdes for nsurance the form of the Insurance poces to
be ssued have been approved by the nsurance commssoner and are to be
ssued by an admtted dsabty nsurer.
(e) The empoyer has consented to the pan and has agreed to make the
payro deductons requred, f any, and transmt the proceeds to the pan nsurer,
f any.
(f) The pan provdes for the ncuson of future empoyees.
(g) The pan s to be n effect for a perod of not ess than 1 year and there-
after contnuousy uness the commsson fnds that the empoyer or a ma|orty
of hs empoyees empoyed n ths State covered by such pan have gven notce
of the termnaton of such pan. Such notce sha be fed n wrtng wth the
commsson and, upon such fng, sha be effectve at the date ndcated theren,
but n any event not ess than 00 days from the tme of the fng of such notce.
(h) The approva of the pnn or pans w not resut n a substanta seecton
of r.sks adverse to the dsabty fund.

Sec. . Labty for Contrbutons and gbty for enefts Under
pproved Pan : Cessaton of Coverage. From and after the effectve date on
whch dsabty benefts become payabe under secton 03 of ths act, nether
an empoyee nor hs empoyer sha be abe for the contrbutons requred by
secton , .2, or 00 of ths act wth respect to wages pad by the empoyer
whe the empoyee s covered by an approved vountary pan, and such an em-
poyee sha not be entted to benefts from the dsabty fund, e cept as pro-
vded In ths secton, for a dsabty whch commenced whe he s covered by
the vountary pan and e cept that authorzed reguatons sha be prescrbed to
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
2.3
29.22(b)(1)- .
aow benefts to ndvduas smutaneousy covered by one or more approved
vountary pans and the dsabty fund.
n empoyee who has ceased to be covered by an approved vountary pan
sha, f otherwse egbe, thereupon mmedatey become entted to benefts
from the dsabty fund to the same e tent as though there had been no e emp-
ton from contrbutons as provded n ths secton, e cept that n computng the
amount of benefts to whch such an empoyee may be entted from the dsabty
fund durng the remander of a beneft year durng a porton of whch he receved
benefts under a vountary pan, the amount of a benefts, at a weeky rate not
e ceedng the empoyee s weeky beneft rate pursuant to secton 203 of ths
act, pad or to be pad to the empoyee under a approved vountary pans durng
that beneft year, whether before or after cessaton of coverage, sha be deducted
from the benefts payabe from the dsabty fund durng that beneft year.
Secton 22(b) ( ) of the Interna evenue Code provdes n part as
foows:
(b) cusons from Gross Income. The foowng tems sha not be n-
cuded n gross ncome and sha be e empt from ta aton under ths chapter
Chapter 1 of the Code :

( ) Compensaton for n|ures or sckness. cept n the case of
amounts attrbutabe to (and not n e cess of) deductons aowed under
secton 23( ) n any pror ta abe year, amounts receved, through accdent
or heath nsurance as compensaton for persona n|ures or
sckness
The State-admnstered pan s defnte both as to contrbutons and
benefts and s a form of heath and accdent nsurance whch meets
the requrements of secton 22(b) ( ) of the Interna Revenue Code.
vountary pan, whch has been approved by the Caforna m-
poyment Stabzaton Commsson, consttutes a contract of nsur-
ance. Such a pan, adopted under the compuson of State aw, s a
contract between the empoyer and hs empoyees whch obgates the
empoyer to pay, and enttes the empoyees to receve, f ed amounts
of compensaton for persona n|ures or sckness for a f ed perod.
The empoyees rghts to receve beneft payments under a vountary
pan n consderaton of ther empoyment and the empoyer s obga-
ton to pay the benefts satsfy the requrements of contract. Further-
more, t seems cear that the contract s one of nsurance, as a vountary
pan assures and promses each quafed empoyee a f ed compensaton
for a f ed perod n the event accdent or sckness renders hm unabe
to work. Such assurance s the basc functon of an nsurance con-
tract. Therefore, such a pan aso meets the requrements of secton
22(b)( ) of the Code.
In vew of the foregong, t s hed that unempoyment compensaton
dsabty benefts receved by empoyees pursuant to artce 10 of the
Caforna Unempoyment Insurance ct, as amended, are e cudbe
from gross ncome under secton 22(b)( ) of the Interna evenue
Code.
Secton 29.22(b) (1)-1: Lfe nsurance mounts
pad by reason of the death of the nsured.
INT RN L R NU COD
mounts receved as nsurance by a benefcary of an empoyee under
a contract, hed by a trust whch s e empt under secton 1G (a). (See
I. T. 3993, page 7 .)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.22(d)-U
26
Secton 29.22(b) (2)-: Lfe nsurance ndow-
ment contracts mounts pad other than by
reason of the death of the nsured.
INT RN L R NU COD
Dstrbuton of, or payments receved pursuant to, an nsurance con-
tract purchased for an empoyee under .an empoyees trust e empt
under secton 16 (a). (See Mn. 6 61, page 73.)
Secton 29.22(b) (2)-2: nnutes.
Dstrbuton of, or payments receved pursuant to, an annuty con-
tract purchased tor an empoyee under an empoyees trust e empt
under secton 16 (a). (See Mm. 6 61, page 73.)
Secton 29.22(b) (2)- : mpoyees annutes.
Dstrbuton of, or payments receved pursuant to, an annuty con-
tract purchased for an empoyee under an empoyees trust e empt
under secton 16 (a). (See Mm. 6 61, page 73.)
Secton 29.22(b) ()-: cuson from gross
ncome of essor of rea property of vaue
of mprovements erected by essee.
aue of mprovements paced upon rea property by essee. (See
L T. 009, page 13.)
S CTION 22(d). GROSS INCOM : IN NTORI S
L CTI M T OD
Prce Indces for anuary, 19 0, pubshed by the ureau of Labor
Statstcs under date of March 2,19 0, for use by department stores
empoyng the reta nventory and eectve nventory methods.
The foowng prce ndces for anuary, 19 0, pubshed by the
ureau of Labor Statstcs for use by department stores empoyng the
reta nventory and eectve nventory methods, are accepted by the
ureau of Interna Revenue pursuant to Treasury Decson 60
(C. . 19 -1, 16), approved March , 19 , and Mmeograph 62
(C. . 19 -1, 21), dated March 9, 19 , for approprate appcaton
to nventores for ta abe years of 12 months ended on December 31,
19 9, and anuary 1,19 0.
nterna revenue code
INT RN L R NU COD
INT RN L R NU COD
Secton 29.22 (d)-: Inventores under eec-
tve method.
INT RN L R NU COD
19 0-9-133 6
I. T. 00
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
27
29.22 k)-.
ureau of Labor Statstcs, department store nventory prce ndces, oy
department groups
( anuary, 19 1 100
anuary,
Group
anuary,
19 9
anuary,
19 0
19 9, to
anuary,
19 0, per-
cent chanso
II. Shore
211.
19G. 2
1 0. 3
1 2.
1 9.
192.3
170.7
171.0
1 2.1
171. 2
191.3
191.
106.3
109.7
1 3.
1 .0
ICS. 13
1 .0
1 2 2
103.
-9.
-2.
-7.
-7. a
-3.3
- .0
-1.2
-7.3
.1
- .
III. .Ma|or appances and eectrca poods
Tota. Groups I, II, III, I . , I , and
1 .7
177.2
1 2.3
17 .0
171.0
173.
Tota. Groups I, II, and III
-3.0
- .
S CTION 22(k). GROSS INCOM : LIMONY,
TC., INCOM
Secton 29.22(k)-: mony and separate man- 19 0-6-13313
tenanee payments Income to former wfe. I. T. 001
( so Secton 23(u), Secton 29.23(u)-.)
I T N L R NU COD
Premums pad by a husband on a fe nsurance pocy absoutey
assgned tc hs former wfe and wth respect to whch she s the
rrevocabe benefcary are ncudbe n the gross ncome of the wfe
under secton 22(k) of the Interna Revenue Code and deductbe by
the husband under secton 23(u) of the Code. Premums pad by the
husband on a fe nsurance pocy not assgned to the we and wth
respect to whch she s ony the contngent benefcary are nether
ncudbe In the gross ncome of the wfe nor deductbe by the
husband.
dvce s requested whether premums pad by a husband on (1) a
fe nsurance pocy assgned to hs former wfe and wth respect to
whch she s the rrevocabe benefcary, and (2) a fe nsurance pocy
not assgned to the wfe and wth respect to whch she s ony the
contngent benefcary, are ncudbe n the gross ncome of the wfe
under secton 22 (k) of the Interna Revenue Code and deductbe by
the husband under secton 23(h) of the Code.
In the nstant case, the husband and hs former wfe entered nto a
property settement agreement whch provdes, n addton to monthy
pa ments for support of the wfe and support, mantenance, and
educaton of mnor chdren, for the payment by the husband of
premums on two fe nsurance poces coverng the husband s fe.
One of the poces s assgned absoutey to the wfe. She s desgnated
as the rrevocabe benefcary of such pocy and the chdren as rrev-
ocabe contngent benefcares. Wthn a specfed number of years
from the date of ssuance of such pocy, the husband w e change t
for a whoe fe or endowment pocy and dever the pocy receved
M e change to the wfe. Wth respect to the other fe nsurance
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.23(a)- .
2
pocy, the husband, pursuant to the agreement wth hs wfe, desg-
nated the chdren as benefcares and the wfe as contngent bene-
fcary. Ths pocy s not assgned to the wfe, and ts possesson and
contro are retaned by the husband. The property settement agree-
ment n queston was entered nto as an ncdent to a dvorce acton,
and the dvorce decree makes reference to and approves the terms of
the agreement.
It s hed that premums pad by the husband on the fe nsurance
pocy absoutey assgned to hs former wfe and wth respect to whch
she s the rrevocabe benefcary are ncudbe n the gross ncome of
the wfe under secton 22 (k) of the Interna Revenue Code and deduct-
be by the husband under secton 23(u) of the Code. (See nta
unby Stewart v. Commssoner. 9 T. C. 19 , acquescence, C. .
19 7-2, , and state of oes C. Tart et a. v. Commssoner, 11 T. C.
16, acquescence, C. . 19 9-1,2.) It s hed further that the premums
pad by the husband on the fe nsurance pocy whch was not
assgned to the wfe and wth respect to whch she s ony the con-
tngent benefcary are nether ncudbe n the gross ncome of the
wfe nor deductbe by the husband.
S CTION 22(n). GROSS INCOM : D FINITION OF
D UST D GROSS INCOM
Secton 29.22 (n)-: d|usted gross ncome.
INT RN L R NU COD S
Dstrct of Coumba gross saes and compensatng-use ta es pad
by vendors or purchasers n connecton wth trade or busness. (See
I. T. 00 , page 3 .)
S CTION 23(a). D DUCTIONS FROM GROSS
INCOM : P NS S
Secton 29.23(a)-1: usness e penses. 19 0-1-13269
L T.39
INT RN L R NU COD ND PRIOR R NU L WS
mounts e pended by nurses, raway tranmen, nnd surgeons for
the purchase and mantenance of dstnctve types of unforms whch
are not adaptabe to ordnary wear, whch unforms they are re-
qured to wear whe on duty, are deductbe as ordnary and neces-
sary busness e penses under secton 23(a) (1) ( ) of the Interna
Revenue Code.
O. D. 9 1 (C. . , 209 (1921)) revoked and I. T. 1 (C. . 1-2,
1 (1922)) modfed.
Reconsderaton has been gven to O. D. 9 1 (C. . , 209 (1921))
and I. T. 1 (C. . 1-2, 1 (1922)) n the ght of the decsons n
eanor . Meer v. Commssoner (2 T. C. , acquescence, C. .
19 , ), een rusto arsaghy v. Commssoner (2 T. C. ,
acquescence, C. . 19 , 3), and Chares Wdman et u . v. Comms-
soner (Ta Court memorandum opnon, decson entered ugust 1 ,
19 6).
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29
29.23(a)- .
0. D. 9 1, supra, hods that e penses ncurred by a raroad con-
ductor n the purchase of unforms whch hs empoyer requres hm
to wear durng busness hours are persona e penses and are not aow-
abe deductons n computng net ncome. I. T. 1 , supra, hods
n part that amounts e pended for the purchase of unforms by nurses,
raway tranmen, and surgeons are persona e penses whch are not
deductbe for Federa ncome ta purposes.
It s the present poston of the ureau that amounts e pended by
nurses, raway tranmen, and surgeons for the purchase and mante-
nance of dstnctve types of unforms whch are not adaptabe to
ordnary wear, whch unforms they are requred to wear whe on
duty, are deductbe as ordnary and necessary busness e penses under
secton 23(a)(1)( ) of the Interna Revenue Code. ccordngy,
0. D. 9 1, supra, s revoked, and I. T. 1 , supra, s modfed.
Secton 29.23 (a)-: usness e penses. 19 0- -132 9
( so Secton 2 , Secton 29.2 -1.) Mm. 6 63
Cost and mantenance of unforms and work cothng
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 2 , D. C, anuary 17,19 0.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
and Others Concerned:
1. In vew of the trend of recent court decsons aowng deductons
for the cost and mantenance of unforms where (1) the unforms
are specfcay requred as a condton of empoyment and (2) are
not of a type adaptabe to genera or contnued usage to the e tent
that they take the pace of ordnary cothng, the ureau has adopted
the poston that amounts e pended for the purchase and mantenance
of poce offcers unforms consttute ordnary and necessary busness
e penses under secton 23(a)(1)( ) of the Interna Revenue Code.
s a resut, the prevous nonacquescence (C. . 19 3, 27) n the case
of Marcus O. enson et u . v. Commssoner (2 T. C. 12, affrmed,
1 6 Fed. (2d) 191) has been wthdrawn and acquescence (C. .
1) substtuted. (See aso I. T. 397 , C. . 19 9-2,2 .)
2. The poston adopted by the ureau n acquescng n the enson
decson contempates that the cost and mantenance of unforms are
generay aowabe deductons f the tests apped by the Ta Court
n determnng ther deductbty have been met.
3. ampes of ths pocy are recent ureau rungs whch have
been ssued snce the acquescence n the enson decson and whch
hod that the deducton s aowabe n the cases of poce offcers
generay, frc-men, etter carrers, and streetcar, bus, and raway men
who are requred to wear dstnctve types of unforms whe at work
but whch are not sutabe for ordnary wear. In appyng the above-
stated genera rue appearng n the foregong paragraph to other
types of unforms, consderaton must be gven to the partcuar facts.
. For the deducton to be aowabe, t s necessary that both of the
requred tests be met. The fact that a unform mght be requred
as a condton of empoyment s not, of tsef, suffcent to warrant the
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.23 (a)-.
30
aowance of the deducton, as n the case of mtary appare whch
the Ta Court has hed s adaptabe generay to contnued wear to the
e tent that t repaces reguar cothng.
. s has been stated, n order to determne whether both of the
requred tests have been met, consderaton must be gven to the
partcuar facts n each case, and the occupaton of the ta payer
s not necessary controng. For e ampe, the deducton w not
be automatcay aowabe n the case of a raroad conductor s
unform snce ths offce has been advsed that n many nstances
raway passenger conductors do not purchase speca unforms but
do purchase good quaty taored serge suts and have reguaton god
snap-on buttons that ft over the reguar sut buttons so that they
can be removed when the sut s worn away from work. In ths event,
the deducton s not aowabe snce the second requred test, namey,
that the unform s not sutabe for ordnary wear, has not been met.
6. Speca attenton s caed to the fact that ths modfcaton
of ureau pocy respectng the deducton of the cost and mante-
nance of unforms of a dstnctve type does not e tend to ordnary
work cothng the cost and mantenance of whch represent non-
deductbe persona e penses.
7. In vew of the foregong, O. D. 9 1 (C. . , 209 (1921)) has
been revoked, and I. T. 1 (C. . 1-2,1 (1922)) has been revoked
nsofar as t hed that such e penses of nurses, raway tranmen, and
surgeons are persona and nondeductbe e penses. (See I. T. 39 ,
page 2 , ths uetn.) ny ureau nstructons regardng the de-
ductbty of the cost and mantenance of unforms and work cothng
are modfed to the e tent that they are n confct wth the provsons
of ths mmeograph.
Fred S. Martn,
ctng Commssoner.
Secton 29.23(a)-: usness e penses. 19 0-11-13361
( so Secton 22(a), Secton 29.22(a)-2; I. T. 010
Secton 1621(a), Secton 0 .101, Regu-
atons 116.)
INT RN L R NU COD
Contrbutons made by empoyers to a fund to provde for the pay-
ment of benefts to empoyees who are unabe to work because of
n|ury or sckness not arsng out of and n the course of empoyment,
whch contrbutons are made pursuant to artce 9 (known as the
dsabty benefts aw) of the New York workmen s compensaton
aw, consttute ordnary and necessary busness e penses whch are
deductbe under secton 23(a) (1) ( ) of the Interna Revenue Code.
Contrbutons requred of empoyees under artce 9 of the New
York workmen s compensaton aw whch are assumed and pad by
empoyers are Incudbe In the gross ncome of the empoyees and
are sub|ect to wthhodng of ncome ta at the source on wages
under secton 1622 of the Code. Such amounts consttute ordnary
and necessary busness e penses to the empoyers under secton
23(a) (1) ( ) of the Code.
dvce s requested as to the deductbty, for Federa ncome ta
purposes, of contrbutons made by empoyers to a fund to provde for
payment of nonoccupatona dsabty benefts to empoyees, whch
contrbutons are made pursuant to artce 9 (added by Laws of New
York, chapter 600, approved pr 13,19 9), known as the dsabty
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
31
29.23(a)- .
benefts aw, of the New York workmen s compensaton aw. dvce s
aso requested as to the deductbty by empoyers of contrbutons
requred of empoyees whch are assumed and pad by empoyers and
the ta abty to the empoyees of such contrbutons.
The pertnent provsons of artce 9 of the New York workmen s
compensaton aw read as foows:
Secton 209. Contrbuton of mpoyees for Dsabty enefts. 1. very
empoyee n the empoyment of a covered empoyer sha, on and after anuary
frst, nneteen hundred ffty, contrbute to the cost of provdng dsabty benefts
under ths artce, to the e tent and n the manner heren provded.
2. The speca contrbuton of each such empoyee to the accumuaton of
funds to provde benefts for dsabed unempoyed sha be as provded n sub-
dvson 1 of secton 21 .
3. The contrbuton of each such empoyee to the cost of dsabty benefts
provded by ths artce sha be one-haf of 1 per centum of the empoyee s wages
pad to hm on and after uy frst, nneteen hundred ffty, but not n e cess of
30 cents per week.
. Notwthstandng any other provson of aw, the empoyer Is authorzed to
coect from hs empoyees the contrbuton provded under subdvsons 2 and
3. through payro deductons. If the empoyer sha not make deducton for any
payro perod he may thereafter, nt not ater than 1 month after payment of
wages, coect such contrbuton through payro deducton.
. In coectng empoyee contrbutons through payro deductons, the em-
poyer sha act as the agent of hs empoyees and sha use the contrbutons
ony to provde dsabty benefts as requred by ths artce.
Sec. 210. mpoyer Contrbutons. 1. very covered empoyer sha, on
and after anuary frst, nneteen hundred ffty, contrbute the cost of provdng
dsabty benefts n e cess of the contrbutons coected from hs empoyees, to
the e tent and n the manner provded n ths artce.
2. The speca contrbuton of each covered empoyer to the accumuaton of
funds to provde benefts for dsabed unempoyed sha be as provded n sub-
dvson 1 of secton 21 .
3. The contrbuton of every covered empoyer to the cost of provdng ds-
abty benefts after une thrteth, nneteen hundred ffty, sha be the e cess of
such cost over the amount of the contrbutons of hs empoyees.
. No proft sha be derved by any empoyer or assocaton of empoyers or of
empoyees from provdng payment of dsabty benefts under ths artce.
funds representng contrbutons of empoyers and empoyees, and ncrements
thereon, hed by empoyers or assocatons of empoyers or of empoyees author-
zed or permtted to pay benefts under the provsons of ths artce, and by
trustees payng benefts under pans or agreements meetng the requrements
of secton 211, sha be trust funds and sha be e pended ony to provde for the
payment of benefts to empoyees and for the costs of admnsterng ths artce
and for the support of the fund estabshed under secton 21 .

Sec. 21 . Speca Fund for Dsabty enefts. There Is hereby created a
fund whch sha be known as the speca fund for dsabty benefts to provde
for the payment of dsabty benefts under sectons 207 and 213 of ths artce.
1. For the purpose of accumuatng funds for payment of benefts to the ds-
abed unempoyed, there s hereby assessed a contrbuton at the rate of two-tenths
of 1 per centum of the wages pad durng the perod from anuary frst, nneteen
hundred ffty to une thrteth, nneteen hundred ffty ncusve, to empoyees n
the empoyment of covered empoyers on or after anuary frst, nneteen hundred
ffty, but not n e cess of 12 cents per week as to each such empoyee, of whch
the empoyee sha contrbute one-tenth of 1 per centum of hs wages but not n
e cess of C cents per week, and the empoyer sha make an equa contrbuton.
The contrbutons of the empoyee sha be deducted from hs wages n the same
manner as provded n secton 209.
It s hed that contrbutons made by empoyers to a fund to pro-
vde for the payment of benefts to empoyees who are unabe to work
because of n|ury or sckness not arsng out of and n the course of
empoyment, whch contrbutons are made pursuant to artce 9
(known as the dsabty benefts aw) of the New York workmen s
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.23(a)- .
32
compensaton aw, consttute ordnary and necessary busness e penses
whch are deductbe under secton 23(a) (1) ( ) of the Interna
Revenue Code.
It s hed further that contrbutons requred of empoyees under
artce 9 of the New York workmen s compensaton aw whch are
assumed and pad by empoyers are ncudbe n the gross ncome of
the empoyees and are sub|ect to wthhodng of ncome ta at the
source on wages under secton 1622 of the Code. Such amounts con-
sttute ordnary and necessary busness e penses to the empoyers
under secton 23(a) (1) ( ) of the Code.
Secton 29.23(a)-1: usness e penses. 19 0-11-13362
I. T. 011
INT RN L R NU COD
Contrbutons made by empoyers under prvate pans estab-
shed pursuant to chapter 21, tte 3 of the Revsed Statutes of
New ersey, as amended and suppemented, to provde for pay-
ment of nonoccupatona dsabty benefts to empoyees are de-
ductbe as ordnary and necessary busness e penses under
secton 23(a) (1) ( ) of the Interna Revenue Code.
dvce s requested as to the deductbty, for Federa ncome ta
purposes, of contrbutons made by empoyers under prvate pans
estabshed pursuant to chapter 21, tte 3 of the Revsed Statutes of
New ersey, as amended and suppemented, to provde for payment
of nonoccupatona dsabty benefts to empoyees.
Pror to une 1 19 , chapter 21, tte 3 of the Revsed Statutes of
New ersey provded for the payment of unempoyment compensa-
ton benefts to those unempoyed persons who were abe to work and
avaabe for work. ffectve une 1, 19 , the aw was amended to
provde aso for compensaton to empoyees n case of dsabty due
to nonoccupatona sckness or accdent as the resut of whch they are
unavaabe or unabe to work. mpoyees may be covered by the
State pan or by prvate pans. The pertnent provsons of the New
ersey Revsed Statutes read as foows:
3: 21-32. stabshment of Prvate Pans.
ny covered empoyer may estabsh a prvate pan for the payment of ds-
abty benefts n eu of the benefts of the State pan herenafter estabshed.
enefts under such a prvate pan may be provded by a contract of nsurance
ssued by an Insurer duy authorzed and admtted to do busness n ths State,
or by an agreement between the empoyer and a unon or assocaton represent-
ng hs empoyees, or by a specfc undertakng by the empoyer as a sef-nsurer.
Sub|ect to the nsurance aws of ths State, such a contract of Insurance may be
between the nsurer and the empoyer; or may be between the nsurer and two
or more empoyers, actng for the purpose through a nomnee, desgnee or trus-
tee ; or may be between the Insurer and the unon or assocaton wth whch
the empoyer has an agreement wth respect thereto. ach such prvate pan
sha be submtted n deta to the commsson unempoyment compensaton com-
msson and sha be approved by the commsson
Secton 23(a)(1)( ) of the Interna Revenue Code provdes n part
that n computng net ncome there sha be aowed as deductons
a the ordnary and necessary e penses pad or ncurred durng the
ta abe year n carryng on any trade or busness.
It s hed that contrbutons made by empoyers under prvate pans
estabshed pursuant to chapter 21, tte 3 of the Revsed Statutes
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
33
29.23(n)-2.
of New ersey, as amended and suppemented, to provde for pay-
ment of nonoccupatona dsabty benefts to empoyees are de-
ductbe as ordnary and necessary busness e penses under
secton 23(a) (1) ( ) of the Interna Revenue Code.
Secton 20.23(a)-: usness e penses.
INT RN L R NU COD
Dstrct of Coumba gross saes ta pad by purchasers wth respect
to property purchased for use n trade or busness. (See I. T. 00 ,
page 3 .)
Secton 29.23(a)-: usness e penses.
INT RN L R NU COD
mounts deducted from empoyees wages under artce 9 of the
New York workmen s compensaton aw for payment of dsabty
benefts. (See I. T. 00 , page 7.)
Secton 29.23(a)-2: Traveng e penses. 19 0-12-13366
I. T. 012
INT RN L R NU COD
ppcaton of the decson u Commssoner v. dwn R. Motch, r.,
etu . (1 0 Fed. (2d) 9).
dvce s requested wth respect to the appcaton of the decson
n Commssoner v. dwn R. Motch, r., etu . (1 0 Fed. (2d) 9) n-
sofar as t hods that traveng e penses n e cess of per dem aow-
ances, ncurred by mtary and cvan offcers and empoyees of the
Unted States n the performance of ther offca dutes, arc not deduct-
be under secton 23(a) (1) ( ) of the Interna Revenue Code.
In Commssoner v. dwn R. Motch, r., et u ., supra, the court
hed, n effect, that the performance of servces for the Unted States
by mtary and cvan offcers and empoyees of the Unted States
does not consttute the carryng cn of a trade or busness wthn the
scope of secton 23(a)(1)( ) of the Interna Revenue Code, wth
the resut that such personne may not under that decson deduct
traveng e penses n e cess of per dem aowances.
The appeate court apparenty msunderstood the Government s
poston as to the bass on whch reversa was sought of the decson
n dtcn R. Motch, r., et u . v. Commssoner (11 T. C. 777, non-
acquescence, C. . 19 9-1, 6). It apparenty overooked secton
(d) of the Code whch provdes that the term trade or bus-
ness ncudes the performance of the functons of a pubc offce. In
Senate Report No. , Seventy-thrd Congress, second sesson, page
29 (C. . 1939-1 (Part 2), 6 at 60 ), submtted to accompany the
Revenue of 193 , the Commttee on Fnance stated that secton
(d) was decaratory of e stng aw. It appears that mtary and
cvan offcers and empoyees of the Government have generay
been regarded as engaged n a trade or busness wthn the meanng
of secton 23(a) (1) ( ) of the Code. (See Mchae F. McDonad v.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.23(a)-1 .
3
Commssoner, 323 U. S. 7, Ct. D. 1617, C. . 19 , 9 ; en|amn Mg-
gns v. Commssoner, Ta Court memorandum opnon, decson en-
tered anuary 31, 19 9; and the thrd sentence n secton 29.2 1-1(2)
of Reguatons 111.) Furthermore, such offcers and empoyees have
been aowed to deduct the ordnary and necessary e penses ncurred
n carryng out ther offca dutes whether or not they receved re-
mbursement therefor. (See O. D. 310, C. . 1, 10 (1919); I. T.
1706, C. . II-2, 9 (1923); I. T. 3 7 , C. . 19 1-1, 207; D. C. ack-
ng v. Commssoner, 9 . T. . 312, acquescence, C. . II-1, 16
(192 ); Water F. rown v. Commssoner, 13 . T. . 32, acqu-
escence, C. . III-1, 6 (19291; and ohn . Ide v. Commssoner,
3 . T. . 799, acquescence, C. . 19 1-1, 6.)
In vew of the foregong, the ureau w not foow the decson
n Commssoner v. dwn R. Motc, r., ct u ., supra, as a precedent
nsofar as t hods that traveng e penses n e cess of per dem aow-
ances, ncurred by mtary and cvan offcers and empoyees of the
Unted States n the performance of ther offca dutes, are not deduct-
be under secton 23(a) (1) ( ) of the Interna Revenue Code,

Secton 29.23(a)-1 : Nontrade or nonbus- 19 0-1-1326


ness e penses. I. T. 39 9
INT RN L R NU COD
mounts equa to dvdends, pad by an nvestor wth respect to
stock borrowed to cover short saes, and premums pad n connecton
wth the acquston of such stock, nre aowabe deductons under
secton 23(a) (2) of the Interna Revenue Code.
dvce s requested reatve to the deductbty, under secton
23(a) (2) of the Interna Revenue Code, of amounts equa to dvdends
pad by a ta payer wth respect to stock borrowed to cover short saes
and premums pad n connecton wth the acquston of such stock.
In the nstant case, the ta payer was an nvestor and not a trader n
securtes.
Secton 23(a) of the Interna Revenue Code provdes n part that
n computng net ncome there sha be aowed as deductons:
(2) Non-trade or non-busness e penses. In the case of an ndvd-
ua, a the ordnary and necessary e penses pad or ncurred durng the
ta abe year for the producton or coecton of ncome, or for the manage-
ment, conservaton, or mantenance of property hed for the producton of
ncome.
In Norbert II. WesUr v. Commssoner (6 T. C. 11 , affrmed, 161
Fed. (2d) 997, certorar dened, 332 U. S. 2), t was hed that the
ta payer, who was engaged n the busness of tradng n securtes,
was entted to deduct as busness e penses amounts equvaent to
dvdends pad on account of stock borrowed to cover short saes. The
ureau has acquesced (C. . 19 -1,3) n that decson. To the same
effect s the decson n F. . Wson v. Commssoner (Ta Court
memorandum opnon, decson entered uy 2 , 19 6, affrmed, 163
Fed. (2d) 6 0, certorar dened, 332 U. S. 2).
It s beeved that the deductbty of amounts pad n connecton
wth stock borrowed to cover short saes shoud be determned by the
same standards whether a ta payer s a trader n securtes or s
merey an nvestor. If amounts so pad by a trader n securtes are
deductbe as trade or busness e penses, amounts pad by an nvestor
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
3
29.23(c)- .
for the same purpose shoud be deductbe as nontrade or nonbusness
e penses.
In vew of the foregong, t s hed that amounts equa to dvdends
pad by an nvestor wth respect to stock borrowed to cover short saes
are aowabe deductons under secton 23(a) (2) of the Interna Reve-
nue Code. Premums pad by an nvestor n connecton wth the ac-
quston of such stock are aso deductbe under that secton of the
S CTION 23(c). D DUCTIONS FROM GROSS
INCOM : T S G N R LLY
Secto 29.23(c)-: Ta es. 19 0- -13332
( so Secton 22(a), Secton 29.22(a)- ; Secton I. T. 00
22(n). Secton 29.22(n)-; Secton 23(a), Sec-
ton 29.23 (a )-; Secton 2 , Secton 29.2 -2.)
INT RN L R NU COD
Deductbty for Federa Income ta purposes of the gross saes
ta and the conpensatng-use ta mposed under Ttes I and II,
respectvey, of the Dstrct of Coumba Revenue ct of 19 9 (G3
Stat. 112).
dvce s requested as to the treatment for Federa ncome ta pur-
poses of the gross saes ta and the compensatng-use ta mposed
under Ttes I and II, respectvey, of the Dstrct of Coumba
Revenue ct of 19 9 (63 Stat. 112).
The pertnent provsons of Ttes I and II of the Dstrct of
Coumba Revenue ct of 19 9 read n part as foows:
Sec. 12 . egnnng on and after the frst day of the frst month succeedng
the s teth day after the approva of ths ct, for the prvege of seng certan
tangbe persona property at reta sae and for the prvege of seng certan
seected servces defned as saes at reta n ths tte Tte I of the ct , a
ta s hereby mposed upon a vendors at the rate of 2 per centum of the gross
recepts of any vendor from the sae of such tangbe persona property and
servces.
Sec. 12G. Rembursement for the ta Imposed upon the vendor sha be co-
ected by the vendor from the purchaser on a saes the gross recepts from
whch are sub|ect to the ta Imposed by ths tte so far as t can be done. It
sha be the duty of each purchaser n the Dstrct to remburse the vendor
for the ta mposed by ths tte. Such rembursement of ta sha .
be a debt from the purchaser to the vendor and sha be recoverabe at aw n
the same manner as other debts.

Sec. 129. Upon each sae of tangbe persona property or servces, the gross
recepts from whch are ta abe under ths tte, the rembursement of ta to
be coected by the vendor from the purchaser under the provsons of ths tte
sha be stated and charged separatey from the saes prce and shown separatey
on any record thereof at the tme the sae s made or evdence of sae ssued
or empoyed by the vendor.

Sec 212. egnnng on and after the frst day of the frst month succeedng
the s teth day after the approva of ths ct, there s hereby mposed and
there sha be pad by every vendor engagng n busness n the Dstrct and by
every purchaser a ta on the use, storage, or consumpton of any tangbe per-
sona property and servces sod or purchased at reta sae. The ta hereby
mposed sha be at the rate of 2 per centum of the saes prce of the tangbe
persona property or servces rendered or sod.
Sec. 213. very vendor engagng n busness n the Dstrct and makng saes
at reta sha, for the prvege of makng such saes, pay to the coector the
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.23(c)- .
36
ta mposed by ths tte Tte II of the ct . t the tme of makng such saes
the vendor sha coect the ta from the purchaser and gve to the purchaser a
recept therefor n such form as prescrbed by the assessor. For the purpose
of unformty of ta coecton by the vendor engagng n busness In the Dstrct
and for other purposes the provsons of sectons 126,127, 129, and 130 of Tte I
of ths ct are hereby ncorporated n and made appcabe to ths tte.
Sec. 21 . very vendor or retaer not engagng n busness n the Dstrct
who makes saes at reta as defned n ths tte, and who upon appcaton to
the coector has been e pressy authorzed to pay the ta Imposed by ths tte,
sha, at the tme of makng such saes, coect the rembursement of the ta
from the purchaser and gve to the purchaser a recept therefor n such form as
prescrbed by the assessor. For the purpose of unformty of ta coecton by
the vendor or retaer who has been e pressy authorzed to pay the ta under
the provsons of ths secton and for other purposes, the provsons of sectons
120, 127, 129, and 130 of Tte I of ths ct are hereby ncorporated n and made
appcabe to ths tte. permt sha be ssued to such vendor or retaer,
wthout charge, to pay the ta and coect rembursement thereof as provded
heren. Such permt may be revoked at any tme by the coector who sha
thereupon gve notce thereof to the vendor or retaer.
Sec. 21 . If a purchaser has not rembursed for the ta such vendors or
retaers as are requred or authorzed to pay the ta , as the case may be, such
purchaser sha fe a return as herenafter provded and pay to the coector 2
per centum of the tota saes prces of property and servces purchased at reta
sae.
Secton 23(c)(1) of the Interna Revenue Code provdes that n
computng net ncome there sha be aowed as deductons ta es pad
or accrued wthn the ta abe year, wth certan e ceptons not here
matera. In genera, ta es are deductbe by the person upon whom
they are mposed. (See secton 29.23(c)- of Reguatons 111.)
owever, secton 23(c)(3) of the Code provdes for the deducton
by purchasers of amounts representng saes ta es pad by the pur-
chasers otherwse than n connecton wth trade or busness. The
term saes ta , as used n secton 29.23(c)-( ) of Reguatons 111
means a ta mposed by any State, Terrtory, Dstrct, or possesson
of the Unted States, or any potca subdvson thereof upon persons
engaged n seng tangbe persona property at reta, whch s
measured by the gross saes prce or the gross recepts from the sae,
or whch s a stated sum per unt of such property sod. The term
aso ncudes a ta mposed by such authortes upon persons engaged
n furnshng servces at reta, whch s measured by the gross re-
cepts for furnshng such servces.
The gross saes ta mposed by secton 12 of the Dstrct of Co-
umba Revenue ct of 19 9 s specfcay mposed upon a vendors
of tangbe persona property and certan stated servces. The com-
pensatng-use ta mposed by secton 212 of the Dstrct of Coumba
Revenue ct of 19 9 s mposed upon purchasers at reta.
ccordngy, t s hed that the gross saes ta mposed by secton
12 of the Dstrct of Coumba Revenue ct of 19 9 s deductbe
by the vendor under secton 23(c) (1) of the Interna Revenue Code.
If the vendor s an ndvdua, the deducton must be taken n arrv-
ng at ad|usted gross ncome. (See secton 22(n) (1) of the Code.)
In the case of a other vendors, the deducton s aowabe n deter-
mnng net ncome. The gross saes ta coected by a vendor from
a purchaser must be ncuded n the vendor s gross ncome for Fed-
era ncome ta purposes. To the e tent that such ta s pad by the
purchaser, otherwse than n connecton wth hs trade or busness,
t s deductbe by the purchaser under secton 23(c) (3) of the Code,
e cept n the case of an ndvdua who eects to take the optona
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
37
20.23(f)- .
standard deducton. Where the gross saes ta s pad wth respect
to property purchased for use n the purchaser s trade or busness, t
s deductbe by hm as a busness e pense f the cost of the property
acqured s propery chargeabe to e pense, or t shoud be treated
as a capta tem -where the cost of the property s propery capta-
zed. Where the purchaser s an ndvdua and the saes ta s
deductbe as a busness e pense, the deducton must be taken n
arrvng at hs ad|usted gross ncome. (See secton 22(n) (1) of the
Code.) In the case of purchasers (other than ndvduas) engaged
n trade or busness, the deducton s aowabe as a busness e pense
n determnng net ncome.
It s aso hed that the compensatng-use ta mposed by secton
212 of the Dstrct, of Coumba Revenue ct of 19 9 s deductbe
by the purchaser under secton 23(c) (1) of the Interna Revenue Code,
e cept that n the case of an ndvdua who eects the optona stand-
ard deducton, no deducton s aowabe under secton 23(c)(1) of
the Code f the use ta s not attrbutabe to a trade or busness carred
on by hm. Where the compensatng-use ta s attrbutabe to a trade
or busness carred on by an ndvdua, the amount of such ta s
deductbe as a ta from gross ncome n computng ad|usted gross
ncome. In the case of ta payers (other than ndvduas) engaged
n trade or busness, the compensatng-use ta s deductbe as a ta
from gross ncome n determnng net ncome. The amount of com-
pensatng-use ta coected by a vendor from a purchaser shoud not
be ncuded n the vendor s gross ncome, and no deducton s aow-
abe to the vendor wth respect to the amount of such ta remtted
by hm to the Dstrct of Coumba.
Secton 29.23 (c)-: Ta es.
INT RN L R NU COD
mounts deducted from empoyees wages under artce 9 of the
New York workmen s compensaton aw for pa| ment of dsabty
benefts. (See I. T. 00 , page 7.)
S CTION 23(e). D DUCTIONS FROM GROSS INCOM :
LOSS S Y INDI IDU LS
Secton 29.23 (e) -1: Losses by ndvduas.
INT RN L R NU COD
Geoogca and geophysca e poraton costs. (See I. T. 006,
page .)
S CTION 23(f). D DUCTIONS FROM GROSS INCOM :
LOSS S Y CORPOR TIONS
Secton 29.23(f)-: Losses by corporatons.
INT RN L R NU COD
Geoogca and geophysca e poraton costs. (See I. T. 00G,
page .)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.23()-2.
3
S CTION 23(1). D DUCTIONS FROM GROSS
INCOM : D PR CI TION
Secton 29.23 (1) -2: Deprecabe property. 19 0-12-13367
( so Secton 113(a), Secton 29.113(a) ( )-; Ct. D. 1731
Secton 71 , Secton 3 .71 -1, Reguatons
112.)
C SS PROFITS T INT RN L R NU COD D CISION OF SUPR M
COURT
1. quty Invested Capta Contrbutons to Capta Cash
and Property Contrbuted by Communty Groups to Pet-
toner Deductons Deprecaton ass.
Certan communty groups pad cash and transferred other prop-
erty to pettoner company as an nducement to the ocaton or e -
panson of ts factory operatons n the communtes. Pettoner
camed and the Commssoner dsaowed a deducton from gross
ncome for deprecaton on the property contrbuted and on the fu
cost of property acqured n part wth contrbuted cash or equvaent
funds, and dsaowed the ncuson of the tota vaue of the con-
trbutons n pettoner s equty nvested capta. ed: The assets
transferred to pettouer by the communty groups represented
contrbutons to capta wthn the meanng of secton 113(a)
( ) ( ) of the Interna Revenue Code and requred no reducton
n the deprecaton bass of the propertes acqured. They were
kewse contrbutons to capta for the purpose of computng
nvested capta credt. To the e tent that pettoner acqured the
property nvoved after December 31,1920, t s entted to deductons
on account of deprecaton under secton 113(a)( )( ). It may
aso ncude the vaue of contrbutons from the communty groups
n equty Invested capta under secton 71 (a) (1) and (2) of
the Code.
2. Case Dstngushed.
Detrot dson Co. v. Commssoner, 319 D. S. 9 (19 3) Ct. D.
1 2, C. . 19 3,1019 , dstngushed.
3. Decson Reversed.
Decson of Unted States Court of ppeas, ghth Crcut (17
Fed. (2d) 30 (19 9)), affrmng n part decson of Unted States
Ta Court (10 T. C. 291 (19 )), reversed.
Supreme Court of the Unted States
rown Shoe Co., Inc., pettoner, v. Commssoner of Interna Revenue
On wrt of certorar to te Unted States Court of ppeas for the ghth Crcut
May 1 , 19 0
opnon
Mr. ustce Cark devered the opnon of the Court
Ths proceedng seeks redetermnaton of pettoner s e cess profts ta , com-
puted by the nvested capta method, for the fsca years ended 19 2 and 19 3.1
The ssues arse from the payment of cash and the transfer of other property to
pettoner by certan communty groups as an nducement to the ocaton or
e panson of pettoner s factory operatons n the communtes. Pettoner
camed, and the Commssoner dsaowed, (1) a deducton from gross ncome for
1 The ta n controversy s Imposed under the e cess profts ta provsons of the
Second Revenue ct of 19 0, Stat. 97 , 973, as amended; I. R. C secton 710 et seq.
The ta 1b eved upon e cess profts net Income remanng after aowance of a ,000
specfc e empton and an e cess profts credt representng a norma proft. The ct
permtted computaton of the credt on the bas ether of average ncome over a base
perod or of nvested capta, whch Incudes equty nvested capta and 60 percent
of borrowed capta. The e cess profts ta provsons of the ct were repeaed n 19 .
9 Stat. 6, G .
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
39
29.23(0-2.
deprecaton on the property contrbuted and on the fu cost of property acqured
n part wth contrbuted cash or equvaent funds, and (2) ncuson of the tota
vaue of the contrbutons n pettoner s equty nvested capta. The Ta Court
reversed the Commssoner s rung n part. 10 T. C. 291 (19 ). The Court of
ppeas for the ghth Crcut hed wth the Commssoner on a Issues. 17 Fed.
(2d) 30 (19 9). We granted certorar, 33 U. S. 909 (19 0), n vew of an as-
serted confct between the decson beow and that of the Court of ppeas for the
Thrd Crcut n Commssoner v. Mc ay Products Corp., 17 Fed. (2d) 639 (19 9),
reversng the Ta Court, 9 T. C. 10 2 (19 7).
Two questons must be determned: Frst, whether pettoner n computng
ts norma-ta net ncome, whch s ad|usted n determnng e cess profts net
ncome, s entted to deductons for deprecaton wth respect to property trans-
ferred to t from communty groups or acqured wth cash to the e tent receved
from such groups. Pettoner contends that the propertes so acqured were
deprecabe as gfts under secton 113(a)(2) of the Interna Revenue Code
or as contrbutons to capta under secton 113(a) ( ) ( ) or both; as to the
propertes acqured wth cash t contends aternatvey that they had cost to
the ta payer under secton 113(a). Second, we must decde whether n com-
putng pettoner s nvested capta credt the aggregate vaue of the assets
transferred by the communty groups may be ncuded n equty nvested capta
under secton 71 (a) of the Code ether as a contrbuton to capta or as
accumuated earnngs and profts.
Pettoner s a New ork corporaton whch at a tmes matera conducted
manufacturng operatons n a number of pants ocated n Inos, Indana,
Mssour and Tennessee. From 191 to 1939 pettoner receved n 17 trans-
actons an aggregate of , 9. n cash and , 71. 6 n budngs from
varous communty groups n 12 towns. cept n one nstance, each trans-
fer was pursuant to a wrtten contract between pettoner and the respectve
communty group. The contracts were of three types: The frst requred pet-
toner to ocate, construct and equp, or to enarge a factory n the communty,
to operate the factory contnuousy so ong as t s practcabe n the conduct
of ts busness for at east a perod of 10 years, and to meet a mnmum payro,
n consderaton of whch the communty group agreed to transfer and and cash
to be used for the payment of sutabe factory budng or budngs ; n one
nstance e stng budngs were aso transferred and n another nstance ony
budngs and no cash sum. Under ths type of contract pettoner was ob-
gated n te event of noncompance to transfer the budng back to the communty
group or to repay the sum. Under a second type of agreement pettoner n
consderaton of a cash payment undertook to enarge an e stng factory and
to operate t for a perod of 10 years wth a stpuated mnmum addton to
personne. thrd type of contract caed ony for the constructon of an
addton to pettoner s e stng factory n consderaton of a cash sum. Con-
tracts of the atter type were n the nature of suppementary agreements wth
communty groups and may have nvoved an obgaton on the part of pettoner
to contnue operaton of the addtona pant factes for the une pred reman-
der of a perod not e ceedng 10 years agreed upon n an earer contract. No
restrcton was mposed n any nstance as to the use whch pettoner mght make
of the property contrbuted or acqured wth cash, or of the proceeds f the
Secton 23(1) of the Code permts a deducton from cross Income for deprecaton of
property, and secton 23(n) provdes nt the bass for deprecaton sha he as pro-
Tded n secton 11 . whch adopts the ad|usted bass provded n secton 113(b) for
determnng (ran. Ths subsecton n turn refers to secton 113(a) whch provdes that
the bass (unad|usted) sha be the cost of the property, wth certan e ceptons
Incudng the foowng: Secton 113(a)(2) provdes In reevant part that If the prop-
erty was acqured by gft after December 31, 1920. the bass sha be the same as t woud
be In the hands of the donor or the ast precedng owner by whom t was not acqured
by gft : secton 113(a)( ) provdes that If the property was acqured after
December 31, 1020, by a corporaton ( ) as pad-n surpus or as a con-
trbuton to capta, then the bass sha be the same as t woud be n the hands of the
transferor
Secton 71 (a) provdes reevanty:
The equty nvested capta for any day of any ta abe year sha
be the snm of the foowng amounts, reduced as provded n subsecton (b)
(1 Money prevousy pad n for stock, or as pad-n surpus, or as a
contrbuton to capta;
(2) Property (other than money) prevousy pad n (regardess of the
tme pad In) for stock, or as pad-n surpus, or as a contrbuton to capta :
( ) The accumuated earnngs and profts as of the begnnng of such
ta abe year
The vaue of the and upon whch the budngs were ocated was not ncuded n
pettoner s books and Is unmportant for ths proceedng.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.23(0-2.
0
property shoud be dsposed of, after e praton of the requred perod of opera-
ton. The Ta Court assumed performance by pettoner accordng to the terms
of the agreements, and the court of appeas dd not dffer. In the case of 11
contracts the stpuated perod for performance had e pred pror to the ta -
abe years n queston.
The snge transacton whch was not based upon such contractua obgatons
Invoved a 10,000 cash bonus pad In 191 , accordng to the mnutes of pettoner s
board of drectors, as a part of organzaton e penses In startng
the factory n the partcuar town.
The cash sums receved by pettoner from the groups were not earmarked for,
or hed ntact and apped aganst, the pant acqustons n the respectve com-
muntes but were deposted n pettoner s genera bank account from whch
were pad genera operatng e penses and the cost of a assets acqured, ncudng
factory budngs and equpment In the towns nvoved. The cash payments were
debted to cash account on the assets sde of pettoner s edger and were credted
to earned surpus ether upon recept or after havng frst been assgned to con-
trbuted surpus. The vaues of the budngs acqured were set up n a budng
account on the assets sde and were credted to surpus. In every Instance the
cash receved by pettoner from a communty group was ess than the amount
e pended by It for the acquston or constructon of the oca factory budng
and equpment.
In computng ts norma ta net ncome for the ta abe years n controversy
pettoner deducted deprecaton on the budngs transferred by the communty
groups and on the fu cost of the budngs and equpment acqured or enarged
In the communtes from whch It had receved cash. Pettoner aso ncuded
the tota of 971,031:01 n cash and other property n ts equty nvested capta.
The Commssoner dsaowed deprecaton deductons wth respect to the bud-
ngs transferred (n the vaue of , 71. 0) and the propertes acqured wth
cash to the e tent pad to pettoner by the groups (n the vaue of , 9. ).
In computng the amount of deprecaton to be aowed, the Commssoner de-
ducted that porton of the cost of the budngs, and and machnery whch was
pad wth such contrbuted cash or equvaent funds. The Commssoner n
makng such reductons aocated the cash contrbuton to each Item, such as
budngs, and f any had been purchased, and machnery n the proporton of
the tota cost of such tem to the tota cost of the pro|ect. The Commssoner aso
dsaowed ncuson In equty nvested capta of the tota assets transferred,
reducng such capta as computed by pettoner by 071,031.01.
The Ta Court reversed the Commssoner s dsaowance of deprecaton wth
respect to that porton of the acqustons pad for wth cash. It concuded
that these tems had cost and therefore bass to pettoner snce they had
been pad for from pettoner s own unrestrcted funds n whch the cash con-
trbutons had been deposted wthout earmarkng; as to the budngs transferred,
the court sustaned the Commssoner on the ground that these transfers were
not gfts and therefore the transferor s bnss was not avaabe to pettoner. It
hed that the pettoner was In error In recordng the contrbutons n equty n-
vested capta as contrbutons to capta because ony stockhoders coud make
such contrbutons. The court of appeas, reversng the Ta Court as to the
aowance of deprecaton deductons wth respect to property acqured wth
cash, hed that to the e tent of the contrbutons there was no cost to pettoner.
We thnk the assets transferred to pettoner by the communty groups repre-
sented contrbutons to capta wthn the meanng of secton 113(a)( )( )
oth courts beow and the Commssoner have e pressy assumed, as pettoner asserts,
that the recepts of property and cash were not ta ed as ncome.
0 The Commssoner does not deny that such deductons were dsaowed for the frst tme
In 19 3, foowng the decson n Detrot dson Co. . Commssoner, 319 D. S. 9 (19 3)
Ct. D. 1 2. C. . 19 3, 1019 .
The amount thus dsaowed on account of deprecaton was 22, 72.60 for the fsca
year ended 19 2 and 2 ,307.10 for the fsca year ended 19 3. There was no determnaton
by the Commssoner of a defcency n pettoner s norma ta for ether year.
The Ta Court reed at ths pont upon Mc ay Products Corp., 9 T. C. 10 2 (19 7),
whch foowed Frank oton d Co., 10 . T. . 1317 (192 ) and . C. F. Gasone Co.,
6 . T. . 1337 (1927), decded under earer e cess profts ta aws, and Lberty Mrror
Works, 3 T. C. 101 (19 ), Invovng secton 71 . The opnons In Frank oton S Co.
and Lberty Mrror Works regarded LaRee Iron Works v. Unted States, 2 U. S. 377
(1921) T. D. 31 1, Ct. D. 12, C. . , 373 (1921) . as controng.
For ths resut the court of appeas cted Detrot dson Co. v. Commssoner, 319
D. S. 9 (19 3) Ct. D. 1 2. C. . 19 3. 1019 ; Commssoner v. runde- rooks Con-
crete Corp., 1 2 Fed. (2d) 22 (C. . th Cr. 19 ) ; and Its own pror decson n
C. L. Downey Co. v. Commssoner, 172 Fed. (2d) 10 (C. . th Cr. 19 9). In affrmng
on the Invested capta ssue the court of appeas reed In part on La ee Iron Works
v. Lnted States, note supa, and on the Detrot dson case.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
1
IS 29.23 ()-2.
and requred no reducton n the deprecaton bass of the propertes acqured.
The vaues whch the ta payer receved were addtons to capta as that term
has commony been understood n both busness and accountng practce;u con-
formaby wth ths usage the pevtnent Treasury Reguatons have consstenty
recognzed that contrbutons to capta may orgnate wth persons havng no
propretary nterest n the busness.11 That ths nterpretaton Is n harmony
wth broad congressona pocy as to deprecaton deductons was emphaszed by
the Thrd Crcut when consderng the smar stuaton presented In Commt-
toner v. Mc ay Product Corp., supra, 17 Fed. (2d) at 6 3:
the assets receved are beng used by the ta payer n the
operaton of ts busness. They w In tme wear out, and f the ta payer
Is to contnue n busness, the physca pant must eventuay be repaced. Look-
ng as they do toward busness contnuty, the Interna Revenue Code s depreca-
ton provsons and especay those whch provde for a substtuted rather than
a cost bass woud seem to envson aowance of a deprecaton deducton n
stuatons ke ths
The Commssoner contends, however, that ths concuson was forecosed by
Detrot dson Co. v. Commssoner, 319 U. S. 9 (19 3) Ct. D. 1 2, C. . 19 3,
1019 . That decson dened ncuson In the base for deprecaton of eectrc
power nes the amount of payments receved by the eectrc company for con-
structon of the ne e tensons to the premses of appcants for servce. It
was hed that to the e tent of such payments the eectrc nes dd not have
cost to the ta payer, and that such payments were nether gfts nor contrbutons
to the ta payer s capta. We do not consder that case controng on the ssue
whether contrbutons to capta are nvoved here. ecause In the Detrot
dson case The payments were to the customer the prce of the servce, the
Court concuded that t overta es magnaton to regard the farmers and other
customers who furnshed these funds as makers ether of donatons or contrbu-
tons to the company. Snce In ths case there are nether customers nor pay-
ments for servce, we may nfer a dfferent purpose In the transactons between
pettoner and the communty groups. The contrbutons to pettoner were
provded by ctzens of the respectve communtes who nether songht nor coud
have antcpated any drect servce or recompense whatever, ther ony e pecta-
ton beng that such contrbutons mght prove advantageous to the communty
at arge. Under these crcumstances the transfers manfested a defnte purpose
to enarge the workng capta of the company.1
MSee O Meara, Contrbutons to Capta by Non-sharehoders, Ta L. Rev. 6 ,
72 (19 ).
No suggeston Is made by the Commssoner that becaose the transfers were the sub|ect
of contract they were not contrbutons wthn the statute.
u See, e. g.. Current Probems In ccountng Proceedngs of the ccountng Insttute
20 (19 1) (Revsed Statement by mercan ccountng ssocaton of ccountng Prn-
cpes underyng Corporate Fnanca Statements) : Guthmann and Douga, Corporate
Fnanca Pocy 2 (19 0): arvey. Some Indca of Capta Transfers under the
Federa Income Ta Laws, 37 Mch. L. Rev. 7 , 7 7 n. 6 (1939) : Marpe, Capta Surpus
and Corporate Net Worth 12, 136-137 (1936). Cf. Mag, Ta abe Income 3 9 (2d ed.
19 ) ; 1 Mertens. Law of Federa Income Ta aton secton .1 (19 2) ; Te as cf Pao.
R. Co. v. Unted States, 2 6 U. S. 2 , 2 9 (1932) Ct. D. 9 . C. . I-1, 203 (1932) ;
Lukes ros. . . Co., Inc., 2 . T. . 139 . 1 01 (19 0), afTd 126 Fed. (2d) 72 , 727
(C. . th Cr. 19 2) : everng v. Caborne- nnapos Ferry Co., 93 Fed. (2d) 7 ,
76 (C. . th Cr. 193 ) Ct. D. 1339, C. . 193 -1. 26 .
Treas. Reg. 6, art. 113(a )-: Treas. Reg. 9 , art. 113(a) ( )-: Treas. Reg.
101. art. 113(a) ( )-; Treas. Reg. 103, secton 19.113(a) ( )-; and Treas. Reg. I,
secton 29.113(a) ( )- have read In part: In respect of property acqured by a cor-
poraton after December 31, 1920. from a sharehoder as pad-n surpus, or rom any
person as a contrbuton to capta, the bass of the property In the hands of the corpora-
ton Is the bass whch the property woud have had In the hands of the transferor If the
transfer had not been made. The provson of secton 113(a)( )( ), Revenue
ct of 1932, In whch the term contrbuton to capta frst appeared n Federa revenue
egsaton, was reenacted wthout change In the ct of 193 and, foowng the above
Interpretaton n the reguatons, In the cts of 1936 and 193 and In the Interna
Revenue Code.
Commssoner . runde- rooks Concrete Corp., 1 2 Fed. (2d) 22 (C. . th Cr.,
19 ), reed upon by the court beow. Invoved ony the Issue whether the fu cost of a
concrete m ng pant, the constructon of whch was fnanced In part by payments from a
nearby supper of a raw matera used n m ng concrete, was deprecabe to the ta -
payer; there was no contrbuton to capta Issue, the ony queston beng one of cost
bass. owever, the payments In that case were made n consderaton of servce
rendered. The constructon of the concrete pant drecty benefted the supper of raw
materas by Insurng the use of Its soe product by the ta payer; the supper was aso
served through a busness affaton wth the parent of the whoy owned ta payer n
the form of an e cusve marketng arrangement whch saved the supper the e pense of a
saes organzaton. See runde-trooka Concrete Corp. v. Commssoner, 129 Fed. (2d)
762 (C. . th Cr. 19 2).
93 0 0 1
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.23(nO-.
2
The assets transferred by the communty groups are kewse contrbutons to
pettoner s capta for the purpose of computng Its Invested capta credt.1
Cf. I. R. C. secton 72 . Precsey the same Interpretaton has been paced by the
reevant Treasury Reguatons upon the term contrbuton to capta appear-
ng n secton 71 (a) as upon the ke e presson n the ncome ta provsons.
That the e cess profts ta provson characterzes capta contrbutons as beng
nvested and pad n does not ndcate, as the Commssoner urges, that the
concept of capta s the constrcted one of ega capta or capta orgnatng
wth persons havng a propretary nterest n the busness; we thnk nstead
that the ta payer s nvestment ncudes certan vaues whch are propery treated
as hs nvestment, cf. Iesnger v. Commssoner, 1 Fed. (2d) 7 , 77- 7
(C. . 2d Cr. 19 ), though not havng cost to the ta payer. Cf. I. R. C. secton
723. It woud have been an oddty for Congress to make the ncuson of actua
capta contrbutons n equty nvested capta turn upon whether the transferor
owned or faed to own one or two shares of stock n the corporaton at the tme
of the transfer.1
The decson of ths Court In La ee Iron Works v. Unted States, 2 6 U. S.
377 (1921) T. D. 31 1, Ct. D. 12, C. . , 373 (1921) , s not to the contrary.
That case was decded under the e cess profts ta aw of 1917 n whch nvested
capta was defned as (1) ctua cash pad In, (2) the nctua cash vaue
of tangbe property pad n other than cash, for stock or shares at
the tme of such payment and (3) pad n or earned surpus and un-
dvded profts used or empoyed n the busness The Court hed
that nether unearned apprecaton n vaue of the ta payer s ore ands nor the
surrender of od stock n e change for new ssues based upon that vaue, coud
be regarded as the actua cash vaue of tangbe property pad In other than
cash or as pad n or earned surpus and undvded profts. The ncudabty
of contrbutons by outsders n nvested capta was not passed upon.
To the e tent that pettoner acqured property nvoved In ths controversy
after December 31, 1920, t s entted to deductons on account of deprecaton
under secton 113(a) ( ) ( ). It aso may ncude the vaue of the contrbutons
from communty groups n equty nvested capta under secton 71 (a) (1) and
(2). The |udgment of the court of appeas s reversed and the case remanded
wth drectons to remand to the Ta Court for further proceedngs n conformty
wth ths opnon.
Reversed.
Mr. ustce ack agrees wth the court of appeas and woud affrm ts udg-
ment.
S CTION 23(m). D DUCTIONS FROM GROSS
INCOM : D PL TION
Secton 29.23 (m)-: Depeton of mnes, o and 19 0- -13297
pas wes| other natura deposts, and tmber; G. C. M. 26290
deprecaton of mprovements,
INT RN L R NU COD
Deductons for depeton under secton 23(m) of the Interna Rev-
enue Code n the case of strppng contractors n coa mnes.
n opnon s requested whether contractors who have undertaken
to remove overburden and mne coa pursuant to so-caed strppng
See rewster. The Federa cess Profts Ta , 110-111 (19 1).
Trens. Reg. 109, secton 30.71 -1; Treas. Re . 112, secton 3 .71 -1.
The Commssoner agrees that the term contrbuton to capta s used wth the same
meanng n sectons 113(a) (S) ( ) and 71 (a).
Sec 2 Montgomery s Federa Ta es Corporatons and Partnershps 19 6- 7, p. 72.
In Southern Pac. Co. v. dcards, 7 Fed. (2d) 91 (S. D. N. Y. 1932). the court hed
that a capta donaton orgnatng wth a non-stockhoder was Incudabe In Invested
capta as pad n surpus under the 1917 ct. owever, contrbutons to capta
account from outsders are often thought of as contrbuted or donated capta surpus
rntcr than as pad-n surpus, see e. g., oagand, Corporaton Fnance (3d ed.
19 7) ; we thnk nt for ths reason among others Congress added the term contrbuton
to capta to the e cess profts ta provsons of the 19 0 ct, as t had to the Revenue
cts (secton 113(a)( )) snce 1932, to ndcate that contrbutons from outsders n-
tended ns addtons to capta shoud be ncuded n the computaton. See S. Rept. Nq.
60 . 72d Cong., 1st sess. 27-2 (1032) ; . R. Rept No. 1 92, 72d Cong., 1st ess. 13
/ rtnn
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
3
29.23(m)-I.
contracts have acqured a depetabe economc nterest n the mnera
n pace.
Subsequent to deveopment of the steam shove and other heavy
e cavatng machnery, t was found that coa whch dd not e at too
great a depth coud be economcay mned by removng the overyng
earth or strata, usuay desgnated as overburden. The companes
whch frst mned coa by ths method operated n those parts of the
country, prncpay the Mdde West, n whch the surface of the
and s comparatvey eve and the coa es at a fary unform dstance
beneath the surface. These companes bought ther own strppng
machnery. In the mountanous coa feds of the ast there are few
arge areas whch can be mned by removng the overburden, and the
cwner or essee of the property docs not ordnary buy the necessary
strppng equpment. ccordngy, n the case of sma tracts of coa
and from whc the mnera cannot be economcay removed by
underground mnng, as we as n stuatons n whch a frnge of coa
near the surface cannot be satsfactory e tracted by underground
methods, the contractor who owns strppng equpment has soved a
probem of the ndustry.
The deducton for depeton s a statutory prvege provded for
by sectons 23(m) and 11 (b) of the Interna Revenue Code. The
Supreme Court of the Unted States has stated that such aedueton
s not to be regarded as a speca bonus for enterprse and wngness
to assume rsks but s based on the concept that part of the amount
reazed from the e tracton and marketng of mnera represents
compensaton for capta consumed n the producton and sae of a
wastng asset. (See Unted States v. Ltdey, 27 U. S. 29 , T. D. 0 6,
C. . T-2, 1 7 (1927).) (See aso everng v. ankUne O Co.,
303 U. S. 362, Ct. D. 1323, C. . 193 -1, 306. and /. Steve nderson
et a. v. dverng, 310 U. S. 0 , Ct. D. 1 6. C. . 19 0-1,10 .) The
deducton s not dependent upon the partcuar ega form of the ta -
payer s nterest, and, regardess of technca ownershp of the ore before
severance, a ta payer may by contract acqure a vauabe property
nterest n the mnera whch s capabe of reazaton as gross ncome
by e ercse of rghts hed under the agreement. (See Lynch v. worth-
Stephens Co., 267 U. S. 36 , T. D. 3690, C. . I -1, 162 (192 ), nvov-
ng a essee.) Reteratng and enargng upon ths concept, n . G.
Pamer v. ender (2 7 U. S. 1, Ct. D. 6 1, C. . I1-1,23 (1933)),
sustanng a cam for depeton by a essor of o propertes, the Court
sad that the deducton s nether restrcted to cases of any partcuar
cass nor made dependent upon ownershp or any other partcuar
form of ega nterest n the mnera content of the and, and that the
forma attrbutes of nstruments between the partes or the descrptve
termnoogy whch may be apped to them by the oca aw are rree-
vant It s enough, t was stated, f by vrtue of the transacton the
ta payer has retaned a rght to share n the mnera produced. If
so, he has an economc nterest n the mnera n pace whch s
depeted by producton. Statements of the Court n . O. Pamer v.
ender, supra, and subsequenty n . Steve nderson et a. v. ever-
ng, supra, rby Petroeum Co. v. Commssoner (326 U. S. 99,
Ct D. 166 , C. . 19 6-1, 69), and urton-Sutton OU Co., Inc., v.
Commssoner (32 U. S. 2 , Ct. D. 167 , C. . 19 6-1, 237) aso show
that the anguage of the statute s broad enough to provde at east
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.23(m)-.

for every case n whch the ta payer has acqured by nvestment any
nterest n mnera n pace, and has secured by any form of ega
reatonshp ncome derved from the e tracton of the mnera to
whch he must ook soey for the return of hs capta. (See secton
29.23(m)-, Reguatons 111.) Furthermore, the deducton for depe-
ton must be equtaby apportoned on the bass of the reatve economc
nterests of each of the partes sharng n the producton of the mn-
era, and a rght to share n the proceeds from sae of the mnera fo-
owng e tracton s anaogous to a rght to share n the mnera tsef.
(See everng v. Twn e O Syndcate, 293 U. S 312, Ct. D. 90 ,
C. . I -1,2 3 (193 ); /. Steve nderson et a. v. everng, supra/
rby Petroeum Co. v. Commssoner, supra; urton-Sutton O Co.,
Inc., v. Commssoner, supra.)
The foregong prncpes are appcabe not ony to mnera rghts
reserved by grantors, but to such rghts acqured by grantees. Snce a
stpuaton reservng mnera payments or the proceeds therefrom to
one aready havng a rght to e tract the mnera and thus possessng
a capta nterest theren nvoves the retenton of a depetabe eco-
nomc nterest, t foows that where by agreement between the partes
such a capta nterest s acqured, the recpent may kewse obtan a
depetabe economc nterest n the mnera n pace. (See G. C. M.
s supported by Carone C. Spadng v. Commssoner (3 . T. .
132, appea dsmssed, 100 Fed. (2d) 1020); by Carone C. Spadng v.
Unted States (17 Fed. Supp. 9 7, affrmed, 97 Fed. (2d) 697, certo-
rar dened, 30 U. S. 61 ), and by T. W. Lee et a. v. Commssoner ( 2
. T. . 1217, affrmed, 126 Fed. (2d) 2 ). Wth respect to mnng,
as stated n G. C. M. 22730, supra, the same basc prncpes appy as n
the case of o, ke ssues arse n the decsons, and such decsons have
been cted nterchangeaby by the courts n the evouton of the rues
of aw appcabe to both ndustres. (See North Range Mnng Co. v.
Commssoner, 6 . T. . 296, acquescence, C. . 19 2-1, 13, and
astern Coa Corporaton v. Yoke. 67 Fed. Supp. 166.) In the atter
case, quotng drecty from G. C. M. 22730, supra, and wth manfest
approva of ts appcaton to coa mnng, the court stated:
It thus appears that the controng cases regard captazed deveopment costs
as representng nvestments returnabe through the depcton aowances, whether
the tota deveopment nvestment s made by a andowner tcho eects to deveop
the property hmsef and take a the o or mnera or s shared by a number of
nvestors cho, by contractua arrangement. , between themseves, agree to dvde
the resutng o or mnera product or the proceeds from the sae of such product.
If the atter, the dvson of o, or the gross ncome therefrom, determnes the
economc ownershp of o or mnera n pace as we as the gross ncome and
attendng depeton aowance. Under ths test, the form of the contracts
dvdng the product or the gross ncome therefrom, or the ega phraseoogy or
devces utzed to accompsh the dvson, are mmatera. Itacs supped.
It s aso to be noted that n astern Coa Corporaton v. Yoke, supra,
the poston was taken by the court that the rght of a contractor to a
specfed amount per ton of mnera produced may consttute a rght
to share n producton whch marks ownershp of a depetabe economc
nterest n the mnera n pace.
For the purpose of factatng consderaton of the queston here
nvoved, a number of strppng contracts whch t s understood are
typca of those used n the coa ndustry have been e amned. For
22730, C. . 19 1-1, 21 .)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e

29.23(m)-.
convenence, the partes to such contracts w be herenafter referred
to as the coa company and the contractor, respectvey. In vew of
the contents of the contracts e amned, t s the opnon of ths offce
that, dependent upon ther rghts n respect of the propertes nvoved,
strppng contractors may be propery regarded as entted to the de-
ducton for depeton n a respects as n the case of other mnera
propertes. The fact that some of the contracts bear aspects of
agency or empoyment, or that ostensby the contractor may not ac-
qure ega tte to the mnera, does not contro. (See Carone G.
Spadng v. Commssoner, supra; Carone C. Spadng v. Unted
States, supra; T. W. Lee et a. v. Commssoner, supra; North Range
Mnng Co. v. Commssoner, supra; and astern Goa Corporaton v.
Yoke, supra.) The crcumstance that strppng contractors at tmes
engage n road budng or other forms of actvty aso appears to be
mmatera.
It s not the vew of ths offce, however, that the deducton for
depeton s to be granted n every case. On the contrary, t seems
cear that the aowance s warranted ony where, under the agreement
between the partes, the strppng contractor obtans a capta nterest
n the mnera n pace and must ook to severance and sae of the
mnera for the return of capta consumed n that process. (See
G. C. M. 22730, supra.) In ths respect, t s noted that n some
nstances contracts may be canceed by the coa company at w.
Under such crcumstances, t woud appear that the contractor receves
no bndng rght to e tract the mnera and thus fas to obtan a
capta nterest theren. Lackng such an nterest n the mnera, t
foows that the contractor cannot propery cam a deducton for
depeton.
In the opnon of ths offce, a contract whch s termnabe by the
coa company at w, and whch thus fas to vest n the contractor the
requste capta nterest n the mnera n pace, s one n whch the
coa company has an absoute rght to cance at any tme wthout
cause or condton. For e ampe, some of the contracts e amned
reserve to the coa company the rght at ts dscreton, wthout a-
bty for damage or oss to the contractor, to termnate entrey a
or any part of the work to be done under the contract. It s aso the
vew of ths offce that a contract whch may be arbtrary termnated
by the coa company upon nomna notce shoud be regarded as one
whch may be canceed at w. In determnng what s nomna
notce, the essenta factor to be consdered s whether, as a resut of
the rght of the coa company to ssue such a notce, the contractor s
eft wthout a rght to possesson and e potaton of the property for
a perod of tme suffcent to permt e tracton by hm of a substanta
porton of the mnera depost. In ths respect, t woud ordnary
seem proper to concude that a contract whch cannot be arbtrary
termnated by the coa company wthn ess than 1 year s not sub|ect
to canceaton on nomna notce. Where, however, the contract
may be arbtrary termnated by the coa company wthn a perod
of ess than 1 year, determnaton of the queston whether t shoud be
regarded as one whch may be canceed upon nomna notce w
depend upon the facts and crcumstances of the partcuar case. Fac-
tors to be consdered n makng such a determnaton ncude the sze
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.23(u)-.
3
of the mnera depost, the probabe tme requred for ts e tracton,
the amount of e pense key to be ncurred by the contractor n opera-
tons premnary to remova of any substanta part of the mnera,
and the amount of equpment to be removed from the property by the
contractor upon termnaton of the contract.
One of the contracts e amned shows that the coa company reserves
the rght, wthout payment of damages, to suspend work ndefntey
at any tme or from tme to tme; under another contract, the coa
company s gven the rght, upon days notce to the contractor and
wthout payment of damages, to suspend work for an ndefnte
perod; and under a thrd contract the coa company may suspend
operatons durng such tme or tmes as the company operates at a oss
because of the mnmum payabe to the contractor. Snce contracts of
ths character, despte the power of ndefnte suspenson provded for
theren, do not, e cept under specfc condtons, appear to permt the
coa company to dsmss contractors absoutey and substtute others
to e tract the mnera, t s the opnon of ths offce that such contracts
shoud not be cassfed as contracts whch may be canceed at w.
It s noted further that n some of the contracts the contractor must
ook for hs compensaton soey to the e tracton and sae of the coa,
that n others hs compensaton s dependent party upon e tracton
and sae of the coa and party upon remova of the overburden and
other factors, and that n st others the remuneraton payabe to the
contractor s n no way dependent upon e tracton and sae of the
mnera. Where, under the tests herenbefore descrbed, the contract
s not termnabe at the w of, or upon nomna notce by, the coa
company, t s the vew of ths offce that f the contractor must ook
for hs compensaton soey to the e tracton and sae of the mnera,
he s entted to the deducton for depeton. Where the contract s
not termnabe at the w of, or upon nomna notce by, the coa com-
pany, t s aso the opnon of ths offce that f the compensaton of the
contractor s derved n part from e tracton and sae of the coa and
n part from remova of the overburden and other servces, the deduc-
ton for depeton s aowabe n respect of that porton of such
compensaton whch s derved from e tracton and sae of the coa.
owever, t s cear that where the compensaton of the contractor s
dependent entrey upon remova of the overburden and other servces,
no part of such compensaton beng derved from e tracton and sae
of the coa, the deducton for depeton s not aowabe.
CI RI. S OLIP NT,
Chef Counse, ureau of Interna Revenue.
S CTION 23(u). D DUCTIONS FROM GROSS INCOM :
LIMONY, TC., P YM NTS
Secton 29.23(u)-1 : Perodc amony payments.
INT RN L R NU COD
Lfe nsurance premums pad by husband. (See I. T. 001,
page 27.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
7
29.2 -1.
S CTION 2 . IT MS NOT D DUCTI L
Secton 29.2 -1: Persona and famy e penses. 19 0- -13333
( so Secton 23(a), Secton 29.23 (a)-1; Secton L T. 00
23(c), Secton 29.23(c)-.)
INT RN L R NU COD
mounts deducted from empoyees wages, pursuant to artce 9
(known as the dsabty benefts aw) of the New York workmen s
compensaton aw, to provde funds for the payment of benefts
to empoyees who are unabe to work because of n|ury or sckness
not arsng out of and n the course of empoyment, do not const-
tute ordnary and necessary busness e penses under secton 23(a)
(1)( ) of the Interna Revenue Code, nor ta es under secton
23(c) (1) of the Code. Such amounts consttute persona e penses,
and they are not deductbe for Federa Income ta purposes.
dvce s requested reatve to the deductbty, for Federa ncome
ta purposes, of amounts deducted from empoyees wages pursuant
to artce 9 (added by Laws of New York, chapter 600, approved pr
13, 19 9), known as the dsabty benefts aw, of the New York
workmen s compensaton aw, whch amounts are used to provde
funds for the payment of benefts to empoyees who are unabe to
work because of n|ury or sckness not arsng out of and n the course
of empoyment.
The pertnent provsons of artce 9 of the New York workmen s
compensaton aw read as foows:
Secton 201. Defntons. s used n ths artce:

. Dsabty durng enpoyment means the nabty of an empoyee, as a
resut of n|ury or sckness not arsng out of and n the course of an empoy-
ment, to perform the regua;- dutes of hs empoyment or the dutes of any other
empoyment whch hs empkyer may offer hm at hs reguar wages and whch
hs In|ury or sckness does not prevent hm from performng. Dsabty dur-
ng unempoyment means the nabty of an empoyee, as a resut of n|ury or
sckness not arsng out of and n the course of an empoyment, to perform the _
dntes of any empoyment for whch he s reasonaby quafed by tranng and
e perence.
9. enefts means the money aowances durng dsabty payabe to an
empoyee who s egbe to receve such benefts, as provded n ths artce.

Sec. 209. Contrbuton of mpoyees fob Dsabty enefts. 1. very
empoyee n the empoyment of a covered empoyer sha, on and after anuary
frst, nneteen hundred ffty, contrbute to the cost of provdng dsabty bene-
fts under ths artce, to the e tent and n the manner heren provded.
2. The speca contrbuton of each such empoyee to the accumuaton of
funds to provde benefts for dsabed unempoyed sha be as provded n sub-
dvson 1 of secton 21 .
3. The contrbuton of each such empoyee to the cost of dsabty benefts
provded by ths artce sha be one-haf of 1 per centum of the empoyee s
wages pad to hm on and after uy frst, nneteen hundred ffty, but not n
e.tcess of 30 cents per week.
. Notwthstandng any other provson of aw, the empoyer Is authorzed to
coect from hs empoyees the contrbuton provded under subdvsons 2 and
3, through payro deductons. If the empoyer sha not make deducton
for any payro perod he may thereafter, but not ater than one month after
payment of wages, coect such contrbuton through payro deducton.
. In coectng empoyee contrbutons through payro deductons, the em-
poyer sha act as the agent of hs empoyees and sha use the contrbutons ony
to provde dsabty benefts as requred by ths artce.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.2 -2.1

Sec. 21 . Speca Fund fob Dsabty enefts. There Is hereby created
a fund whch sha be known as the speca fund for dsabty benefts to pro-
vde for the payment of dsabty benefts under sectons 207 and 213 of ths
artce.
1. For the purpose of accumuatng funds for payment of benefts to the
dsabed unempoyed, there s hereby assessed a contrbuton at the rate of two-
tenths of 1 per centum of the wages pad durng the perod from anuary frst,
nneteen hundred ffty to une thrteth, nneteen hundred ffty ncusve, to
empoyees n the empoyment of covered empoyers on or after anuary frst, nne-
teen hundred ffty, but not n e cess of 12 cents per week as to each such em-
poyee, of whch the empoyee sha contrbute one-tenth of 1 per centum of hs
wages but not n e cess of 6 cents per week, and the empoyer sha make nn
equa contrbuton. The contrbutons of the empoyee sha be deducted from
hs wages u the same manner as provded n secton 209.
Secton 23(a) (1) ( ) of the Interna Revenue Code provdes n part
that n computng net ncome there sha be aowed as deductons
a the ordnary and necessary e penses pad or ncurred durng the
ta abe year n carryng on any trade or busness. Secton 23(c) (1)
of the Code provdes that n computng net ncome there sha be
aowed as deductons ta es pad or accrued wthn the ta abe year,
wth certan e ceptons not here matera.
It s hed that the amounts deducted by the empoyer from the wages
of empoyees, pursuant to the provsons of artce 9 of the New York
workmen s compensaton aw, do not consttute ordnary and necessary
busness e penses wthn the meanng of secton 23(a) (1) ( ) of the
Interna Revenue Code, nor ta es wthn the meanng of secton
23(c)(1) of the Code. Such contrbutons consttute persona e -
penses of the empoyees, and are not deductbe n computng net
ncome for Federa ncome ta purposes.
Secton 29.2 -1: Persona and famy e penses.
Unforms and work cothng not specfcay requred as a condton
of empoyment or whch take the pace of ordnary cothng. (See
Mm. 0 63, page 29.)
Geoogca and geophysca e poraton costs consttute capta
e pendtures and are not deductbe as busness e penses under
secton 23(a) (1) ( ) of the Interna Revenue Code. If a property
s acqured or retaned on the bass of geoogca and/or geo-
physca data obtaned from an e poraton pro|ect, the cost of the
pro|ect shoud be captazed as a part of the cost of the property
acqured or retaned. If no property s acqured or retaned on the
bass of such data, the cost of the pro|ect s deductbe as a oss
under secton 23 (e) or (f) of the Code.
dvce s requested whether, for Federa ncome ta purposes,
geoogca and geophysca e poraton costs consttute capta e -
pendtures or ordnary and necessary busness e penses.
It has been hed that e poraton costs are capta e pendtures
and are not deductbe as busness e penses under secton 23 (a) (1) ( )
INT RN L- R NU COD
Secton 29.2 -2: Capta e pendtures.
( so Secton 23(e), Secton 29.23(e)-;
Secton 23(f), Secton 29.23(f)- .)
19 0- -1333
I. T. 006
INT RN L R NU COD
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
9
29.2 -2.
of the Interna Revenue Code and correspondng provsons of pror
revenue aws. (See The Lousana Land and poraton Co. v.
Commssoner, 1 T. C. 07, affrmed on other ssues, 161 Fed. (2d)
2; Sehermerhom O Corf oraton et a. v. Commssoner, 6 . T. .
1 1; Rato Mnng Corporaton v. Commssoner, 2 . T. . 9 0;
0. . Cotton v. Commssoner, 2 . T. . 66; Parker Grave Co.,
Inc., v. Commssoner ,21 . T. . 1; C. M. Nusbaum v. Commssoner,
10 . T. . 66 ; and Seetha O. Thompson v. Commssoner, 9 . T. .
13 2.) Such costs are ncurred for the purpose of obtanng and
accumuatng data whch w serve as a bass for the acquston or
retenton of property. In ths connecton, the term property s used
n the sense of nterest n a mnera property, as provded n secton
29.23(m)-() of Reguatons 111. ccordngy, f property s ac-
qured or retaned on the bass of data obtaned from e poraton,
costs of e poraton attrbutabe to that property shoud be captazed
as part of the cost of such property.
It s customary n the search for mnera-producng propertes for
an e porer to conduct hs e poraton program by pro|ects, each
pro|ect coverng ony that terrtory whch he has determned by
anayss of certan varabes, vz, the sze and topography of the area
to be e pored, e stng nformaton wth respect to that area and
nearby areas, and the quantty of equpment, men, and money ava-
abe, can be e pored advantageousy as a snge ntegrated operaton.
fter determnaton of ts area, eac pro|ect usuay begns wth a
reconnassance-type survey coverng the entre area. The purpose
of ths reatvey ne pensve survey s to ocate those portons of the
pro|ect area whch have the greatest promse, thus enabng the e -
porer to most effectvey concentrate the use of hs money and equp-
ment and the efforts of hs men n those portons of the area. ach
such separabe, noncontguous porton of the pro|ect area, dentfed
by the reconnassance-type survey as possessng suffcent mnera-
producng potenta to mert further e poraton, s an area of nterest.
Where an e poraton pro|ect s conducted wthout a premnary re-
connassance-type survey, the pro|ect area and the area of nterest
are coe tensve.
When the areas of nterest n an orgna pro|ect area have been
ocated by the reconnassance-type survey, for the purposes of ao-
catng and captazng costs of further e poratory operatons, the
orgna pro|ect s consdered subdvded nto as many smaer pro| cts
as there are areas of nterest. Snce each area of nterest thereafter
consttutes a separate pro|ect, further e poratory operatons con-
ducted wth respect to one area of nterest are competey ndependent
of those conducted wth respect to a dfferent area of nterest aso
wthn the orgna pro|ect area.
y further e poratory operatons (detaed surveys) conducted
wth respect to each area of nterest, the e porer seeks to ascertan the
presence or absence of a mnera depost n that area of nterest. For
that purpose, he empoys such geoogca and geophysca e poraton
methods as w obtan subsurface data suffcenty accurate to afford
a bass for a decson to acqure or retan propertes wthn or ad|acent
to a partcuar area of nterest, or to abandon the entre area of
nterest as unworthy of deveopment by mne or we.
If, from the data obtaned from the reconnassance-type survey, ony
one area of nterest s ocated or dentfed wthn the orgna pro|ect
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29. 1-3.
0
area, the entre cost of the reconnassance-type survey must be ao-
cated to that one area of nterest. If two or more areas of nterest are
ocated or dentfed wthn the orgna pro|ect area, the entre cost of
the reconnassance-type survey must be aocated equay among the
varous areas of nterest. Dependng upon the fna dsposton of
the area of nterest to whch t s aocated, each aocated part of the
cost of the reconnassance-type survey w be treated as a capta e -
pendture under secton 2 (a) (2) of the Interna Revenue Code or as
a oss under secton 23 (e) or (f) of the Code. If, from the data ob-
taned by the reconnassance-type survey, no areas of nterest are
ocated or dentfed wthn an orgna pro|ect area, the entre cost of
the reconnassance-type survey may be deducted as a oss under secton
23 (e) or (f) of the Code for the year of abandonment of that
partcuar pro|ect.
Where a detaed (ntensve) survey s conducted wth respect to a
partcuar area of nterest, f a property s acqured or retaned wthn
or ad|acent to that area on the bass of the data so obtaned, the entre
cost of that detaed survey pus that porton of the cost of the prevous
reconnassance-type survey aocated to such area must be captazed
as a part of the cost of the property so acqured or retaned. Where
more than one property s so acqured or retaned wthn or ad|acent to
an area of nterest, t s proper to aocate, on an acreage bass, the
entre cost of the detaed survey pus that porton of the cost of the
prevous reconnassance-type survey aocated to such area among the
propertes so acqured or retaned. Where, on the bass of data ob-
taned from e poraton conducted wth respect to an area of nterest,
no property s acqured or retaned wthn or ad|acent to that area,
the costs of e poraton, ncudng that porton of the cost of the
reconnassance-type survey aocated to that area of nterest, may be
deducted as a oss for the year n whch that area of nterest s
abandoned as a potenta source of mnera producton.
Secton 29.2-1-2: Capta e pendtures.
INT RN L R NU COD
Dstrct of Coumba gross saes ta pad by purchasers wth respect
to property purchased for use n trade or busness. (See I. T. 00 ,
page 3 .)
P RT I . CCOUNTING P RIODS ND M T ODS OF CCOUNTING
S CTION 1. G N R L RUL
Secton 29. 1-3: Methods of accountng. 19 0-6-1331
( so Secton 2, Secton 29. 2-1; Secton Mm. 6 7
3, Secton 29. 3-1.)
Treatment of bocked foregn Income for Federa ncome ta pur-
poses.
Mmeograph 207 (C. . 19 2-1, ) modfed.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
1
29. 1-3.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 2 , D. C, March 1,19 0.
Coectors of Interna Revenue, Interna Revenue gents n Charge
eads of Fed Dvsons of the Technca Staff, and Others Con-
cerned:
1. Numerous nqures have been receved by the ureau reatve to
the proper treatment for Federa ncome ta purposes of ncome,
ether n currency or n other property, arsng n countres havng
monetary or e change restrctons. The e stence of these restrc-
tons often makes t dffcut for ta payers to ascertan the vaue, n
terms of Unted States doars, of the bocked ncome arsng n
countres havng such restrctons.
2. For the purposes of ths mmeograph, the term deferabe n-
come s used to descrbe ncome receved by, credted to the account
of, or accrued to a ta payer whch, owng to monetary e change or
other restrctons mposed by a foregn country, s not ready con-
vertbe nto Unted States doars or nto other money or property
whch s ready convertbe nto Unted States doars. owever, n-
come ceases to be deferabe ncome when, to the e tent thereof, (a)
money or property n such foregn country s ready convertbe nto
Unted States doars or nto other money or property whch s ready
convertbe nto Unted States doars; (b) notwthstandng the
e stence of any aws or reguatons forbddng the e change of money
or property nto Unted States doars, converson s actuay made
nto Unted States doars or other money or property whch s ready ,
convertbe nto Unted States doars; or (c) such ncome s used for
nondeductbe persona e penses, s dsposed of by way of gft, bequest,
devse, or nhertance, or by dvdend or other dstrbuton, or, n the
case of a resdent aen, a ta payer termnates hs resdence n the
Unted States.
3. ta payer, whether ndvdua, corporate, or other, may eect
to use a method of accountng (sectons 1- 3, Interna evenue Code)
n whch the reportng of deferabe ncome as ta abe ncome s
deferred unt the ncome ceases to be deferabe ncome, at whch
tme t s ncudbe n gross ncome.
. ta payer who eects to use ths method of accountng sha fe
wth hs Federa ncome ta return a return headed Report of Defer-
abe Foregn Income, pursuant to Mmeograph No. 6 7 , usng for
ths purpose a separate ncome ta form of the same type as that
wth whch t s fed. In such return, the ta payer sha decare that
the deferabe ncome w be ncuded n ta abe ncome for the year
n whch such ncome, to the e tent thereof, ceases to be deferabe
ncome. In such return, the ta payer sha aso decare that he
waves any rght to cam that the deferabe ncome, or any part
thereof, was ncudbe n hs gross ncome for any earer year.
. nformaton requred by the return of deferabe ncome
sha be furnshed wth such adaptaton to the currency nvoved as
may be necessary. If deferabe ncome s receved, credted, or
accrued to the account of a ta payer n more than one country, a sep-
arate return sha be fed for each such country. In hs ncome ta
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29. 1-3.
2
return for the ta abe year n whch any deferabe ncome s ncud-
be n ta abe ncome under the method of accountng provded for
heren, the ta payer sha ncude such ncome n gross ncome and
cam the deductons aocabe thereto (as provded n the subsequent
paragraphs hereof), the ncome thus reported, together wth such
deductons, to be verfed aganst the returns of deferabe ncome
prevousy fed.
6. Where the ta payer makes the eecton descrbed above, e penses
pad or accrued or pad or ncurred n the currency of the country
n whch there s deferabe ncome are not deductbe from the gross
ncome reported n Unted States doars, e cept n the manner and to
the e tent provded n secton 29. 3-1 (a) of Reguatons 111. Thus,
such e penses w be deductbe n any subsequent ta abe year n
the same proporton as the deferabe ncome s ncudbe n ta abe
ncome. The same treatment sha be accorded deprecaton, obso-
escence, and depeton measured n terms of such money. Smary,
no credt may be taken for foregn ta es pad or accrued wth respect
to deferabe ncome e cept n the manner and to the e tent provded
n secton 29.131-6 of Reguatons 111.
7. (a) Under the method of accountng set forth n ths mmeo-
graph, the prncpe s to be apped n genera that Unted States
doar ncome s not to be burdened wth costs and drect e penses n
Unted States doars to the e tent nvoved n the producton of de-
ferabe ncome. In appyng ths prncpe, costs n Unted States
doars nvoved n a transacton any part of the proceeds of whch s
ncudbe n deferabe ncome sha, to the e tent not recovered n
such transacton, not be taken nto account n computng gross ncome;
and when any part of such deferabe ncome ceases to be defer-
abe ncome, n determnng the amount of gross ncome to be re-
ported on account thereof, unrecovered costs n Unted States doars
sha be apped aganst the amount reeased to the e tent thereof.
The foregong rue as to costs appes not ony to the cost of goods
taken out of nventory but aso to the cost (or other bass) of other
assets sod or e changed. Drect e penses n Unted States doars n-
voved n a transacton gvng rse to deferabe ncome sha not be
deducted n computng net ncome unt after recovery of costs, f any,
and then may be deducted, but ony n the proporton whch the part
of the proceeds ncudbe n gross ncome for the ta abe year bears
to the proceeds from the transacton n e cess of the amount apped
aganst costs (or such e penses may, wth the consent of the Comms-
soner, be deducted to the e tent that such proceeds are ncudbe n
gross ncome). The above rues may be ustrated by the e ampe of a
Unted States manufacturer whch sod merchandse for 2,000 unts of
the money of a foregn country. The cost of goods sod was 700,
and drect e penses attrbutabe to the sae were 100. The manufac-
turer was abe to convert nto Unted States doars n the ta abe year
of the sae ony 1, 00 unts of the foregn money at the rate of 0. 0
per unt ( 7 0). In such case ony 0 s requred to be ncuded n
gross ncome n such year cn account of the transacton (the e cess of
7 0 over the cost of 700) and one-s th of the drect e penses of 100
s deductbe n such year (beng the rato of the 100 unts of the foregn
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
3
29. 1-3.
money whch s refected n the 0 gross ncome to the 600 unts of
such money n e cess of the 1, 00 unts apped aganst cost).
(b) Notwthstandng the rues of subparagraph (a), where the
same costs and drect e penses n Unted States doars are apped n
foregn operatons n more than one country (as, for e ampe, n the
case of an artce e hbted or crcuated n varous countres), and
the ta payer n keepng ts books does not reguary aocate such
costs and e penses on a country-by-country bass under a recognzed
method, appcaton may be made by the ta payer to the Commssoner
for approva of an approprate method for determnng the e tent to
whch such costs and e penses sha be taken nto account currenty.
Such appcaton sha be made wthn the tme prescrbed for an ap-
pcaton for change of accountng method (see secton 29. 1-2 of
Reguatons 111), e cept that n the case of ta abe years begnnng
pror to anuary 1, 19 0, such appcaton may be made on or before
the date of the frst eecton under ths mmeograph (see paragraphs
and 9 of ths mmeograph). Where other speca crcumstances
e st, rungs may be made upon request, addressed to the Comms-
soner, as to the appcaton of the method of accountng prescrbed
n ths mmeograph.
(c) If and when t becomes apparent that any foregn hodngs
whch refect the recept of deferabe ncome are substantay worth-
ess, the takng nto account for ta purposes of costs and drect e -
penses pertanng thereto and descrbed n ths paragraph sha no
onger be deferred.
(d) Nothng contaned n ths mmeograph sha be construed as
passng on the queston of whether e pendtures attrbutabe to foregn
operatons consttute ordnary and necessary busness e penses.
. Where the ta payer adopts the method of accountng provded
for by ths mmeograph, osses sha aso be taken nto account under
the rues for deferment str ted heren.
9. The provsons of ths mmeograph w be appcabe to a open
ta abe years. The ta payer sha desgnate the frst open ta abe
year for whch the method of accountng provded heren sha be
used. If such frst ta abe year s a pror ta abe year, the report
(prescrbed n paragraph number , above) for such year and for each
of the ntervenng ta abe years n order sha be fed wth the ta -
payer s ncome ta return when the eecton s made as provded n such
paragraph .
10. ta payer who adopts such method of accountng sha, before
makng any change or varaton theren, secure the consent of the
Commssoner.
11. Mmeograph 297 (C. . 19 2-1, ) s modfed to accord
herewth.
12. Correspondence and nqures from the foowng regardng ths
mmeograph shoud refer to ts number and to the symbos ndcated:
Coectors of nterna revenue, C: Co; nterna revenue agents n
charge, IT: IM; heads of fed dvsons of the Technca Staff,
TS: RM.
G O. . SC O N M N,
Commssoner.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29. 2-1.

Secton 29. 1-3: Methods of accountng. 19 0- -1333
( so Secton 2, Secton 29. 2-1; Secton Mm. 6 9
3, Secton 29. 3-1.)
mendment of Mmeograph 6 7 (page 0, ts uetn), reatng
to treatment of bocked foregn ncome for Federa ncome ta
purposes.
Treasuky Department,
Offce of Commssoner or Interna Revenue,
Washngton 2 , D. C, March 27,19 0.
Coector s of Interna Revenue, Interna Revenue gents n Charge,
eads of Fed Dvsons of the Technca Staff, and Others
Concerned:
1. Paragraph 7( ) of Mmeograph 6 7 (page 0, ths uetn),
dated March 1,19 0, s amended to read as foows:
(6) (1) Where the same costs and drect e penses n Unted States doars are
apped n foregn operatons n more than one country (as, for e ampe, n the
case of an artce e hbted or crcuated n varous countres), and the ta payer
n keepng ts books does not reguary aocate such costs and e penses on a
country-by-country bass under a recognzed method, the ta payer shoud, n
an reports of deferabe foregn ncome fed n accordance wth the provsons
of paragraph , make such aocaton. The method of aocaton w be sub|ect
to verfcaton and approva by the Commssoner upon e amnaton of the returns
and reports of deferabe foregn ncome for the ta abe years nvoved.
(2) Where speca crcumstances e st, rungs may be made upon request,
addressed to the Commssoner, as to the appcaton of the method of accountng
prescrbed n ths mmeograph.
Fred S. Martn,
ctng Commssoner.
S CTION 2. P RIOD IN W IC IT MS OF GROSS
INCOM INCLUD D
Secton 29. 2-1: When ncuded n gross ncome.
INT RN L R NC COD
ocked foregn ncome. (See Mm. 6 7 , page 0.)
Secton 29. 2-1: When ncuded n gross ncome.
INT RN L R NU COD
ocked foregn ncome. Mmeograph 6 7 (page 0, ths uetn)
amended. (See Mm. 6 9 , above.)
Secton 29. 2-1: When ncuded n gross ncome.
INT RN L R NU COD
aue of mprovements paced upon rea property by essee. (See
I. T. 009, page 13.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29. 3-2.
S CTION 3. P RIOD FOR W IC D DUCTIONS
ND CR DITS T N
Secton 29. 3-1: Pad or ncurred and pad
or accrued.
INT RN L R NU COD
penses attrbutabe to bocked foregn ncome. (See Mn. 6 7 ,
page 0.)
Secton 29. 3-1: Pad or ncurred and pad
or accrued.
INT RN L R NU COD
penses attrbutabe to bocked foregn ncome. Mmeograph
6 7 (page 0, ths uetn) amended. (See Mm. 6 9 , page .)
Secton 29. 3-2: When charges deductbe. 19 0- -13290
. I. T. 399
INT RN L R NU COD
Where and has been sod to the State of Mchgan for denquent
ta es, a oss sustaned by a property owuer who fas to redeem such
and and does not e ercse hs rght to repurchase under the scav-
enger sae provsons of Mchgan aw s deductbe, for Federa
ncome ta purposes, for the year n whch such rght to repurchase
termnates.
I. T. 3 0 (C. . 10 1-1, 2 1) revoked.
Reconsderaton has been gven to the ssue nvoved n I. T. 3 0
(C. . 19 1-1, 2 1) n the ght of the dec sons n Mcheson Land C
ome Co. v. Commssoner (Ta Court memorandum opnon, dec-
son entered ugust 31, 19 9) and F. P. . Notehoders Corporaton
v. Commssoner ( T. C. 72, acquescence, page 2, ths uetn;
affrmed, 1 7 Fed. (2d) 9 2).
In I. T. 3 0, supra, t was hed that where a property owner sustans
a oss by reason of faure to redeem and sod to the State of Mchgan
for denquent ta es, hs oss s deductbe, for Federa ncome ta pur-
poses, for the ta abe year durng whch the 1 -month perod for
redempton e pres. In the Mcheson case, supra, the Ta Court,
foowng ts prevous decson n the F. P. . Notehoders case, supra,
hed n effect that the tme for deducton of oss was not the year n
whch the 1 -month redempton perod e pred but was the year n
whch the rght to repurchase under the scavenger sae provsons
of Mchgan aw (see Mch. Stat. nn. (19 7 Cum. Supp.), secton
7.9 7) was termnated. The decson n the Mcheson case s, there-
fore, n drect confct wth the concuson stated n I. T. 3 0, supra.
In vew of the foregong, t s hed that where and has been sod
to the State of Mchgan for denquent ta es, a oss sustaned by a
property owner who fas to redeem such and and does not e ercse
hs rght to repurchase under the scavenger sae provsons of Mch-
gan Taw s deductbe, for Federa ncome ta purposes, for the year
n whch the rght to repurchase termnates. ccordngy, I. T. 3 0,
supra, s revoked.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29. 3-2.
0
G. C. M. 19367 (C. . 1937-2, 11 ) s not affected by the above-
stated concuson. The opnon e pressed n that memorandum es-
tabshes a genera rue wth respect to mortgage forecosures, whereas
the nstant ssue reates to ta saes of and to the State of Mchgan.
P T . R TURNS ND P YM NT OF T
S CTION 3. TIM ND PL C FOR FILING
R TURNS
Secton 29. 3-2: tensons of tme for fng 19 0-7-13322
returns. Mm. 6 2
tenson of tme for fng ncome ta returns of fe Insurance
companes for the caendar year 1919.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 2 , D. C, March 6,19 0.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
and Others Concerned:
1. . . Res. 371, whch was passed by the ouse of Representatves
on anuary 26, 19 0, and was referred to the Senate Commttee on
Fnance on anuary 30, 19 0, proposes an amendment to the formua
used n computng the reserve and other pocy abty credt of fe
nsurance companes for a ta abe year begnnng n 19 7, 19 , and
19 9.
2. In vew of such proposed egsaton, a genera e tenson of tme
s hereby granted to a fe nsurance companes, as defned n secton
201(b) of the Interna Revenue Code, to and ncudng May 1 , 19 0,
for fng ncome ta returns for the caendar year 19 9. Ths e ten-
son of tme s granted under the authorty of secton 3(a) (2) of the
Code.
3. Correspondence n regard to ths mmeograph shoud refer to ts
number and the symbos IT: IM.
Geo. . Scoeneman,
Commssoner.
Secton 29. 3-2: tensons of tme for fng 19 0-11-13363
returns. Mm. 6 03
( so Secton 6, Secton 29. 0-2.)
tenson of tme for fn ncome ta returns of fe nsurance
companes for the caendar year 19 9.
Mmeograph C S2 (above) superseded.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 2 , D. C, May ,19 0.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
and Others Concerned:
1. . . Res. 371, whch proposes an amendment to the formua used
n computng the reserve and other pocy abty credt of fe nsur-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
7
29.109-1.
ance companes, was passed by the ouse of Representatves on anu-
ary 26, 19 0, was amended and passed by the Senate on pr 13,
19 0, and was sent to conference on pr 17, 19 0, for consderaton
of Senate amendments. The |ont resouton, as amended, provdes
a speca rue wth respect to ta abe years begnnng n 19 9 and 19 0.
2. In vew of such proposed egsaton, a genera e tenson of tme
s hereby granted to a fe nsurance companes, as defned n secton
201(b) of the Interna Revenue Code, to and ncudng uy 1 , 19 0,
for the fng of ncome ta returns and payment of the ta for the
caendar year 19 9. Ths e tenson of tme s granted under the
authorty of sectons 3(a) (2) and 6(c) (1) of the Interna Revenue
Code.
3. Ths mmeograph supersedes Mmeograph 6 2 (page 6, ths
uetn) whch granted a genera e tenson of tme for the fng of
ncome ta returns by fe nsurance companes to and ncudng May
1 , 19 0.
. Correspondence n regard to ths mmeograph shoud refer to
ts number and the symbos IT: IM.
Geo. . Scoeneman,
Commssoner.
S CTION 6. P YM NT OF T
Secton 29. 6-2: tenson of tme for payment
of the ta or nstament thereof.
INT RN L R NU COD
Lfe nsurance companes for 19 9. (See Mm. 6 03, page 6.)
SU C PT R C SUPPL M NT L PRO ISIONS
SUPPL M NT . R T S OF T
S CTION 109. W ST RN MISP R TR D
CORPOR TIONS
Secton 29.109-1: Western emsphere trade 19 0-1-13270
corporatons. I. T. 3990
INT RN L R NU COD
domestc corporaton a of the busness of whch s done n
ermuda cannot quafy as a Western emsphere trade corpora-
ton for the purpose of secton 109 of the Interna Revenue Code.
dvce s requested whether a domestc corporaton a of the bus-
ness of whch s done n ermuda can quafy as a Western em-
sphere trade corporaton under secton 109 of the Interna Revenue
domestc corporaton whch quafes as a Western emsphere
trade corporaton under the provsons of secton 109 of the Interna
Revenue Code s e empt from the surta mposed by secton 1 (b) of
the Code on corporatons generay. Secton 109 of the Code provdes
n part as foows:
93 0 0
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.117-1.

S C. 109. W ST RN MISP R TR D CORPOR TIONS.
For the purposes of ths chapter Chapter 1 of the Code , the term Western
emsphere trade corporaton means a domestc corporaton a of whose bus-
ness s done n any country or countres n North, Centra, or South merca,
or In the West Indes, or n Newfoundand
Inasmuch as secton 109 of the Code, n defnng the term Western
emsphere trade corporaton, specfcay desgnates the geograph-
ca areas n whch busness s to be carred on, a other geographca
areas are necessary e cuded. dmttedy, ermuda s wthn the
geographca mts of the Western emsphere, but t s not part of
contnenta North, Centra, or South merca, nor s t part of the
West Indes or of Newfoundand.
It s hed that a domestc corporaton a of the busness of whch
s done n ermuda cannot quafy as a Western emsphere trade
corporaton for the purpose of secton 109 of the Interna Revenue
Code.
SUPPL M NT . COMPUT TION OF N T INCOM
S CTION 113(a). D UST D SIS FOR D T RMINING
G IN OR LOSS: SIS (UN D UST D) OF PROP RTY
Secton 29.113(a) ( )-: Property acqured by
a corporaton after December 31,1920.
INT RN L R NU COD
Property receved as nducement to operate n the communty. (See
Ct. D. 1731, page 3 .)
S CTION 117. C PIT L G INS ND LOSS S
Secton 29.117-1: Meanng of terms. 19 0-10-133 3
G. C. M. 26379
INT RN L revenue code and pror revenue aws
The sae of a partnershp nterest s a sae of a capta asset whch
s sub|ect to the provsons of secton 117 of the Interna Revenue
Code.
G. C. M. 10092 (C. . I-1,11 (1932)) revoked.
n opnon s requested whether, for Federa ncome ta purposes,
the ureau shoud contnue to treat a sae of a partnershp nterest as
a sae of the seng partner s undvded nterest n each specfc part-
nershp asset.
The overwhemng weght of authorty s contrary to the poston
heretofore taken by the ureau, vz, that the sae of a partnershp
nterest s a sae of the seng partner s undvded nterest n each
specfc partnershp asset. (See dam esser, r., v. Unted States,
12 Fed. (2d) 1 2; Commssoner v. Morrs Shapro, 12 Fed. (2d)
32; George 27. Thorney et u . v. Commssoner, 1 7 Fed. (2d) 16;
Commssoner v. state of Dane Gartng et at., 170 Fed. (2d) 73;
Commssoner v. an S. Lehman, 16 Fed. (2d) 3 3, certorar de-
ned, 33 U. S. 19; Commssoner v. 27. R. Smth, 173 Fed. (2d) 70,
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
9
29.122-2.
certorar dered, October 10, 19 9; L. F. Long v. Commssoner, 173
Fed. (2d) 71, certorar dened, October 10, 19 9; Ma Shapro v.
Unted States, 3 Fed. Supp. 37 ; contra: Cty ank Farmers Trust
Co. et a. ousman W) v. Unted Sates, 7 Fed. Supp. 9 .) See
aso Robert . Ford et a. v. Commssoner (6 T. C 99, acquescence,
C. 13.19 G-2,2) wheren the court (consstent wth the vews e pressed
n the above-cted cases that a partnershp nterest s a capta asset
and that gan or oss reazed upon the sae of such an nterest s capta
gan or oss) hed that the bass for computng gan or oss on an asset
purchased by a partnershp and sod after the retrement of one of the
partners was the orgna cost of such asset when acqured by the frm.
It s accordngy the opnon of ths offce that the sae of a partner-
shp nterest shoud be treated as the sae of a capta asset under the
provsons of secton 117 of the Interna Revenue Code. The appca-
ton of ths rue shoud, of course, be mted to those cases n whch the
transacton n substance and effect, as dstngushed from form and
appearance, s essentay the sae of a partnershp nterest. (See
state of erbert . atch et a. v. Commssoner, 1 T. C. 2 1.) For
e ampe, payments made to a retrng partner whch represent hs
dstrbutve share of earnngs for past servces shoud be treated as
ordnary ncome rather than the proceeds derved from a sae of hs
nterest. (See everng v. eber Smth, 90 Fed. (2d) 90; Ct. D.
1297, C. . 193 -1, 277; Rchard S. Doye v. Commssoner, 102 Fed.
(2d) 0; ames Wesey Mc fee et v . v. Commssoner, 9 T. C. 720.)
See aso Commssoner v. George Whtney et a. (169 Fed. (2d) 62;
Ct. D. 1719, C. . 19 9-1,70, certorar dened, 33 U. S. 92) wheren
the court-hed that secton 2 (b) (1) ( ) of the Interna Revenue Code
precuded the ndvdua partners from deductng capta osses resut-
ng from ther sae of the partnershp property to a corporaton more
than a ma|orty of the stock of whch was owned by them.
G. C. M. 10092 (C. . I-1,11 (1932)) s hereby revoked. Other
opnons of ths offce to the e tent nconsstent wth the vew that a
partnershp nterest s a capta asset are modfed to conform herewth.
Chares Ophant,
Chef Counse, ureau of Interna Revenue.
S CTION 122. N T OP R TING LOSS
D DUCTION
Secton 29.122-2: Computaton of net operat- 19 0-3-132 6
ng oss n case of corporaton. Ct. D. 172
INCOM T INT RN L R NU COD D CISION OF SUrR M COURT
1. Gnoss Income Deductons Net Operatnq Losses Carry-
over Computaton To e Made Under Statute n ffect
Durng Tear of Loss.
Id. 19 1 pettoner corporaton sustaned a oss resutng from the
worthessness of the stock of a whoy owned suhsdary. Ths oss
was a ong-term capta oss under secton 23(g) of the Interna evc-
nue Code, the aw appcabe n 19 1. Pettoner contends that
athough ts oss was Incurred n 19 1, determnaton of the amount
of net operatng oss was postponed unt 19 2, when t sought to
carry over and deduct such net operatng oss, and that the 19 2
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
S 29.122-2.
CO
statute, whch amended secton 23(g) of the Code to make such a
oss as that suffered by pettoner an ordnary rather than a capta
oss, therefore governs that determnaton. ed: In the computa-
ton of net operatng oss, the governng statutes are those n effect
durng the ta abe year when the transacton occurred. The amount
of net operatng oss whch may be utzed as a carry-over or carry-
back and the e tent to whch t may be used as an offset to net
ncome n another year depend upon the aw of the year n whch the
carry s effectve, whe the net operatng oss deducton whch may
be taken n any one year depends upon the aw n effect durng that
year.
2. Decson ffbmed.
Decson of the Unted States Court of ppeas, S th Crcut (170
Fed. (2d) 1001 (19 )), affrmng decson of the Ta Court (9 T. C.
31 ), affrmed.
STP M COU T OF UNIT D ST T S
Reo Motors, Inc., pettoner, v. Commssoner of Interna Revenue
On wrt of certorar to the Unted States Court of ppeas for the S th Crcut
anuary 9, 19 0
OPINION
Mr. Chef ustce nson devered the opnon of the Court
n asserted confct between the decson beow and that of the Court of
ppeas for the Ffth Crcut n Commssoner v. Moore, Inc., 1 1 Fed. (2d) 27,
made ths an approprate case for our revew on wrt of certorar.1 recta
of the facts must precede defnton of the ssue.
Pettoner s a Mchgan corporaton engaged n the manufacture of motor
vehces. On February 1, 19 1, Reo Saes Corp., a whoy owned subsdary,
was dssoved and a of ts assets, sub|ect to a ts abtes, were transferred
to pettoner. t the date of dssouton, Reo Saes was Indebted to pettoner
n an amount greater than the vaue of ts net assets. Consequenty, ts stock,
whch had an ad|usted bass n pettoner s hands of 1, 1,902.79, was worthess.
Ths oss was a ong-term capta oss under the aw appcabe n 19 1. It
was so camed by pettoner and aowed by the Commssoner.
Pettoner reazed no gans from the sae or e change of capta assets n
19 1. Its gross ncome amounted to 2, 73,239. 9, whe aowabe deductons
under Chapter 1 of the Interna Revenue Code, e cusve of the capta oss
on Reo Saes stock, amounted to ,f2 21 ,727.0 . Wth the Reo Saes stock oss
ncuded, pettoner s aowabe deductons e ceeded ts gross ncome by
1,19 ,309.9 .
Under the ta aws appcabe n 19 1, pettoner s capta oss on Reo Saes
stock coud not have been utzed as a net operatng oss to be carred over to
subsequent years. Secton 122(a) of the Code defnes net operatng oss as
the e cess of the deductons aowed by ths chapter over the gross ncome,
wth the e ceptons and mtatons provded n subsecton (d). The e cep-
tons outned n secton 122(d) ncuded the foowng, whch s pertnent here:
( ) Long-term capta gans and ong-term capta osses sha be taken
nto account wthout regard to the provsons of secton 117(b). s so
computed the amount deductbe on account of ons-term capta osses sha
not e ceed the amount ncudbe on account of ong-term capta gans, and
the amount deductbe on account of short-term capta osses sha not
e ceed the amount ncudbe on account of short-term capta gans;

1 337 U. S. 923.
1 Secton 23(s) of the Interna Revenue Coe, 26 D. S. C. secton 23(g).
Secton 122 (a) was amended by secton 10 (e) (3) of the Revenue ct of 19 2 to read
w|th the e ceptons, addtons, and mtatons provded In subsecton (d).
Secton 122(d) ( ) was amended by secton 1 0(e) of the Revenue ct of 19 2 to read
as foows:
( ) Gans and osses from saes or e changes of capta assets sha be taken Into
account wthout regard to the provsons of secton 117(b). s so computed the amount
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
G
29.122-2.
Snce pettoner reazed no ong-term capta gans n 19 1, ts ong-term capta
oss on the eo Saes stock coud not enter nto the computaton of net operatng
oss.
In the Revenue ct of 19 2, secton 23(g) of the Code, whch defnes capta
osses, was amended by addng subsecton ( ). Ths amendment had the prac-
tca effect of makng osses such as that suffered by pettoner In the dssouton
of Reo Saes Corp. ordnary rather than capta osses. Under 19 2 aw, there-
fore, the e cepton set out n secton 122(d) ( ) s nappcabe, and a oss of
ths knd may enter nto the computaton of net operatng oss.
It s pettoner s contenton, refected n ts 19 2 ncome ta returns, that a-
though ts oss n the qudaton of Reo Saes Corp. was ncurred n 19 1,
determnaton of the amount of net operatng oss was postponed unt 19 2, when
t sought to carry over and deduct such net operatng oss, and that the 19 2
statutes therefore govern that determnaton. Snce, under the 19 2 statutes,
ts oss on Reo Saes stock was an ordnary oss, t cams the rght to ncude
that oss n the computaton of net operatng oss for carry-over and deducton
from gross ncome n 19 2. Whe secton 101 of the Revenue ct of 19 2 pro-
vdes that cept as otherwse e pressy provded, the amendments made by
ths tte sha be appcabe ony wth respect to ta abe years begnnng after
December 31,19 1. pettoner contends that ths smpy means that such amend-
ments sha be appcabe ony n computng a abty for ta years after
December 31, 19 1.
The ssue s, therefore, whether, n the computaton of net operatng oss, the
governng statutes are those n effect durng the year when the transacton
occurred (19 1), or whether the statutes n effect durng the year when the net
operatng oss deducton s taken (19 2) are controng. The Commssoner s
dsaowance of pettoner s net operatng oss deducton n 19 2 was uphed
hy the Ta Court, 9 T. C. 31 . and the court of appeas affrmed, 170 Fed. (2d)
1001.
We thnk that a net operatng oss must be computed on the bass of the ta
aws appcabe to the year n whch the oss was suffered. What pettoner seeks
here s not the knd of reef whch the statute was desgned to grant It asks
that the carry-over secton be used as a vehce by whch t may take advantage
of changes n the ta aws n years after the ta abe event has occurred. We
fnd nothng n the anguage or egsatve hstory of the statutes to |ustfy such
an nterpretaton.
The scheme of the statute s ths: Secton 23(s) of the Code permts as a
deducton from gross ncome the net operatng oss deducton computed under
secton 122. The amount of that deducton s determned n three separate
steps. Frst, the net operatng oss s determned. Secton 122(a) provdes
the defnton and method of computaton of net operatng oss, specfcay pro-
vdng that the e ceptons and mtatons of secton 122(d) are appcabe n ts
computaton. Second, net operatng oss havng been determned, the amount
and e tent to whch t may be utzed ns a carry-over s set out n secton
122(b)(2), and as a carry-back n secton 122(b)(1). Fnay, the amount
deductbe on nccount of such osses sha not e ceed the amount Incudbe on account
ofsue gans.
It was ths amendment that was nvoved n Commssoner . oore, 1 1 Fed. (2d) 27.
In 1S 1 Moore bad a ong-term capta oss of 17,02 and short-term capta gans of
2, . Under secton 122(d)( ) as It stood In 19 1 (see te t, supra). Inns-term capta
osses coud not be deducted from short-term capta sans n computng net operatng
osses, whe under the 10 2 amendment the dstncton between Ions and short-term
ranta osses was wthdrawn. Ta payer therefore had no net operatng oss n 19 1, but
naer the 19 2 statute he woud have had such a oss to the e tent of hs short-term capta
Wn of 2, . The Court of ppeas for the Ffth Crcut approved such an offset n
the computaton of net operatng oss to be carred over to 19 2 and deducted n that year,
that decson s obvousy Inconsstent wth the vew we take of the statute and must
be dsapproved.
Subsecton ( ). whch was added by secton 123(a)(1) of the Revenue ct of 19 2,
Provdes that for the purpose of determnng capta osses, stock n a corporaton affated
Wtn the ta payer sha not be deemed n capta asset. ffaton s defned n terms
taat ceary comprehend pettoner s ownershp of Reo Saes Corp.
See n. R. Rept. No. 3 , 76th Cong.. 1st sess. (1939) C. . 1939-2, 0 ; S. Rept.
. 1631. 77th Cong.. 2d sess. (19 2) C. . 19 2-2. 0 .
(a) Defnton of Net Operatng Loss. s used
ed In ths secton, the term net
operatng oss means the e cess of the deductons aowed bv ths chapter over the gross
a|ara16 Wtb thC e ccPtons and mtatons provded In subsecton (d). See note 3,
(2) Net operatng oss carry-over. If for any ta abe year the ta payer has a
ft operatng oss, such net operatng oss sa be a net operatng oss carrv-ove r for each
the two succeedng ta abe years, e cept that the carry over n the case of the second
succeedng ta abe year sha be the e cess, f any, of the amount of bucI net operatng
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.122-2.
62
whch may actuay be deducted from gross Income under secton 23(s) Is com-
puted under the terms of secton 122(c) That secton provdes for the aggre-
gaton of permssbe carry-overs and carry-backs and the appcaton of certan
ad|ustments thereto.
The startng pont s thus the determnaton of net operatng oss under sec-
ton 122(a). We may pont brefy to severa crcumstances whch, we thnk,
requre a hodng that net operatng oss must be computed soey wth reference
to the statutes n effect durng the year when the oss occurred.
Frst, under pettoner s theory, the net operatng oss sustaned In any gven
year woud not be a f ed amount but woud vary from year to year dependng
upon changes n the ta aws. ut secton 122(a) defnes net operatng oss as
the e cess of the deductons aowed by ths chapter over the gross ncome.
Ceary, determnaton of the amount of gross ncome and of aowabe deductons
for any gven year must depend upon the ta statutes n effect durng that year.
If, as pettoner contends, 19 2 aw governs athough the oss occurred In 19 1,
t s dffcut to see why the whoe of ts 19 1 operatons, and pot merey the Reo
Saes qudaton, shoud not be recomputed on the bass of the ncome and
deducton provsons appcabe n 19 2. Pettoner does not suggest such a
recomputaton, n spte of the fact that the terms n whch net operatng oss Is
defned gross Income and deductons aowed by ths chapter are equay
appcabe n the computaton of ncome ta es generay. nd even f a dstnc-
ton coud be drawn, so far as appcabe aw s concerned, between computaton
of net operatng oss and computaton of ordnary ta abty, we shoud thnk
It straned and anomaous to read secton 122(a) as defnng net operatng oss
n ths case as the e cess of the deductons aowed for 19 2 ncomes over the
gross ncome earned n 19 1 but computed accordng to 19 2 aw.
Furthermore, the anguage of secton 122(b) negatves the contenton that net
operatng oss for any gven year s not a f ed amount but vares dependng upon
the aw n effect durng the year when the deducton Is taken. Secton 122(b) (2),
for e ampe, states that f for any ta abe year the ta payer has a net operatng
oss, such net operatng oss sha be a carry-over for the two succeedng
years. Under pettoner s nterpretaton, such net operatng oss for any
ta abe year may be dfferent amounts at dfferent tmes. nd, as n ths case,
what was no net operatng oss at a for the year when the event occurred be-
comes a oss for that year through subsequent changes n the statutes. Smary,
n some cases In whch the ta payer bad net Income for the year under con-
trong aw, subsequent changes n the aw mght produce a net operatng oss
for that year f pettoner s constructon of the statute prevaed. We fnd no
warrant for the vew that Congress Intended that a statute desgned to equnze
ta burdens shoud be used to produce net osses where none had prevousy
e sted.
We aso agree wth the court beow that the words of secton 101 of the Revenue
ct of 19 2, whch states that the amendments enacted theren sha be app-
cabe ony wth respect to ta abe years begnnng after December 31, 19 1,
cannot be read to mean sha be appcabe ony n computng ta abty for
ta abe years begnnng after December 31. 19 1. To appy secton 23(g) ( )
to estabsh a net operatng oss s ceary to appy the 19 2 amendment wth
respect to 19 1, contrary to the statute.
Pettoner fnds comfort n the fact that the 192 ,1926, 192 , and 1932 Revenue
cts, whch permtted the carry-over of net oss from an earer year, e pressy
provded that such net oss shoud be computed under the aw n effect durng
the earer perod, whe the present Code contans no such provson. Two
observatons may be made: frst, that n revvng carry-overs n 1939 after a
oss over the net ncome for the ntervenng ta abe year computed n snch
a way that the carry-over must be used to offset certan nonta abe, as we as ta abe.
Income. Secton 122(b) (1) Is smar In anguage and theory.
(c) mount or Net Opebatnq Loss Deducton. The amount of the net operatng
oss deducton sha be the aggregate of the net operatng oss carry-overs and of the net
operatng oss carry-backs to the ta abe year reduced by the amount, f any, by whch
the net Income (computed wth the e ceptons and mtatons provded n Rubsecton (d)
(1) (2) (3) and ( )) e ceeds, In the case of a corporaton, the norma-ta
net ncome (computed wthout such deducton and wthout the credt provded In secton
26(e)):
In commentng upon a smar possbty n connecton wth the net oss provsons
of the Revenue ct of 192 , the ouse Commttee on Ways and Means stated: If capta
osses were aowed as a deducton n computng the net oss, t woud resut In the
anomaous stuaton of a ta payer payng a ta In one year but at the same tme havng
a net oss whch he coud carry over as a deducton n computng the ta for the subse-
quent year. . R. Rept. No. 179, G th Cong., stsess. (192 ) C. . 1939-1 (Part 2), 2 1 .
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
G3
29.131-1.
7-year apse, Congress patterned the new statute generay on the pror practce
wthout any suggeston of change n ths partcuar; and second, that whe
such e press provsons were approprate n Revenue cts pror to the Code, when
the aw of a pror year was of no effect when superseded by a new ct uness
specfcay made appcabe, the present Code has contnuous appcaton, and
ncorporaton of prevous statutes s unnecessary. Instead, the od provsons
reman n effect for pror years, and genera provsons, such as secton 101 of
the 1I 2 ct, gve amendments prospectve appcaton ony, uness otherwse
specfcay provded.
The resut s that net operatng oss must be computed soey on the bass
of the statutes n effect durng the ta abe year when the oss was ncurred.
Ony f such a oss e sts under those statutes w a ta payer have anythng
that may be carred over or back. Secton 122 (a) and (d). The amount of
net operatng oss whch may be utzed ns a carry-over or carry-back and the
e tent to whch t may be used as an offset to net ncome n another yenr depend
upon the aw of the year n whch the carry s effectve, secton 122(b), whe
the net operatng oss deducton whch may be taken n any one year depsnds
upon the aw n effect durng that year. Sectons 23(s) and 122(c).
Wth respect to pettoner s other contentons, t s suffcent to say that they
gnore the trchotomy pany estabshed wth respect to secton 122: determna-
ton of net operatng oss; determnaton of the amount and e tent of carry-over
and carry-back ; and determnaton of net operatng oss deducton. The decson
of the court of appeas s
ffrmed.
Mr. ustce Dougas took no part n the consderaton or decson of ths case.
SUPPL M NT C CR DITS G INST T
S CTION 131. T S OF FOR IGN COUNTRI S ND
POSS SSIONS OF UNIT D ST T S
Secton 29.131-1: nayss of credt for 19 0- -1329
ta es. I. T. 3997
INT RN L R NU COD
The ta mposed on transportaton companes by the Domncan
Repubc pursuant to artce 1, secton 1, chapter I of Income Ta
Law No. 1027 dated February 11, 19 9, on net ncome determned as
provded n artce 11, secton 2, chapter I of such aw, consttutes
an ncome ta whch s aowabe ns a credt aganst Unted States
ncome ta to the e tent provded by secton 131 of the Interna
Revenue Code.
dvce s requested whether the ta mposed on transportaton com-
panes bv the Domncan Repubc pursuant to artce 1, secton 1,
chapter I of Income Ta Law No. 1927 dated February 11, 19 9, on
net ncome determned as provded n artce 11, secton 2, chapter I of
such aw, consttutes an ncome ta whch s aowabe as a credt
aganst Unted States ncome ta .
The above-cted provsons of Domncan aw read n part as foows:
sncr. 1. n annua ta s estabshed on the net Income obtaned In the
Domncan Repubc of any natura or |urdca person, natona or foregn,
whether or not domced n the country.
Pettoner rees, nter aa, npon some anguage n the report of the Senate Fnance
SoFW S /Lt ne Itf nue of 1 2- s- cft- No. 1631, 77th Cong.. 2d sess., pp. 122.
.r .C- - 19 ,2-2. 0 - PP- 6, 7 . ut that porton of the report Is not concerned
un computaton of net operatng oss but wth estabshment of carry back provsons
na amendment of the carry-over secton. Its references are to the aw appcabe In
Determnng the amount and e tent of the carry-over and carry back (secton 122(b)).
not to that appcabe In determnng net operatng oss (secton 122 (a) and (d)).
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29,131-1.
6
bt. 11. For the purpose of ths aw, companes not estabshed n the Repubc
whch are engaged n the busness of transportaton between natona terrtory
and foregn countres sha be consdered as obtanng net ncome from Domncan
sources equa to 6 percent of the gross amount of freght from passenger fares
and cargo reated to such transportaton, uness there be proof to the contrary.
If by ths proof t Is estabshed that net ncome s greater or ess than 6 percent
Indcated, the ta sha appy to the ncome actuay obtaned.
Secton 131 of the Interna Revenue Code provdes n part as foows:
(a) owance of Credt. If the ta payer chooses to have the benefts of
ths secton, the ta mposed by ts chanter Chapter 1 of the Code , e cept the
ta mposed under secton 102, sha be credted wth:
(1) Ctzens and domestc corporatons. In the case of a
domestc corporaton, the amount of any ncome ta es pad or
accrued durng the ta abe year to any foregn country
In order for a ta pad to a foregn country to be aowabe as a
credt aganst Unted States ncome ta under secton 131 of the In-
terna Revenue Code, supra, t must be shown that the ta mposed by
the foregn aw s a ta on ncome wthn the Unted States concept
or s a ta mposed n eu of an ncome ta .
It s hed that the ta mposed on transportaton companes by the
Domncan Repubc pursuant to artce 1, secton 1, chapter I of
Income Ta Law No. 1927 dated February 11, 19 9, on net ncome
determned as provded n artce 11, secton 2, chapter I of such aw,
consttutes an ncome ta whch s aowabe as a credt aganst Unted
States ncome ta to the e tent provded by secton 131 of the Interna
Revenue Code.
The ta es on dvdends mposed by the Repubc of Cuba pursuant
to subparapraph (3), tarff second, artce III, chapter s th of the
mergency Ta Law of anuary 29, 1931. and artce , secton sec-
ond, chapter thrd of Resouton-Law No. 1 dated December 31, 19 1,
as such aws were amended by Genera Ta Law No. 7 dated pr ,
19 3, as we as the surta mposed by secton 1, artce frst of the
mergency Ta Law of September , 19 1, quafy as ncome ta es
whch are aowabe, to the e tent provded by secton 131 of the
Interna Revenue Code, as credts aganst Unted States ncome ta .
dvce s requested whether the ta es on dvdends mposed by the
Repubc of Cuba pursuant to subparagraph (3), tarff second, artce
III, chapter s th of the mergency Ta Law of anuary 29, 1931,
and artce , secton second, chapter thrd of Resouton-Law No. 1
dated December 31,19 1, as such aws were amended by Genera Ta
Law No. 7 dated pr ,19 3, as we as the surta mposed by secton
1, artce frst of the mergency Ta Law of September ,19 1, quafy
as ncome ta es aowabe, under secton 131 of the Interna Revenue
Code, as credts aganst Unted States ncome ta .
ccordng to submtted e cerpts (transated) of Cuban aw, tarff
second, artce III, chapter s th (Genera Ta on Profts) of the
mergency Ta Law of anuary 29,1931, provdes n part as foows:
There w be pad:

(3) Pour percent on dvdends on stock of corporatons of a knds
and of sent partnershps the nvestment n whch Is represented by shares of
stock, and those of mted abty, f any.
19 0- -13299
I. T. 399
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
6
29.131-1.
Ths statute was amended by Genera Ta Law No. 7 dated pr ,
19 3, to provde for an ncrease n the rate of ta on dvdends from
percent to percent.
rtce , secton second, chapter thrd of Resouton-Law No. 1,
dated December 31,19 1, provdes as foows:
ta s estabshed on the ncome from a knds of saares, wages, compen-
saton and pensons, honorarums, fees or emouments, or from persona or rea
property, securtes, stocks, bonds, obgatons, ttuos (another word for se-
curtes) of a knds, dvdends, nterest, proceeds and any other knd of per-
sona revenue comng from smar or anaogous sources
Ths statute was amended by Genera Ta Law No. 7 dated pr ,
19 3, to provde for an ncrease n the graduated rates of ta on
dvdends.
Secton 1, artce frst of the mergency Ta Law (Law No. 2 ) of
September ,19 1, provdes n part as foows:
surta s estabshed, up to twenty per centum (20 ), e gbe begnnng
from the effectve date of ths aw and unt the new Genera udgets of the
Naton, approved by Congress, become effectve, on a tarffs, scaes and amounts
of the ta es and contrbutons of the Naton now n force.
Secton 131 of the Interna Revenue Code provdes n part as
foows:
(a) owance of Credt. If the ta payer chooses to have the benefts of ths
secton, the ta mposed by ths chapter Chapter 1 of the Code , e cept the ta
mposed under secton 1C2, sha be credted wth:
(1) Ctzens and domestc corporatons. In the case of a
domestc corporaton, the amount of any ncome ta es pad or ac-
crued durng the ta ube year to any foregn country
It s hed that the ta es mposed on dvdends by the above-cted
Cuban statutes quafy as ncome ta es whch are aowabe, under
secton 131 of the Interna Revenue Code, as credts aganst Unted
States ncome ta . (See I. T. 3 6 , C. . 19 2-2,13 .)
The ta es mposed under artces 96 and 07 of razan Income
Ta Law No. 17 dated March 13, 19 2, as amended, revsed, and
consodated by Decree Law No. S of September 23, 19 3, and Law
No. 1 of November 23, 19 7, fa wthn the Unted States concept
of ncome ta es and are aowabe as a credt aganst Unted States
ncome ta under secton 131(a) of the Interna tevenue Code,
sub|ect to the mtatons contaned n secton 131(b) of the Code.
dvce s requested whether the ta es mposed under artces 96
and 97 of razan Income Ta Law No. 17 dated March 13, 19 2,
as amended, revsed, and consodated by Decree Law No. of Sep-
tember 23,19 3, and Law No. 1 of November 2 ,19 7, are aowabe
as a credt aganst Unted States ncome ta .
The reguatons (Decree No. 2 ,239 of December 22,19 7) reatng
to the above-cted provsons of razan aw read as foows:
rtce 90. The foowng are sub|ect to wthhodng of the ta at the source:
1. t the rate of C percent; Interest of bearer securtes of federa, state, or
muncpa pubc debts, e cept those whch e pressy en|oy federa fsca
19 0-12-1336
I. T. 013
mmunty;
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.131-1.
66
2. t the rate of 1 percent:
(a) Dvdends of bearer shares and any bonuses attrbuted to them;
(b) enefts and any other earnngs on bearer securtes caed benefcary
shares or founder shares;
(c) dvantages receved by the prncpas and partners of frms or com-
panes, wth the ncreased vauaton of ther assets, n the case of ncor-
poraton or organzaton of a new company;
(d) The vaue of new shares and the benefts n addton to dvdends
dstrbuted to the hoders of bearer shares, n the eases:
I. Of utzaton of any funds, Incudng those of amortzaton, de-
precaton, and reapprasa of assets;
II. Of ncrease of capta, wth resources taken from any funds;
III. Of ncreased vauaton of the assets or the sae of part of them,
wthout the reducton of capta;
(e) The nterest of debentures or of other bearer obgatons dervng
from oans n or out of the country, by natona companes or foregn com-
panes whch operate n the natona terrtory;
(f) Profts n e cess of 1,000 cruzeros, dervng from cash przes, obtaned
n a ottery, drawngs of any knd or sportng contests; ncudng those of
the turf, whch aso ncude bettngs.
Soe Paragbaph. The rates to whch ths artce refers sha fa on the gross
earnngs.
rt. 97. Income receved by the foowng sha be sub|ect to the wthhodng
of the ta at the rate of 1 percent:
(a) Indvduas or corporate bodes resdng or domced abroad;
(6) Resdents of the country who were absent abroad for more than 12
months, e cept those referred to n artce 73;
(c) Resdents abroad who reman n razan terrtory for ess than 12
months.

3. The rate referred to In ths artce w fa on the gross earnngs, uness
they are derved from rea property, n whch case t w be aowabe to deduct,
f proved, the e penses provded for n artce 16.
Secton 131 of the Interna Revenue Code provdes n part as
foows:
(a) owance of Credt. If the ta payer chooses to have the benefts of
ths secton, the ta mposed by ths chapter Chapter 1 of the Code , e cept
the ta mposed under secton 102, sha be credted wth:
(1) Ctzens and domestc corporatons. In the case of a ctzen of
the Unted States and of a domestc corporaton, the amount of any
ncome ta es pad or accrued durng the ta abe year to any
foregn country
In order for a ta pad to a foregn country to be aowabe as
a credt aganst Unted States ncome ta under secton 131 of the
Interna Revenue Code, supra, t must be shown that the ta mposed
by the foregn aw s a ta on ncome wthn the Unted States con-
cept, as dstngushed from a ta on gross recepts, or s a ta pad
n eu of an ncome ta .
raz mposes ta es on ndvduas and corporatons on a bass
whch fas wthn the Unted States concept of ta es on ncome. The
provsons n artces 96 and 97, supra, that the rates provded theren
sha fa on gross earnngs, e cept n the case of earnngs derved from
rea property, assume the aspects of sectons 211 and 231 of the Inter-
na Revenue Code wth respect to the ta aton of gross ncome of
nonresdent aen ndvduas and nonresdent foregn corporatons.
ccordngy, t s hed that the ta es mposed under artces 96
and 97 of razan Income Ta Law No. 17 dated March 13, 19-12,
as amended, revsed, and consodated by Decree Law No. of
September 23, 19 3, and Law No. 1 of November 2 , 19 7, fa
wthn the Unted States concept of ncome ta es and are aowabe
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
67
29.131-1.
as a credt aganst Unted States ncome ta under secton 131(a)
of the Interna Revenue Code, sub|ect to the mtatons contaned
n secton 131 (b) of the Code.
The ta mposed under artce G3 of the Loca Ta Law of
apan (Law No. 110 of uy 7, 19 , and Law No. 200 of uy 30,
10 , as amended by Law No. 2 3 of December 1 , 19 ) fas
wthn the Unted States concept of an ncome ta and s aowabe
as a credt aganst Unted States ncome ta under secton 131(a)
of the Interna Revenue Code, sub|ect to the mtatons contaned
n secton 131(b) of the Code.
dvce s requested whether the ta mposed under artce 63 of
the Loca Ta Law of apan (Law No. 110 of uy 7, 19 , and
Law No. 200 of uy 30, 19 , as amended by Law No. 2 3 of De-
cember 1 , 19 ) quafes as an ncome ta whch may be aowed
as a credt aganst Unted States ncome ta .
The pertnent provsons of the above-cted aw read n part as
foows:
btce 63. nterprse ta sha be mposed on enterprse conducted by |urs-
tc persons (e cudng |urstc persons under artce 3 of the Cv Code (Law
No. 0, 1 90)) and the frst and second categores of enterprse conducted by
ndvduas on the bass of the sad |urstc persons and ndvduas by the Do,
urban or rura prefecture concerned, n whch the pace of enterprse e sts.

sr. 0 . The ncome mentoned n artce 03, paragraph 1 sha be the ncome
of every busness fsca year and qudated ncome n a |urstc person, and sha
be the ncome of busness n the precedng year n an ndvdua.

The ncome of each busness year of a |urstc person sha be n accordance
wth the amount obtaned by deductng from the tota profts the tota osses
of each busness year.

The ncome of an ndvdua sha be the amount obtaned by subtractng the
necessary e penses from the tota ncome n the precedng year or the perod
between anuary 1st of the precedng year to the date of aboton of the
enterprse.

m. CT. The standard mposton rate of enterprse ta sha be 7. percent
for the enterprse conducted by |urstc persons (e cudng speca |urstc
persons) or the frst category enterprse conducted by ndvduas and per-
cent for the enterprse conducted by speca |urstc person and second cate-
gory enterprse conducted by Indvduas
Secton 131 of the Interna Revenue Code provdes n part as
foows:
(a) owance of Credt. If the ta payer chooses to have the benefts
of ths secton, the ta mposed by ths chapter Chapter 1 of the Code ,
e cept the ta mposed under secton 102, sha be credted wth:
(1) Ctzens and domestc corporatons. In the case of a ctzen of
the Unted States and of a domestc corporaton, the amount of any
ncome ta es pad or accrued durng the ta abe year to any
foregn country
In order for a ta pad to a foregn country to be aowabe as
a credt aganst Unted States ncome ta under secton 131 of the
19 0-12-13369
I. T. 01
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.131-2.
6
Interna Revenue Code, supra, t must be shown that the ta m-
posed by the foregn aw s a ta on ncome wthn the Unted
States concept or s a ta pad n eu of an ncome ta .
It s hed that the enterprse ta mposed under artce 63 of the
Loca Ta Law of apan (Law No. 110 of uy 7, 19 , and Law
No. 200 of uy 30, 19 , as amended by Law No. 2 3 of December
1 ,19 ) fas wthn the Unted States concept of an ncome ta and
s aowabe as a credt aganst Unted States ncome ta under
secton 131(a) of the Interna Revenue Code, sub|ect to the m-
tatons contaned n secton 131(b) of the Code.
Secton- 29.131-2: Meanng of terms, 19 0-7-13323
I. T. 002
INT RN L R NU COD
The ta pad pursuant to Domncan Repubc Law No. 9 2 of
ugust 30, 19 , on sugar produced and sod for e port s, to the
e tent provded n Domncan Law No. 1937 of February 26, 19 9,
but not n e cess of Domncan ncome ta abty under Law No.
1927 of February 11, 19 9, a ta pad n eu of an ncome ta wthn
the meanng of secton 131(h) of the Interna Revenue Code.
dvce s requested whether the ta pad to the Domncan Repubc
on sugar produced and sod for e port, pursuant to Domncan Law
No. 9 2 of ugust 30, 19 , s a ta mposed n eu of an ncome ta
wthn the meanng of secton 131(h) of the Interna Revenue Code.
Domncan Law No. 9 2 of ugust 30, 19 , mposes a ta on raw
and refned sugars, srups, and other products contanng qud sugar
whch are produced and sod for e port, the ta beng based upon
e port prce. Smar products produced for consumpton wthn the
Domncan Repubc are specfcay e empt from the ta . The ta
must be pad monthy wthn 10 days foowng the month of
producton.
rtce 1 of chapter 1 of Domncan Law No. 1927 dated February
11, 19 9, provdes n part as foows:
rtce 1. n annua ta s estabshed on the net Income obtaned n the
Domncan Repubc of any natura or |urdca person, natona or foregn,
whether or not domced n the country.
Domncan Law No. 1937 of February 2G, 19 9, provdes n part that
the Natona Congress, on behaf of the Repubc
Consderng : That the ta on the producton of crude and ordnary sugar
mposed n accordance wth Law No. 9 2 s actuay a ta on the
profts derved from the ndustra operaton of sugar;
as nacted the Foowng Law :
Sot.e rtce. s of the date of the promugaton of the Income Ta Law
No. 1927 dated February 11,19 9, payments made n compance wth Law No. 9 2
w be consdered as payments on account of the ta estabshed by
ths aw. Nevertheess, payments made n compance wth ths ast aw w
be fna and no refund or credt of the baance w be made f ths payment was
greater than the ncome ta whch shoud have been pad.
Secton 131 of the Interna Revenue Code provdes n part as
foows:
(a) owance of Credt. If te ta payer chooses to have the benefts of
ths secton, the ta mposed by ths chapter Chapter 1 of the Code , e cept the
ta mposed under secton 102, sha be credted wth:
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
09
29.1 7-2.
(1) Ctzens and domestc corporatons. In the case of a ctzen of
the Unted States and of a domestc corporaton, the amount of any ncome,
war-profts, and e cess-profts ta es pad or accrued durng the ta abe
year to any foregn country

(h) Credt for Ta es n Leu of Income, tc., Ta es. For the purposes of
ths secton and secton 23(c)(1), the term ncome, war-profts, and e cess-
profts ta es sha ncude a ta pad n eu of a ta upon ncome, war-profts,
or e cess-profts otherwse generay mposed by any foregn country
In vew of the fact that Law No. 1937 provdes that the ta mposed
on the producton of crude and ordnary sugar n accordance wth
Law No. 9 2 s actuay a ta ton the profts derved from the ndus-
tra operaton of sugar, t s hed that the ta pad under Law No.
9 2 s, to the e tent provded n Law No. 1937, but not n e cess of
the ncome ta abty mposed by Law No. 1927, a ta pad n eu
of an ncome ta wthn the meanng of secton 131 (h) of the Interna
Revenue Code.
SUPPL M NT D. R TURNS ND P YM NT OF T
S CTION 1 1. CONSOLID T D R TURNS
Secton 23.11, Reguatons 10 : Consodated 19 0-3-132 2
returns for subsequent 3|ears. I. T. 3992
INT RN L R NU COD
Fng of consodated Federa ncome ta returns for fsca years
endng n 19. 0 by affated corporatons whch fed such returns for
fsca years ended n 19 9.
dvce s requested whether, under the provsons of cause (2) of
secton 23.11(a) of Reguatons 10 , affated corporatons whch
fed consodated Federa ncome ta returns for fsca years ended
n 19 9 may eect to fe separate Federa ncome ta returns for fsca
years endng n 19 0.
It s hed that the condtons stated n cause (2) of secton 23.11 (a)
of Reguatons 10 for the aowance of a new eecton do not e st
wth respect to fsca years endng n 19 0. ccordngy, affated
corporatons whch fed consodated Federa ncome ta returns for
fsca years ended n 19 9 w not be permtted to fe separate Federa
ncome ta returns for fsca years endng n 19 0 uness one of the
other condtons provded n secton 23.11(a) of Reguatons 10 s
met, or uness a subsequent change n the aw or reguatons shoud
gve rse to an occason for an eecton for such years.
S CTION 1 7. INFORM TION T SOURC
Secton 29.1 7-2: Return of nformaton as
to payments to empoyees.
INT RN L R NU COD
Premums pad by e empt empoyees trust for current fe nsur-
ance protecton. (See Mn. G 77, page 1G.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
S 29.162-1.1
70
SUPPL M NT ST T S ND TRUSTS
S CTION 162. N T INCOM
Secton 29.162-1: Income of estates and 19 0-6-1331
trusts. Ct. D. 1730
INCOM T INT RN L R NU COD D CISION OF SUPR M COURT
1. Trust Income Net Income Chartabe Contrbuton Perma-
nenty Set sde From Capta Gans Percentage Taken
Into ccount n Computaton of Net Income.
Trustees who n 19 permanenty sot asde a chartabe contrbu-
ton from gans reazed upon the dsposton of capta assets hed
for more than 6 months were not entted, n computng the Federa
Income ta of the trust, to deduct the fu amount of the contrbuton
under secton 162(a) of the Interna Revenue Code, where ony one-
haf of those gans was taken nto account n computng net ncome
n accordance wth secton 117(b) of the Code. The words n the
atter secton whch state that ony 0 percent of certan recognzed
capta gans sha be taken Into account In computng
net ncome are treated as appyng to the entre computaton of the
ta , begnnng wth the statement of the gross ncome of the trust
and concudng wth ts ta abe net Income. That percentage of
capta gans whch e pressy s not to be taken nto account n
computng ta abe net ncome Is treated as aso e cuded from
statutory gross ncome.
2. Decson Reversed.
Decson of the Unted States Court of Cams, 1 Fed. Supp. 717
(19 0), reversed.
Supreme Court of tde Unted Stat:s
The Unted Stae of merca, pettoner, v. een W. enedct and Frank .
Smth, a Trustees, and Leand . Stocc and Unted States Trust Co. of
Nec York as Successor Trustees under the W of ohn . ndrus, Deceased
On wrt of certorar to the Unted States Court of Cams
February 13, 10 0
opnon
Mr. ustce urton devered the opnon of the Court.
The queston presented s whether trustees, who, n 19 , permanenty set
asde a chartabe contrbuton from gans reazed upon the dsposton of
capta assets hed for more than 6 months, were entted, n computng the
Federa ncome ta of the trust, to deduct the fu amount of the contrbuton,1
athough ony haf of those gans were taken nto account n computng net
Income.2 For the reasons hereafter stated, our answer s n the negatve.
S C. 162. N T INCOM .
The net ncome of the estate or trust sha be computed n the same manner and on th
ame bass as n the case of an ndvdua, e cept that
(a) There sha be aowed as a deducton (In eu of the deducton for chartabe, etc.,
contrbutons authorzed n secton 23(0)) any part of the gross ncome, I tthout mta-
ton, whch pursuant to the terms of the w or deed creatng the trust, s durng the ta -
abe year pad or permanenty set asde for te purposes and In the manner specfed n
secton 23(o), or s to be used e cusvey tor regous, chartabe, scentfc, ternry, or
educatona purposes, or for the preventon of cruety to chdren or anmas, or for the
estabshment, acquston, mantenance or operaton of a pubc cemetery not operated for
proft; ( mphass supped.) 63 Stat 60, 26 U. S. C. secton 102(a).
S C. 117. C PIT L G INS ND LOSS S.

(b) Percentage Taken Into ccount. In the case of a ta payer, other than a cor-
poraton, ony the foowng percentages of the gan or oss recognzed upon the sae or
e change of a capta asset ha be taken nto account In computng net capta gan, net
capta oss, and net ncome :
1(10 per centum If the capta asset has been hed for not more than 6 months:
0 per centum f the capta nsset as been hed for more than 6 months. 3
Stat. 0- 1, as amended, 0 Stat. 3, 20 U. S. C. secton 117(b).
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
71
29. If.2-1.
The respondents are trustees of a trust created by the w of ohn . ndrus.
The w drects that the net ncome of the trust be dvded nto 100 parts,
to be pad to certan ndvdua benefcares and to the Surdna Foundaton,
Inc., a chartabe corporaton. Pursuant to those terms the trustees perma-
nenty set asde for the Foundaton 0 percent of the trust s net ncome for the
fsca year ended pr 30,191 , the perod nvoved n ths case.
In ther fducary ta return, the trustees reported ordnary net ncome of
2 0, 67.73, and deducted from t. as a chartabe contrbuton, the 10S,2 .
( percent of that net ncome) whch they had set asde for the Surdna Founda-
ton. Ths was done under secton 102(a) of the Interna Revenue Code The
trustees aso reported gans of 00,37 .01 on the dsposton of capta assets
hed for more than 6 months. Of these gans, they took nto account ony 0
percent, amountng to 30,1 7.01, n computng the trust s ta abe ncome.
Ths was done under secton 117(b). n uncontroverted deducton of 329.60,
representng the carry-over of a 19 2 oss, reduced ths amount to 29, 7. 1.
From ths the trustees deducted percent, representng a proportonate share
of the trust s contrbuton to the Surdna Foundaton. Ths deducton amounted
to 13, 3 . 3, eavng a ta abe net ncome of 16, 21. , on whch a ta of
3, 0.3 was pad, pus nterest.
In 19 7 the trustees fed a cam for a refund of ,1 7. 1. They based ther
cam upon a 19 0 decson of the Ta Court as to the 19 1 ta es of a neary
dentca trust. ndrus Trust No. 1 v. Commssoner, 7 T. C. 73. On that
bass, the trustees camed a deducton from the aforesad 29, 7. 1, not ony
of a proportonate share of the contrbuton whch the trust had set asde from
capta gans, but of the entre amount of that contrbuton. Ths ncreased
that deducton from 13, 3 . 3 ( percent of 29, 7. 1) to 27,16 .31 ( percent
of the tota capta gans of 60,37 .01), and correspondngy reduced the trust s
ta abe net ncome from 16, 21. to 2,6 9.10.
In uy, 19 7, the Court of ppeas for the Second Crcut unanmousy
reversed the Ta Court n the case reatng to 10 1 ta es. Commssoner v.
Centra anover Sank Co., 163 Fed. (2d) 20 Ct. D. 170 , C. . 19 S-2, 93 ,
certorar dened, November, 19 7, 332 U. S. S30. The Commssoner, however,
took no acton on the trustees cam for a refund reatng to 19 ta es, and,
n 19 , the trustees fed ths proceedng for ts recovery through the Court
of Cams. Wth one |udge dssentng, that court decded n ther favor. 112
Ct CI. 0, 1 Fed. Supp. 717. To resove the resutng confct, we granted
certorar. 336 U. S. 966.
n ustraton based upon the facts n the nstant case w brng the statutory
probem nto cearer focus. trust reazes gans of 60,000 durng the ta
year from the sae of capta assets hed for more than 6 months. From these
t makes a chartabe contrbuton of 0 percent. Secton 162(a) of the Code
provdes that a trust may deduct any part of ts gross ncome whch t con-
trbutes to such a charty as the one seected. Secton 117(b) provdes that
ony 0 percent of such gans sha be taken nto account n computng net ncome.
The trustees contend that, for ta purposes, the entre 00,000 s gross
ncome, that from ths amount the 30,000 chartabe contrbuton may be
deducted under secton 162(a), and that the entre remanng 30,000 s to be
eft out of account by force of secton 117(b), thereby eavng no ta abe net
ncome, athough 30,000 goes to ndvdua benefcares. The Commssoner,
however, contends that ony the 30,000 of the recognzed capta gans that s
taken nto account by force of secton 117(b) consttutes gross ncome,
and that necessary the other 30,000 that s not to be taken nto account for
ta purposes s not gross ncome. egnnng, thus, wth 30,000 of gross
ncome, the Commssoner aows a deducton from t of that proportonate
part of the chartabe contrbuton that s attrbutabe to the haf of the recognzed
The w creatng the trust contaned no provson as to the knd of ncome from whch
the chartabe contrbutons were to be set asde, and t s not dsputed that the trustees
propery set asde the contrbutons proportonatey from capta sans and a other Income.
There s nothng to ndcate that the trustees, n settng asde the contrbuton, attempted
to aocate them to any partcuar part or percentage of the cnpta gans. See evcrna
T. ss, 2D.3 D. S. 1 , 1 9-1 0 Ct. D. , C. . III-2, 101 (193 )1 ; drey v. Com-
mssoner. 11 Fed. (2d) 1 3 (C. . 7th Cr., affrmng 1 . T. . 23 ) : Scott v. Unted
Mates, 111 ct. CI. 010. 01 -620, 7 Fed. Supp. 11, 1 - 10; Newbury v. Unted States,
102 Ct. CI. 192, 7 Fed. Supp. 16 ; McUsncr v. Commssoner, T. C. 7 0 ; state of Traser
v. Commssoner, 1 . T. . 22 ; Montgomery, Federa Ta es, states. Trusts and Gfts
179 (19 -19 9) ; 2 Nossaman, Trust dmnstraton and Ta aton 11 -116 (19 ).
See note 1, supra.
1 See note 2, supra.
See note 1, supra.
See note 2, supra.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.162-1.
72
capta gans whch has been taken nto account. That deducton amounts
to 1 ,000, eavng a ta abe net ncome of 1 ,000.
The narrow statutory queston thus presented s whether the entre recognzed
capta gans or ony that haf taken nto account under secton 117(b) sha
consttute gross ncome for ta purposes. Stated conversey, the queston
s whether that haf of a ta payer s recognzed capta gans that s not taken
nto account for ta purposes sha be eft out of account by way of ts nta
e cuson from gross ncome, or by way of ts subsequent deducton from gross
ncome. On ths precse queston the Code s sent. No provson of the
Code and nothng n the egsatve hstory or admnstratve practce e pressy
settes the course to be foowed. We, therefore, seek the purposes of the
appcabe sectons of the Code and adopt that constructon whch best gves
effect to those purposes.
We fnd that the obvous purpose of secton 162(a) s to encourage the makng
of chartabe contrbutons out of the gross ncome of a trust and, to that end,
t competey e empts such contrbutons from ncome ta , wthout the mta-
tons mposed upon chartabe contrbutons made by ndvduas or corporatons.
Ths purpose s served by each of the constructons of the Code suggested by
the partes. Under ether method of computaton the benefcares of the
chartabe contrbuton w receve t n fu and free of ta .
We then fnd that the effect of secton 117(b) s to ta recognzed capta gans
ke ordnary ncome, e cept that the ta on capta gans hed for more than
6 months s to be computed on 0 percent of the amount on whch t woud be
computed f those gans were ordnary ncome. The Commssoner s souton
accompshes precsey that resut and thus serves that purpose. In the ustra-
ton, f the gans were ordnary ncome, the amount sub|ect to ta , after the
deducton of the chartabe contrbuton, woud be 30,000. s t s, the amount
sub|ect to ta s 1 ,000. The trustees constructon In the nstant case woud
resut n ta ng the capta gans at substantay ess than 0 percent of the
amount at whch they woud be ta ed f they were ordnary ncome. To the
e tent that the amount sub|ect to ta goes beow that percentage, t fas to gve
effect to the purpose of secton 117(b). In the more e treme crcumstances
suggested by the ustraton, ths constructon woud entrey emnate the ta .
We, therefore, approve that nterpretaton of secton 117(b) and the defnton
of statutory gross ncome adopted by the Commssoner. We treat the words In
secton 117(b), whch state that ony 0 percent of certan recognzed capta
gans sha be taken nto account n computng net ncome, as appy-
ng to the entre computaton of the ta , begnnng wth the statement of the gross
Income of the trust and concudng wth ts ta abe net ncome.10 We treat that
percentage of capta gans whch e pressy s not to be taken nto account n
computng ta abe net Income as aso e cuded from statutory gross ncome.
Unted States . Peasant , 30 U. S. 3 7. 303 TCt. T . 1379, C. . 1039-1 (Part 1), 239 ;
Od Coony Trust Co. . Commssoner, 301 U. S. 379, 3 Ct. D. 1230, C. . 1037-1, 227 ;
cverng v. ss. 203 U. S. 1 , 1 7.
When the words wthout mtaton, n secton 162(a), are read n connecton wth
secton 23(o), 3 Stnt. 13-1 , as amended. 3 Stat. 0, and 6 Stat. 2 , 26 U. S. C.
secton 23(o), ther effect Is ony to make nappcabe the mtaton of 1 percent, under
secton 23(0), and any other statutory mtaton whch otherwse mght appy to char-
tabe contrbutons made out of the cross ncome of an estate or trust. Grey v. Comms-
soner, 1 . T. . 23 . 2 3, affd.. 11 Fed. (2d) 1 3. See aso, Od Coony Trust Co. v.
Commssoner, 301 U. S. 379. 3 2-3 ; Commssoner v. Centra anover ank Co., 163
Fed. (2d) 20 , 211 (C. . 2d Cr.) ; Frank Trust of 1931 v. Commssoner, 1 Fed. (2d)
11, 13 (C. . 3d Cr.) ; Scott v. Unted States. I Ct. CI. 610, 61 -620, 7 Fed. Supp.
11, 1 -S10; Netcbury v. Unted States. 102 Ct. CI. 192, 7 Fed. Supp. 16 . For the
comparabe percent mtaton appcabe to chartabe contrbutons made by corpora-
tons, see 3 Stnt. 1 -10, as amended, 0 Stat. 22. 20 U. S. C. secton 23(g).
See note 2, supra. The aternatve computaton of the ta on cnpta gans provded by
secton 117(c) (2) of the Code s consstent wth ths resut. 63 Stat. 61, as amended, 66
Stat. 3-S , 20 U. S. C. secton 117(c) (2).
It s unnecessary to revew the ntrcate arguments presented as to the termnoogy
of the Code. They do not compe the adopton of ether nterpretaton or precude the
concuson here reached. Ths s not a case In whch the trust or the statute nas requred
or even authorzed the trustees to earmark ther chartabe contrbutons as comng from
anv partcuar tems of trust ncome, or from any partcuar knd of trust ncome. The
ssue does not nvove any possbe aocaton of a chartabe deducton to ordnary Income
rather than to capta gans.
For the requrement that, under secton 102(a), each contrbuton In order to be deduct-
be must be made or permanenty set asde pursuant to the terms of the w or deed creat-
ng the trust, and aso must be from a part of the gross ncome of the trust, see Od Coony
Trust Co. v. Commssoner, 301 U. S. 370; Front Trust of 1931 v. Commssoner, 1 Fed.
(2d) 11 (C. . 3d Cr.) ; Weman v. Wech. 99 Fed. (2d) 7 (C. . 1st Cr.) ; state of
Tyer v. Commssoner, 9 . T. . 2 , 202-203. _ , _
11 See Comm soncr v. Centra anover ank Co., 103 Fed. (2d) 20 , 210; Fran Trust
of 19S1 v. Commssoner, supra; Weman v. Wech, supra; reen v. Commssoner, 7 T. C.
2C3, 277 ; Uaoy v. Commssoner, . T. . 110 , 1107.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
73
29.16 -6.
ccordngy, the acceptance by the Commssoner of the orgna return 1b
approved and the udgment of the Court of Cams s
eversed.
Mr. ustce ack and Mr. ustce ackson are of the opnon that the udg-
ment of the Court of Cams shoud be affrmed for the reasons whch It gave.
Mr. ustce Doro S took no part n the consderaton or decson of ths case.
S CTION 16 . MPLOY S TRUSTS
Secton 29.16 -6: Ta abty of benefcary 19 0-3-132 3
under a trust whch meets the requrements Mm. 6 61
of secton 16 (a).
( so Secton 22(b), Sectons 29.22(b) (2)-,
29.22(b) (2)-2, and 29.22(b) (2)- .)
mounts to be ncuded n ncome on account of dstrbuton of
or payments under nsurance or annuty contracts purchased for
empoyees under a trust e empt under secton 16 (a) of the Inter-
na Revenue Code, as amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 2 , D. C, anuary ,19 0.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
eads of Fed Dvsons, Technca Staff, and Others Concerned:
1. Secton 29.16 -6 of Reguatons 111, reatng to secton 16 (b) of
the Interna Revenue Code, as amended, provdes n part as foows:
If a trust e empt under secton 16 (a) purchases an annuty contract for an
empoyee and dstrbutes t to the empoyee In a year for whch the trust s
e empt, the contract contanng a cash surrender vaue whch may be avaabe
to an empoyee by surrenderng the contract, such cash surrender vaue w not
be consdered ncome to the empoyee uness and unt the contract Is surrendered.
deferment for ncuson of the vaue of the contract n ncome s
thus afforded where the contract s an annuty contract. smar
deferment appes n case the contract purchased s an nsurance
contract but, ncdent to ts dstrbuton, t has been rrevocaby con-
verted nto an annuty contract or ts entre vaue has been rrevocaby
setted under an agreement essentay ke an annuty contract.
2. If a trust e empt under secton 16 (a) of the Code dstrbutes
an nsurance contract to an empoyee so that part or a of ts then
vaue coud be apped to contnue nsurance for hm under such a
contract, the vaue so appcabe then oses ts prevous status as an
accumuaton to secure deferred benefts under a penson or proft-
sharng pan, as to whch ncuson n ncome has been deferred, and
becomes a dstrbuton of the trust whch must be ncuded n the
ncome of the empoyee for the year n whch the contract s ds-
trbuted, as provded n secton 16 (b) of the Code, whether or not
such vaue coud then be obtaned n cash by surrender of the contract.
In genera, the amount of such dstrbuton s consdered to be the
entre net vaue of the contract at the tme t s dstrbuted. Ths net
vaue shoud, however, be reduced by any porton thereof whch coud
not, under any crcumstances, be used for contnued nsurance of an
amount payabe under an nsurance contract n event of death before
maturty of the contract. Thus, f the contract dstrbuted s a typ-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.16 -6.
7
ca endowment or ncome endowment nsurance pocy (often caed
retrement endowment or retrement ncome pocy) and t coud
be contnued n fu force after t s dstrbuted, the amount of the
dstrbuton s consdered to be the then entre vaue of the contract
reduced by any e cess thereof over the then vaue of term nsurance
from that tme to the maturty date for the amount (or ncreasng
amounts) whch woud be payabe n event of death of the nsured f
the contract were so contnued, provded no more vauabe nsurance
coud be obtaned by converson of the contract after ts dstrbuton.
If such a contract s dstrbuted and, ncdent to ts dstrbuton, t
s converted nto a typca reduced pad up endowment or ncome en-
dowment nsurance form, the amount of the dstrbuton s consdered
to be the then entre vaue of the contract reduced by the e cess
thereof over the then vaue of term nsurance from that tme to the
maturty date for the amount (or ncreasng amounts) whch woud
be payabe under such form n event of death of the nsured, provded
no more vauabe form of nsurance coud be obtaned by converson
or renstatement of the contract after ts dstrbuton. These rues
appy regardess of whether the amount payabe n event of death
e ceeds the reserve under the contract at the tme t s dstrbuted or
subsequent thereto. For the purpose of the reductons mentoned
above, the amount of term nsurance s undmnshed by any reserve,
and ts vaue shoud be determned on a bass consstent wt the
bass of the e tended term provson n the contract or, f there s no
such provson, t shoud be based on mortaty and nterest rates
whch are reasonaby consstent wth the gross premums under the
contract. In any case, the amount of dstrbuton shoud be reduced
by any pror contrbutons of the empoyee appcabe thereto (e cu-
sve of contrbutons appcabe to pror nsurance protecton).
3. mounts receved by an empoyee from payment of the cash
surrender vaue, maturty vaue, ncome, nstaments, dvdends, or
nterest under an nsurance or annuty contract whch s purchased,
hed, or dstrbuted by a trust e empt under secton 16 (a) of the
Code, or under an agreement for settement of such a contract, and
amounts receved by the benefcary of a deceased retred empoyee
from suc payments are to be ncuded n the ncome of the empoyee
or benefcary as provded n sectons 10 (b) and 22(b)(2) of the
Code and the reated sectons of the reguatons. (See partcuary
sectons 29.1G -6, 29.22(b) (2)- , 29.22(b) (2)-2, and 29.22(b) (2)-
of Reguatons 111.) For ths purpose, n appyng the provsons of
secton 22(b)(2) of the Code, any amount prevousy accounted for
as ncome by the empoyee on account of nsurance under the contract
s to be treated as consderaton pad by the empoyee.
. Correspondence from the foowng regardng ths mmeograph
shoud refer to ts number and to the symbos ndcated: Coectors
of nterna revenue, C:Co; nterna revenue agents n charge,
IT: PS; heads of fed dvsons of the Technca Staff, TS: RM.
Geo. . Schoeneman,
Commssoner.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
7
29.16 -6.
Secton 29.16 -6: Ta abty of benefcary 19 0-3-132
under a trust whch meets the requrements I. T, 3993
of secton 16 (a).
( so Secton 22(b), Secton 29.22(b) (1)-1.)
INT RN L R NU COD
Where an empoyee who s nsured under an nsurance contract
hed by a trust whch Is e empt under secton 16 (a) of the Interna
Revenue Code des before maturty of the contract, amounts re-
ceved by a benefcary of the empoyee whch are attrbutabe to
the reserve under the contract at the tme of death are requred to
be ncuded In the gross ncome of the benefcary under secton
16 (b) of the Code. In genera, amounts receved by the benefcary
whch are attrbutabe to the e cess over the reserve at the tme of
death are e cudbe from gross ncome under secton 22(b) (1) of
the Code,
dvce s requested as to the amounts requred to be ncuded n
gross ncome under the provsons of sectons 16 (b) and 22(b) (1)
of the Interna Revenue Code and secton 29.16 -G of Reguatons 111
wth respect to payments to the benefcary of an empoyee, pursuant
to an nsurance contract purchased by a trust whch s e empt under
secton 16 (a) of the Code, on account of the death of the empoyee
before retrement and whe the contract s hed by the trust. The
nsurance contracts to whch consderaton has been gven ncude
typca whoe fe nsurance poces, typca endowment nsurance
poces, and typca retrement ncome endowment nsurance poces
(cften caed retrement endowment or retrement ncome
poces).
Wth respect to each pocy, there s a reserve accumuaton under
the contract whch s provded whoy or party from empoyer con-
trbutons and s ntended to secure penson or other deferred benefts
under a penson or proft-sharng pan as to whch ncuson n ncome
has been deferred. mounts receved by the banefcary of an em-
poyee whch are attrbutabe to the reserve under the contract at the
tme of death consttute dstrbutons of the trust whch are requred
to be ncuded n the gross ncome of the benefcary under secton
16 (b) of the Code. For ths purpose, any contrbutons of the em;
poyee toward the reserve accumuaton (e cusve of contrbutons
toward nsurance) are treated as consderaton pad by the empoyee.
In each case, the tota amount payabe under the contract on account
of the death of the empoyee e ceeds the reserve, at east n the eary
contract years. The e cess s often caed current nsurance pro-
tecton, and the cost of such protecton s requred to be ncuded n
the ncome of the empoyee n accordance wth secton 29.16 -6 of
Reguatons 111. mounts receved by the benefcary whch are
attrbutabe to such e cess at the tme of death are e cudbe from
gross ncome under secton 22(b) (1) of the Code e cept n the case of
certan transferees, as provded n secton 29.22(b) (2)-3 of Regua-
tons 111, and n the case of a spouse ..o whom the payments consttute
gross ncome under secton 22(k) of the Code. (See secton 29.22(b)
(1)-1 of Reguatons 111.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.211-7.
76
SUPPL M NT . NONR SID NT LI N INDI IDU LS
S CTION 211. T ON NONR SID NT LI N
INDI IDU LS
Secton 29.211-7: Ta aton of nonresdent 19 0-7-13326
aen ndvduas. T. D. 777
( so Secton 231, Secton 29.231-1.)
TITL 26 INT RN L R NU . C PT R I, SU C PT R , P RT 7.
T TION PURSU NT TO TR TI S SU P RT D NM R , T L T S
GINNING FT R D C M R 31, 19 7
Reguatons affectng the ta aton of nonresdent aens who are
resdents of Denmark and of Dansh corporatons under the ncome
ta conventon between the Unted States and the ngdom of
Denmark, procamed by the Presdent of the Unted States on
December , 19 .
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton , D. C.
To Coectors of Interna Revenue and Others Concerned:
On October 13, 19 9, notce of proposed rue makng under the n-
come ta conventon between the Unted States and the ngdom of
Denmark, procamed by the Presdent of the Unted States on Decem-
ber , 19 , was pubshed n the Federa Regster (13 F. R. G22 ).
fter consderaton of a such reevant matter as was presented by
nterested persons regardng the proposa, the foowng reguatons
are adopted for the purposes of such conventon.
Tabe of Contents
Secton
7.9 0. Introductory.
7.9 1. ppcabe provsons of the Interna Revenue Code.
7.9 2. Scope of the conventon.
7.9 3. Defntons.
7.9 . Scope of conventon wth respect to determnaton of ndustra or com-
merca profts.
7.9 . Contro of a domestc enterprse by a Dansh enterprse.
7.9 G. Income from operaton of shps or arcraft.
7.9 7. empton from, or reducton n rate of, Unted States ta n the case
of dvdends, nterest, and royates.
7.9 . Rea property ncome, natura resource royates.
7.9 9. Government wages, saares, pensons, and smar remuneraton.
7.900. Pensons and fe annutes.
7.9G1. Compensaton for abor or persona servces.
7.9G2. Students and apprentces; remttances.
7.963. stng professors or teachers.
7.90 . Credt aganst Unted States ta abty for Dansh ta .
7.90 . Recproca admnstratve assstance.
7.960. Cams n cases of doube ta aton.
Secton 7.9 0. Introductory. The ncome ta conventon between
the Unted States and the ngdom of Denmark, sgned May 6,19 ,
procamed (wth reservatons thereto) by the Presdent of the Unted
States on December , 19 , and effectve for ta abe years begnnng
on and after anuary 1, 19 (herenafter referred to as the conven-
ton) , provdes n part as foows:
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
77
29.211-7.
rtce I
(1) The ta es referred to n ths conventon are:
(a) In the case of the Unted States of merca:
The Federa Income ta , ncudng surta es:
(6) In the case of Denmark:
The natona ncome ta , ncudng the war profts ta .
The ntercommuna ncome ta .
The communa Income ta .
(2) The present conventon sha aso appy to any other ta es of a sub-
tantny smar character mposed by ether contractng state subsequenty to
the date of sgnature of the present conventon.
rtc-e II
(1) s used n ths conventon :
(a) The term Unted States means the Unted States of merca, and
when used n a geographca sense ncudes ony the States, the Terrtores
of aska and awa, and the Dstrct of Coumba.
(6) The term Denmark means the ngdom of Denmark: the prov-
sons of the conventon sha not, however, e end to the Faroe Isands; nor
do they appy to Greenand.
(c) The term permanent estabshment means a branch offce, factory,
warehouse, or other f ed pace of busness, but does not Incude the casua
and temporary use of merey storage factes, nor does t ncude an agency
uness the agent has and e ercses a genera authorty to negotate and con-
cude contracts on behaf of an enterprse or has a stock of merchandse
from whch he reguary fs orders on ts behaf. n enterprse of one of
the contractng states sha not be deemed to have a permanent estabshment
a the other state merey because t carres on busness deangs n such
other state through a bona fde commsson agent, broker, or custodan act-
ng n the ordnary course of hs busness as such. The fact that an enter-
prse of one of the contractng states mantans n the other state a f ed
pace of busness e posvey for the purchase of goods or merchandse sha
not of tsef consttute such f ed pace of busness a permanent estabsh-
ment of such enterprse. The fact that a corporaton of one contractng
state has a subsdary corporaton whch s a corporaton of the other state
or whch s engaged n trade or busness n the other state sha not of t-
sef consttute that subsdary corporaton a permanent estabshment of
ts parent corporaton.
( f) The term enterprse of one of the contractng states means, as
the case may bp, Unted States enterprse or Dansh enterprse.
(e) The term enterprse ncudes every form of undertakng whether
carred on by an ndvdua, partn rshp, corporaton, or any other entty.
(/) The term Unted States enterprse means an enterprse carred on
n the Unted States of merca by a resdent of the Unted States of mer-
ca or by a Unted States corporaton or other entty; the term Unted
States corporaton or other entty means a partnershp, corporaton, or
other entty created or organzed n the Unted States of merca or under
the aw of the Unted States of merca or of any State or Terrtory of the
Unted States of merca.
(g) The term Dansh enterprse means an enterprse carred on In Den-
mark by a resdent of Denmark or by a Dansh corporaton or other entty;
the term Dansh corporaton or other entty means a partnershp, corpora-
ton, or other entty created or organzed n Denmark or under D.ush aws.
(ft) The term competent authortes means, n the case of the Unted
States, the Commssoner of Interna Revenue or hs authorzed representa-
tve; and n the case of Denmark, the Chef of the Ta aton Department
of the Mnstry of Fnance (Generadrekt ren for Skattevaesenet) or hs
authorzed representatve.
(2) In the appcaton of the provsons of the present conventon by one of
the contractng states any term not otherwse defned sha, uness the conte t
otherwse requres, have the meanng whch such term has under ts own ta aws.
rtce III
(1) n enterprse of one of the contractng states sha not be sub|ect to ta a-
ton n the other contractng state In respect of ts ndustra and commerca
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.211-7.
7
profts uness t s engaged n trade or busness n such other state through a
permanent estabshment stuated theren. If t Is so engaged such other state
may mpose ts ta upon the entre ncome of such enterprse from sources wthn
such other state.
(2) In determnng the ndustra or commerca profts from sources wthn
the terrtory of one of the contractng states of an enterprse of the other con-
tractng state, no profts sha be deemed to arse from the mere purchase of
goods or merchandse wthn the terrtory of the former contractng state by such
enterprse.
(3) Where an enterprse of one of the contractng states s engaged n trade
or busness n the terrtory of the other contractng state through a permanent
estabshment stuated theren, there sha be attrbuted to such permanent estab-
shment the ndustra or commerca profts whch t mght be e pected to derve
f t were an ndependent enterprse engaged n the same or smar actvtes
under the same or smar condtons and deang at arm s ength wth the
enterprse of whch t s a permanent estabshment and the profts so attrbuted
sha, sub|ect to the aw of such other contractng state, be deemed to be ncome
from sources wthn the terrtory of such other contractng state.
utce I
Where an enterprse of one of the contractng states, by reason of ts partc-
paton n the management or the fnanca structure of an enterprse of the other
contractng state, makes wth or mposes on the atter, n ther commerca or
fnanca reatons, condtons dfferent from those whch woud be made wth an
ndependent enterprse, any profts whch woud normay have accrued to one
of the enterprses but by reason of those condtons have not so accrued, may be
ncuded n the profts of that enterprse and ta ed accordngy.
rtce
(1) Income whch an enterprse of one of the contractng states derves from
the operaton of shps or arcraft regstered n that state sha be e empt from
ta aton n the other contractng state.
(2) The present conventon sha not be deemed to affect the arrangement
between the Unted States and Denmark provdng for reef from doube ncome
ta aton on shppng profts, effected by e changes of notes dated May 22, ugust 0
and 1S. October 2 , 2 , and 2 , and December and 6, n the year 1922.
rtce I
(1) Dvdends sha be ta abe ony n the contractng state n whch the
sharehoder s resdent or, f the sharehoder s a corporaton or other entty,
n the contractng state n whch such corporaton or other entty s ncorporated
or organzed.
(2) ach of the contractng states reserves, however, the rght to coect and
retan the ta whch, under ts revenue aws, s deductbe at the source wth
respect to such dvdends, but the ta sha not e ceed 1 percent of the amount
of dvdends derved from sources wthn such state by a resdent, corporaton,
or other entty of the other state, f the recpent has no permanent estabshment
n the contractng state from whch the dvdends are derved.
(3) It s agreed, however, that the rate of dvdend ta at the source sha not
e ceed percent f the sharehoder s a corporaton controng, drecty or
ndrecty, at east 0 percent of the entre votng power n the corporaton payng
the dvdend, and f not more than 2 percent of the gross ncome of such payng
corporaton s derved from nterest and dvdends, other than nterest and
dvdends receved from ts own subsdary corporatons. Such reducton of the
rate to percent sha not appy f the reatonshp of the two corporatons has
been arranged or s mantaned prmary wth the ntenton of securng such
reduced rate.
rtce II
Interest on bonds, securtes, notes, debentures, or on any other form of
ndebtedness derved from sources wthn one of the contractng states by a res-
dent or corporaton or other entty of the other contractng state not havng a
permanent estabshment n the former state sha be e empt from ta by such
former state.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
79
20.211-7.
rtce III
Royates and other amounts derved as consderaton for the rght to use copy-
rghts, patents, desgns, secret processes r.nd formuas, trade-marks, and other
ke property (ncudng rentas and ke payments n respect of moton pcture
fms) derved from sources wthn one of the contractng states by a resdent
or corporaton or other entty of the other contractng state not havng a perma-
nent estabshment n the former state sha be e empt from ta aton n such
former state.
htce I
(1) Income from rea property (not ncudng nterest derved from mort-
gages and bonds secured by rea property) and royates n respect of the opera-
ton of mnes, quarres, or other natura resources, sha be ta abe ony n the
contractng state n whch such property, mnes, quarres, or other natura
resources are stuated.
(2) resdent or corporaton of one of the contractng states dervng any
such ncome from sources wthn the other contractng state may, for any ta abe
year, eect to be sub|ect to the ta of such other contractng state, on a net bass,
as f suc-h resdent or corporaton were engaged n trade or busness wthn such
other contractng state through a permanent estabshment theren durng such
ta abe year.
rtce
(1) Wages, saares, and smar compensaton and pensons pad by one of
the contractng states or by any other pubc authorty wthn that state to nd-
vduas resdng n the other state sha be ta abe ony n the former state.
(2) Prvate pensons and fe annutes derved from wthn one of the con-
tractng states and pad to ndvduas resdng n the other contractng state
sha be e empt from ta aton n the former state.
(3) The term fe annutes as used heren means a stated sum payabe
perodcay at stated tmes durng fe, or durng a specfed number of years,
under an obgaton to make the payments n consderaton of a gross sum pad
for such obgaton.
rtce I
(1) Compensaton for abor or persona servces, ncudng the practce of the
bera professons, sha be ta abe ony n the contractng state n whch such
servces are rendered.
(2) The provsons of paragraph (1) are, however, sub|ect to the foowng
e ceptons:
(a) resdent of Denmark sha be e empt from Unted States ta upon
compensaton for abor or persona servces f he s temporary present n
the Unted States for a perod or perods not e ceedng a tota of 90 days
durng the ta abe year and the compensaton receved for such servces does
not e ceed 3,000 n the aggregate. If, however, hs compensaton s receved
for abor or persona servces performed as an empoyee of, or under contract
wth, a resdent or corporaton or other entty of Denmark, he w be e empt
from Unted States ta f hs stay n the Unted States does not e ceed a
tota of ISO days durng the ta abe year.
(6) The provsons of paragraph (2) (a) of ths artce sha appy, mutats
mutands, to a resdent of the Unted States wth respect to compensaton
for persona servces otherwse sub|ect to ncome ta n Denmark.
(3) The provsons of ths artce sha have no appcaton to the ncome to
whch rtce () reates.
rtce II
Gans derved n one of the contractng states from the sae or e change of
capta assets by a resdent or corporaton or other entty of the other contractng
state sha be e empt from ta aton In the former state f such resdent or corpo-
raton or other entty s not engaged n trade or busness n such former state.
Ths artce deeted by reservaton, see Presdent s Procamaton herenafter.
rtce III
Students or apprentces, ctzens of one of the contractng states, resdng n
the other contractng state e cusvey for purposes of study or for acqurng
busness e perence, sha not be ta abe n the atter state n respect of remt-
tances (other than ther own ncome) receved by them from abroad for the
Furposcs of ther mantenance or studes.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.211-7.
SO
rtce I
professor or teacher, a resdent of one of the contractng states, who tem-
porary vsts the terrtory of the other contractng state for the purpose of
teachng for a perod not e ceedng 2 years at a unversty, coege, schoo, or
other educatona nsttuton n the other contractng state, sha be e empted
n such other contractng state from ta on hs remuneraton for such teachng
for such perod.
rtce
It s agreed that doube ta aton sha be avoded n the foowng manner:
(a) The Unted States n determnng the ncome ta es, ncudng sur-
ta es, of ts ctzens, resdents, or corporatons may, regardess of any other
provson of ths conventon, ncude n the bass upon whch such ta es arc
mposed a tems of ncome ta abe under the revenue aws of the Unted
States as f ths conventon had not come nto effect. The Unted States
sha, however, sub|ect to the provsons of secton 131, Interna Revenue
Code, deduct from ts ta es the amount of Dansh ta es specfed n rtce
I of ths conventon.
(6) Denmark, n determnng ts ta es specfed n rtce I of ths con-
venton, may, regardess of any other provson of ths conventon, ncude
n the bass upon whch such ta es are mposed a tems of ncome sub|ect
to such ta es under the ta aton aws of Denmark. Denmark sha, how-
ever, deduct from the ta es so cacuated the Unted States ta on ncome
comng wthn the provsons of rtces III, I , (), III, and I of
ths conventon and on earned ncome earned wthn the Unted States, but
n an amount not e ceedng that proporton of the Dansh ta es whch such
ncome bears to the entre ncome sub|ect to ta by Denmark. Denmark
w aso aow as a deducton from ts ta es an amount equa to 1 percent
( percent n the case of dvdends covered by rtce I(3)) of the gross
amount of dvdends (reduced by the Unted States ta appcabe to such
dvdends) from sources wthn the Unted States.
rtce I
(1) The ctzens of one of the contractng states sha not, whe resdent n
the other contractng state, be sub|ected theren to other or more burdensome
ta es than are the ctzens of such other contractng state resdng n ts terr-
tory. s used n ths paragraph,
(a) the term ctzens ncudes n ega persons, partnershps, and
assocatons created or organzed under the aws n the respectve contract-
ng states, and
(6) the term ta es means ta es of every knd or descrpton whether
natona, Federa, State, provnca, or muncpa.
(2) It s agreed that secton 2 , paragraph , of the Dansh aw No. 391 of
uy 12, 19 0, prescrbng an addton of 0 percent of the capta ncrement ta
on corporatons n cases where more than 0 percent of the entre stock capta
s owned by a snge sharehoder resdng outsde Denmark, sha not be appca-
be when the sharehoder n queston s a resdent of the Unted States or a
Unted Staes corporaton or other entty.
rtce II
The competent authortes of the contractng states sha e change such nfor-
maton (beng nformaton avaabe under the respectve ta aton aws of the
contractng states) as s necessary for curryng out the provsons of the present
conventon or for the preventon of fraud or the admnstraton of statutory
provsons aganst ta avodance n reaton to the ta es whch are the sub|ect
of the present conventon. ny nformaton so e changed sha be treated as
secret and sha not bo dscosed to any person other than those concerned wth
the assessment and coecton of the ta es whch are the sub|ect of the present
conventon. No nformaton sha be e changed whch woud dscose any trade
secret or trade process.
rtce III
(1) The contractng states undertake to end assstance and support to each
other n the coecton of the ta es whch are the sub|ect of the present conven-
ton, together wth nterest, costs, and addtons to the ta es.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
1
29.211-7.
(2) In the case of appcaton for enforcement of ta es, revenue cams of each
of the contractng states whch have been fnay determned may be accepted
for enforcement by the other contractng state and may be coected n that
state n accordance wth the aws appcabe to the enforcement and coecton
of ts own ta es.
(3) ny appcaton sha ncude a certfcaton that under the aws of the
state makng the appcaton the ta es have been fnay determned.
( ) The assstance provded for n ths artce sha not be nccorded wth
respect to the ctzens, corporatons, or other enttes of the state to whch
appcaton s made, e cept as s necessary to nsure that the e empton or re-
duced rate of ta granted under the present conventon to such ctzens, cor-
poratons, or other enttes sha not be en|oyed by persons not entted to such
benefts.
utc|s I
The state to whch appcaton s made for nformaton or assstance sha
compy as soon as possbe wth the request addressed to t e cept that such
state may refuse to compy wth the request for reasons of pubc pocy or f
compance woud nvove voaton of a trade, busness, ndustra or profes-
sona secret, or trade process.
rtce
Where a ta payer shows proof that the acton of the revenue authortes of
the contractng states has resuted n doube ta aton n hs case n respect of
any of the ta es to whch the present conventon reates, he sha be entted
to odge a cam wth the state of whch he s a ctzen or, f he s not a ctzen
of ether of the contractng states, wth the state of whch he Is a resdent, or,
f the ta payer s a corporaton or other entty, wth the state n whch t s cre-
ated or organzed. Shoud the cam be uphed, the competent authorty of such
state may come to an agreement wth the competent authorty of the other state
wth a vew to equtabe avodance of the doube ta aton n queston.
rtce I
(1) The provsons of ths conventon sha not be construed to deny or affect
In any manner the rght of dpomatc and consuar offcers to other or add-
tona e emptons now en|oyed or whch may hereafter be granted to such off-
cers.
(2) The provsons of the present conventon sha not be construed to re-
strct In any manner any e empton, deducton, credt, or other aowance ac-
corded by the aws of one of the contractng states n the determnaton of the
ta mposed by such state.
(3) Shoud any dffcuty or doubt arse as to the nterpretaton or appca-
ton of the present conventon, or ts reatonshp to conventons between one
of the contractng states and any other state, the competent authortes of the
contractng states may sette the queston by mutua agreement.
rtce II
The competent authortes of the two contractng states may prescrbe regua-
tons necessary to Interpret and carry out the provsons of ths conventon.
Wth respect to the provsons of ths conventon reatng to e change of n-
formaton and mutua assstance n the coecton of ta es, such authortes may,
by common agreement, prescrbe rues concernng matters of procedure, forms
of appcaton and repes thereto, converson of currency, dsposton of amounts
coected, mnmum amounts sub|ect to coecton and reated matters.
rtce III
(1) The present conventon sha be ratfed and the nstruments of ratfca-
ton sha be e changed at Washngton as soon as possbe.
(2) Upon the e change of nstruments of ratfcaton, the present conventon
sha have effect
(o) n the case of Unted States ta , for the ta abe years begnnng on
or after the 1st day of anuary of the year n whch such e change takes
pace;
(6) n the case of Dansh ta , for the ta abe years begnnng on or
after the 1st day of pr of the year n whch such e change takes pace.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.211-7.
2
(3) The present conventon sha contnue effectve for a perod of years and
ndefntey after that perod, but may be termnated by ether of the contractng
states at the end of the -year perod or at any tme thereafter, provded that
at east 6 months pror notce of termnaton has been gven and, n such event,
the present conventon sha cease to be effectve
(a) as respects Unted States ta , for the ta abe years begnnng on or
after the 1st day of anuary ne t foowng the e praton of the 6-month
perod;
(6) as respects Dansh ta , for the ta abe years begnnng on or after
the 1st day of pr ne t foowng the e praton of the 6-month perod.
Done at Washngton, n dupcate. In the ngsh and Dansh anguages, the
two te ts havng equa authentcty, ths 6th day of May, 19 .
For the Presdent of the Unted States of merca:
S L G. C. M RSII LL.
For s Ma|esty the ng of Denmark:
sea enrk auffmann.
Procamaton of the Presdent of the Unted States
Dated December , 19

nd whereas the Senate of the Unted States of merca, by ther resouton
of une 17,19 , two-thrds of the Senators present concurrng theren, dd advse
and consent to the ratfcaton of the aforesad conventon sub|ect to a reservaton,
as foows:
The Government of the Unted States of merca does not accept rtce
II of the conventon reatng to gans from the sae or e change of capta
assets.
nd whereas the te t of the aforesad reservaton was communcated by the
Government of the Unted States of merca to the Government of Denmark
and thereafter the Government of Denmark gave notce of Its acceptance
of the aforesad reservaton;
nd whereas the aforesad conventon was duy ratfed by the Presdent of
the Unted States of merca on November 2 ,19 , n pursuance of the aforesad
advce and consent of the Senate and sub|ect to the aforesad reservaton, and
the sad conventon, wth the e cepton of rtce II thereof, was duy ratfed
on the part of Denmark;
nd whereas the respectve nstruments of ratfcaton of the aforesad con-
venton were duy e changed at Washngton on December 1, 19 , and a protoco
of e change of nstruments of ratfcaton, In the ngsh and Dansh anguages,
was sgned on that date by the respectve Penpotentares of the Unted States
of merca and Denmark, the ngsh te t of whch protoco reads n part:
t s the understandng of both Governments that rtce II of the conventon
aforesad sha be deemed to be deeted and of no effect, ;

Sec. 7.9 1. ppcabe Provsons of the Interna Revenue
Code. The Interna Revenue Code provdes n part as foows:
C PT R I. INCOM T

S C. 22. GROSS INCOM .

(b) cusons from Gross Income. The foowng tems sha not be n-
cuded n gross ncome and sha be e empt from ta aton under ths chapter:

(7) Income e empt under treaty. Income of any knd, to the e tent
requred by any treaty obgaton of the Unted States;

S C. 62. RUL S ND R GUL TIONS.
The Commssoner, wth the approva of the Secretary, sha prescrbe and
pubsh a needfu rues and reguatons for the enforcement of ths chapter.
Pursuant to secton 62 of the Interna Revenue Code, other prov-
sons of the nterna revenue aws, and to rtce II of the con-
venton, the foowng reguatons, whch are desgnated as sectons
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3


G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
S3
29.211-7.
7.9 0 to 7.966, are hereby prescrbed and a reguatons nconsstent
herewth are modfed accordngy.
Sec. 7.9 2. Scope op the Conventon. The prmary purposes of
the conventon, to be accompshed on a recproca bass, are to avod
doube ta aton upon ma|or tems of ncome derved from sources n
one country by persons resdent n, or by corporatons of, the other
country, and to provde for admnstratve cooperaton between the
competent ta authortes of the two countres ookng to the avod-
ance of doube ta aton and fsca evason.
The specfc casses of ncome from sources wthn the Unted States
e empt under the conventon from Unted States ta for ta abe
years begnnng on and after anuary 1,19 , are:
(a) Industra and commerca profts of a Dansh enterprse
havng no permanent estabshment n the Unted States ( rtce
I);
(o) Income derved by a nonresdent aen who s a resdent of
Denmark, or by a Dansh corporaton, from the operaton of shps
or arcraft regstered n Denmark ( rtce );
(c) Interest and royates (ncudng moton pcture fm rent-
as) derved by a nonresdent aen who s a resdent of Denmark
or by a Dansh corporaton f such aen or corporaton has no
permanent estabsment n the Unted States ( rtces II and
v);
(d) Compensaton and pensons pad by Denmark to aens for
servces rendered to Denmark ( rtce ());
(e) Prvate pensons and fe annutes derved by nonresdent
aen ndvduas resdng n Denmark ( rtce (2));
(/) Compensaton, sub|ect to certan mtatons, for persona
servces derved by a nonresdent aen who s a resdent of Den-
mark ( rtce I);
(g) Remttances from sources outsde the Unted States re-
ceved n the Unted States by a Dansh ctzen who s temporary
present n the Unted States for the purposes of study or for
acqurng busness e perence, such remttances beng for the
purpose of hs mantenance or studes ( rtce III);
( ) Remuneraton derved from teachng n the Unted States
for a perod of not more than 2 years by a professor or teacher
who s a resdent of Denmark but who s temporary present n
the Unted States ( rtce I ).
The conventon aso reduces to 1 percent the rate of ta otherwse
mposed upon dvdends derved by a nonresdent aen who s a res-
dent of Denmark, or by a Dansh corporaton, f such aen or corpora-
ton has no permanent estabshment n the Unted States ( rtce
s to e empton from wthhodng of the ta at the source n the
case of nterest, royates, pensons, and fe annutes, and reducton
n the rate of ta from 30 percent to 1 percent n the case of dvdends,
see Treasury Decson 692 C. . 19 9-1, 10 , approved March ,
19 9 26 CFR 7.900 to 7.907, ncusve .
The conventon does not affect the abty to Unted States ncome
ta aton of ctzens of Denmark who are resdents of the Unted
States e cept that such ndvduas are entted to the benefts of
rtce (reatng to credt for Dansh ncome ta ), and of rtce
I (reatng to equaty of ta aton). cept as provded n rt-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.211-7.
S
ce , reatng to the credt for ncome ta , the conventon does
not affect ta aton by the Unted States of a ctzen of the Unted
States or of a domestc corporaton, even though such ctzen s res-
dent n Denmark and such corporaton s engaged n trade or busness
n Denmark.
_ Sec. 7.9 3. Def tons. s used n sectons 7.9 0 to 7.966, ncu-
sve, uness the conte t otherwse requres, the terms defned n the
conventon sha have the meanngs so assgned to them. ny term
used n sectons 7.9 0 to 7.966, ncusve, whch s not defned n the
conventon but whch s defned n the Interna Revenue Code sha be
gven the defnton contaned theren uness the conte t otherwse
requres.
s used n sectons 7.9 0 to 7.966, ncusve:
(a) The term permanent estabshment means a branch offce,
factory, warehouse, or other f ed pace of busness, but does not n-
cude the casua and temporary use of merey storage factes. The
fact that a Dansh corporaton has a domestc subsdary corporaton
or a foregn subsdary corporaton havng a branch n the Unted
States, does not of tsef consttute ether subsdary corporaton a
permanent estabshment of the parent Dansh enterprse. The fact
that a Dansh enterprse has busness deangs n the Unted States
through a bona fde commsson agent, broker, or custodan, actng n
the ordnary course of hs busness as such, or mantans n the Unted
States an offce or other f ed pace of busness used e cusvey for
the purchase of goods or merchandse, does not mean that such Dansh
enterprse has a permanent estabshment n the Unted States. If,
however, a Dans enterprse carres on busness n the Unted States
through an agent who has, and habtuay e ercses, a genera au-
thorty to negotate and concude contracts on behaf of such enterprse
or f t has an agent who mantans wthn the Unted States a stock
of merchandse from whch he reguary fs orders on behaf of hs
prncpa, then such enterprse sha be deemed to have a permanent
estabshment n the Unted States. owever, an agent havng power
to contract on behaf of hs prncpa but ony at f ed prces and
under condtons determned by the prncpa does not necessary
consttute a permanent estabshment of such prncpa. The mere
fact that an agent (assumng he has no genera authorty to contract
on behaf of hs empoyer or prncpa) mantans sampes or occason-
ay fs orders from ncdenta stocks of goods mantaned n the
Unted States w not consttute a permanent estabshment wthn
the Unted States. The mere fact that saesmen, empoyees of a Dan-
sh enterprse, promote the sae of ther empoyers products n the
Unted States or that such enterprse transacts busness n the Unted
States by means of ma order actvtes, does not mean such enterprse
has a permanent estabshment theren. The term permanent estab-
shment as used n the conventon mpes the actve conduct theren
of a busness enterprse. The mere ownershp, for e ampe, of tmber-
ands or a warehouse n the Unted States by a Dansh enterprse does
not mean that such enterprse has a permanent estabshment theren.
s to the effect of the mantenance of a permanent estabshment
wthn the Unted States upon e empton from Unted States ta b
the case of nterest and royates and reducton n the rate of Untcc:
States ta n the case of dvdends, see secton 7.9 7.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.211-7.
(b) The term enterprse means any commerca or ndustra
undertakng whether conducted by an ndvdua, partnershp, cor-
poraton, or other entty. It ncudes such actvtes as manufactur-
ng, merchandsng, mnng, processng, and bankng. It does not
ncude the rendton of persona servces. ence, a nonresdent aen
who s a resdent of Denmark and who renders persona servces s not,
merey by reason of such servces, engaged n an enterprse wthn
the meanng of the conventon and hs abty to Unted States ta s
not affected by rtce I of the conventon.
(c) The term Dansh enterprse means an enterprse carred on
n Denmark by a resdent of Denmark or by a Dansh corporaton or
other entty. The term Dansh corporaton or other entty means
a partnershp, corporaton, or other entty created or organzed n
Denmark or under the aws of Denmark.
d) The term ndustra or commerca profts means profts ars-
ng from ndustra, commerca, mercante, manufacturng, and ke
actvtes of a Dansh enterprse as defned n ths secton. Such term
does not ncude rentas, royates, nterest, dvdends, fees, compensa-
ton for persona servces, nor gans derved from the sae or e change
of capta assets. Such enumerated tems of ncome are not governed
by the provsons of rtce III of the conventon.
Sec. 7.9 . Scope of Conventon Wth espect to Determna-
ton of Industra or Commerca Profts. (a) Genera. rtce
III of the conventon adopts the prncpe that an enterprse of one
of the contractng states sha not be ta abe by the other contractng
state upon ts ndustra or commerca profts uness t has a perma-
nent estabshment n the atter state. ence, a Dansh enterprse s
sub|ect to Unted States ta upon ts ndustra and commerca profts
to the e tent of such profts from sources wthn the Unted States ony
f t has a permanent estabshment wthn the Unted States. From
the standpont of Federa ncome ta aton, the artce has appcaton
ony to a Dansh enterprse and to the ndustra and commerca n-
come thereof from sources wthn the Unted States. It has no ap-
pcaton, for e ampe, to compensaton for abor or persona servces
performed n the Unted States nor to ncome derved from rea prop-
erty ocated n the Unted States, ncudng rentas and royates
therefrom, nor to gans from the sae or dsposton of such prop-
erty, nor to nterest, dvdends, royates, other f ed or determnabe
annua or perodca ncome, and gans derved from the sae or e -
change of capta assets.
(b) No Unted States permanent estabshment. nonresdent
aen (ncudng a nonresdent aen ndvdua, fducary, and part-
nershp) who s a resdent of Denmark, or a Dansh corporaton, car-
ryng on an enterprse n Denmark and havng no permanent estab-
shment n the Unted States, s not for ta abe years begnnng on or
after anuary 1, 19 , sub|ect to Unted States ncome ta upon n-
dustra or commerca profts from sources wthn the Unted States.
For e ampe, f the Dansh enterprse carred on by such aen or cor-
poraton ses, n 19 , merchandse, such as sverware, dary prod-
ucts, or quors through a bona fde commsson agent or broker n
the Unted States actng n the ordnary course of hs busness as such
a|rent or broker, the resutng profts are, under the terms of rtce
I of the conventon, e empt from Unted States ncome ta . Lke-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.211-7.
SG
wse no permanent estabshment e sts and no Unted States ncome
ta attaches to such profts f such enterprse, through ts saes agents
n the Unted States, secures orders for ts products, the saes beng
made n Denmark.
_ (c) Unted States permanent estabshment. nonresdent aen
(ncudng a nonresdent aen ndvdua, fducary, and partnershp)
who s a resdent of Denmark, or a Dansh corporaton, whether or
not carryng on a Dansh enterprse, havng a permanent estabsh-
ment n the Unted States, s sub|ect to ta upon ndustra or com-
merca profts from sources wthn the Untea States to the same e -
tent as are nonresdent aens and foregn corporatons engaged n
trade or busness theren. In the determnaton of the ncome ta abe
to such aen or foregn corporaton a ndustra and commerca
profts from sources wthn the Unted States sha be deemed to be
aocabe to the permanent estabshment n the Unted States. ence,
for e ampe, f a Dansh enterprse havng a permanent estabsh-
ment n the Unted States ses n the Unted States, through a com-
msson agent theren goods produced n Denmark, the resutng prof-
ts derved from Unted States sources from such transactons are a-
ocabe to such permanent estabshment even though such transactons
were carred on ndependenty of such estabshment. In determn-
ng ndustra and commerca profts no account sha be taken of the
mere purchase of merchandse wthn the Unted States by the Dan-
sh enterprse. The ndustra or commerca profts of the perma-
nent estabshment sha be determned as f the estabshment were an
ndependent enterprse engaged n the same or smar actvtes and
deang at arm s ength wth the enterprse of whch t s a permanent
estabshment.
Sec. 7.9 . Contro of a Domestc nterprse by a Dansh nter-
prse. rtce I of the conventon provdes, n effect, that f a
Dansh corporaton by reason of ts contro of a domestc enterprse
mposes on such atter enterprse condtons dfferent from those whch
woud resut from norma busness reatons between ndependent
enterprses, the accounts between the enterprses may be ad|usted so as
to ascertan the true net ncome of each enterprse. The purpose s to
pace the controed domestc enterprse on a ta party wth an uncon-
troed domestc enterprse by determnng, accordng to the standard
of an uncontroed enterprse, the true net ncome from the property
and busness of the controed enterprse. The basc ob|ectve of the
artce s that f the accountng records do not truy refect the net
ncome from the property and busness of such domestc enterprse
the Commssoner of terna Revenue may ntervene and, by makng
such dstrbutons, apportonments, or aocatons as he may deem
necessary of gross ncome or deductons of any tem or eement affect-
ng net ncome as between such domestc enterprse and the Dansh
enterprse by whch t s controed or drected, determne the true
net ncome of the domestc enterprse. The provsons of secton
29. -1, Reguatons 111 26 CFR 29. -1 , sha, nsofar as app-
cabe, be foowed n the determnaton of the net ncome of the
domestc busness.
Sec. 7.9 G. Income From Operaton of Shps or rcraft. The
ncome derved from the operaton of shps or arcraft regstered n
Denmark by a nonresdent aen who s a resdent of Denmark, or by
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
7
29.211-7.
a Dansh corporaton, and carryng on an enterprse n Denmark, s,
for ta abe years begnnng on or after anuary 1,19 , e empt from
Unted States ncome ta under the provsons of rtce of the
conventon.
Sec. 7.9 7. empton From, on Reducton n Rate of, Unted
States Ta n the Case of Dvdends, Interest, and Royates. (a)
Dvdend . (1) Genera. The ta mposed by the Interna Revenue
Code n the case of dvdends receved from sources wthn the Unted
States by () a nonresdent aen (ncudng a nonresdent aen nd-
vdua, fducary, and partnershp) who s a resdent of Denmark, or
() a Dansh corporaton s, for ta abe years begnnng on and after
anuary 1,19 , mted to 1 percent under the provsons of rtce
I (reatng to dvdends) f such aen or corporaton, at no tme
durng the ta abe year n whch such dvdends were so derved, had
a permanent estabshment wthn the Unted States. Thus, f a non-
resdent aen who s a resdent of Denmark, performs persona serv-
ces wthn the Unted States durng the caendar year 19 but has
at no tme durng such year a permanent estabshment wthn the
Unted States, he s entted to the reduced rate of ta wth respect
to such dvdends derved n that year from Unted States sources, as
rovded n rtce I of the conventon, even though by reason of
s havng rendered persona servces wthn the Unted States he s
engaged n trade or busness theren n that year wthn the meanng
of secton 211 (b) of the Interna Revenue Code. If, for e ampe, ,
a nonresdent aen who s a resdent of Denmark, derves n 19 ,
,000 compensaton for such persona servces and hs ony other
ncome from sources wthn the Unted States conssts of dvdends,
the dvdends are sub|ect to ta at a rate not to e ceed 1 percent and
hs earned ncome s sub|ect to norma ta and surta wthout takng
the dvdends nto account n determnng the ta on such earned
ncome.
(2) Dvdends pad by a Unted States subsdary corporaton.
Under the provsons of rtce I (3) of the conventon, dvdends
pad by a domestc corporaton to a Dansh corporaton are sub|ect to
ta at the rate of ony percent f () such Dansh corporaton con-
tros, drecty or ndrecty, at the tme the dvdend s pad 9 percent
or more, of the votng power n such domestc corporaton, () not
more than 2 percent of the gross ncome of the domestc corporaton
for the 3-year perod mmedatey precedng the ta abe year n whch
the dvdend s pad conssts of dvdends and nterest (other than
dvdends and nterest pad to such domestc corporaton by ts own
subsdary corporatons, f any), and () the reatonshp between
such domestc corporaton and such Dansh corporaton has not been
arranged or mantaned prmary wth the ntenton of securng such
reduced rate of percent.
(b) Interest and royates. Interest, whether on bonds, securtes,
notes, debentures, or any other form of ndebtedness (ncudng nter-
est on obgatons of the Unted States and on obgatons of nstru-
mentates of the Unted States), and royates for the rght to use
copyrghts, patents, desgns, secret processes and formuae, trade-
marks, and other anaogous property, and royates (ncudng rentas
and ke payments n respect of moton pcture fms) receved from
sources wthn the Unted States by (1) a nonresdent aen (ncudng
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.211-7.)
ss
a nonresdent aen ndvdua, fducary, and partnershp) who s a
resdent of Denmark, or (2) a Dansh corporaton, are, for ta abe
vears begnnng on and after anuary 1, 19 , e empt from Unted
States ta under the provsons of rtces II and III of the con-
venton f such aen or corporaton at no tme durng the ta abe year
n whch such nterest or royaty was so derved had a permanent es-
tabshment stuated wthn the Unted States.
Such nterest and royates are, therefore, not sub|ect to the wth-
hodng provsons of the Interna Revenue Code.
(c) enefcares of an estate or trust. nonresdent aen who s
a resdent of Demnark and who s a benefcary of a domestc estate
or trust sha be entted to the e empton, or reducton n the rate of
ta , as the case may be, provded n rtces I, II, and III of
the conventon wth respect to dvdends, nterest, and royates to
the e tent that such tem or tems are ncuded n hs dstrbutve share
of ncome of suc estate or trust f he at no tme durng the ta abe
year had a permanent estabshment n the Unted States. In such
case such benefcary must, n order to be entted to the e empton
or reducton n the rate of ta e ecute Form 1001-D or Form 1001 -D
(modfed to show dvdends where appcabe) and fe such form
wth the fducary of such estate or trust n the Unted States.
In any case n whch dvdends, nterests, or royates are derved
from Unted States sources by a Dansh estate or trust, any benefcary
of such estate or trust who s not a resdent of Denmark, or who has a
permanent estabshment n the Unted States, s not entted to any
e empton under the conventon wth respect to such ncome ncuded
n hs dstrbutve share of the ncome of the estate or trust.
Sec. 7.9 . Rea Property Income, Natura Resource Roya-
tes. Under rtce I of the conventon, a nonresdent aen (n-
cudng a nonresdent aen ndvdua, fducary, and partnershp)
who s a resdent of Denmark, or a Dansh corporaton, who derves
from sources wthn the Unted States n any ta abe year begnnng
on or after anuary 1,19 , ncome from rea property (not ncudng
nterest derved from mortgages or bonds secured by rea property)
or royates from the operaton of mnes, quarres, o wes, or other
natura resources may, for such ta abe year, eect to be sub|ect to
Federa ncome ta as f such aen or corporaton were engaged n
trade or busness wthn the Unted States by reason of havng a per-
manent estabshment theren durng such ta abe year. Such eecton
sha be made by so sgnfyng on the return for such year. The eec-
ton so sgnfed sha be rrevocabe for the ta abe year for whch
fruch eecton s made. In such case a return may be fed by the non-
resdent aen or foregn corporaton even though the soe ncome of
such aen or corporaton from sources wthn the Unted States s
f ed or determnabe annua or perodca ncome upon whch the
t a has been fuy satsfed at the source and there e sts no necessty
for the fng of the return e cept for the purposes of securng the
benefts of rtce I of the conventon. See secton 29.217-2, Regu-
atons 111 26 CFR 29.217-21.
Sec. 7.9 9. Government Wages, Saares, Pensons, and Smar
Remuneraton. Under rtce () of the conventon any wage,
saary, smar compensaton, or penson pad by the Government or
Denmark or by any other pubc authorty wthn Denmark to an n-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
S9
29.211-7.
dvdua n the Unted States s e empt from Federa ncome ta for
ta abe years begnnng on and after anuary 1, 19 . y reason,
however, of the appcaton of rtce (a) of the conventon, such
e empton does not appy to recpents of such ncome who are ether
ctzens of the Unted States or aen resdents theren. s to the
ta aton generay of compensaton of aen empoyees of foregn gov-
ernments, see secton 116(h) of the Interna Revenue Code and secton
29.116-2, Reguatons 111 26 CFR 29.116-2 .
Sec. 7.960. Pensons and Lfe nnutes. Under the provsons
of rtce (2) of the conventon, prvate pensons, and fe annutes
derved from sources wthn the Unted States by nonresdent aen
ndvduas who are resdents of Denmark are e empt from Federa
ncome ta for ta abe years begnnng on and after anuary 1, 19 .
The term fe annutes s defned n rtce (3). The term pr-
vate pensons does not ncude pensons or retred pay pad by the
Unted States or by any State or Terrtory of the Unted States; t does
ncude perodc payments made n consderaton for servces rendered
or by way of compensaton for n|ures receved.
Sec. 7.961. Compensaton for Labor or Persona Servces.
rtce I of the conventon adopts the prncpe that compensaton
for abor or persona servces, ncudng the practce of the bera
professons, s sub|ect to ta ony n the contractng state n whch
such servces are rendered. ence, n genera, such compensaton de-
rved by a nonresdent aen ndvdua resdng n Denmark for
servces rendered n the Unted States s sub|ect to Federa ncome
ta . Under rtce I of the conventon ths genera rue s sub|ect
to the foowng e ceptons:
(a) Where such ndvdua s temporary pesent n the Unted
States for a perod or perods not e ceedng a tota of 90 days
durng the ta abe year, compensaton receved for abor or per-
sona servces wthn the Unted States durng such year s e empt
from Federa ncome ta provded such compensaton does not
e ceed 3,000 n the aggregate.
(b) Where such ndvdua s temporary present n the Unted
States for a perod or perods not e ceedng a tota of 1 0 da S
durng the ta abe year, compensaton for abor or persona
servces wthn the Unted States durng such year s e empt
from Federa ncome ta provded such compensaton s receved
for servces performed as a worker or empoyee of, or under con-
tract wth, a resdent or corporaton of Denmark (even though
such resdent or corporaton s engaged n trade or busness n the
Unted States) whch resdent or corporaton actuay bears the
e pense of such compensaton and s not rembursed therefor by
another person.
s to the source of compensaton for abor or persona servces, see
secton 119(a)(3) of the Interna Revenue Code.
Sec. 7.962. Students and pprentces; Remttances. Under
rtce III of the conventon, ctzens of Denmark who are tem-
porary present n the Unted States as students or apprentces e -
cusvey for the purposes of study or for acqurng busness e per-
ence, are e empt for ta abe years begnnng on or after anuary 1,
19 , from Federa ncome ta upon amounts representng remttances
33 0 0 -7
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.211-7.
from sources outsde the Unted States for the purposes of ther man-
tenance or studes.
Sec. 7.963. stng Professors or Teachers. Under rtce
I of the conventon, an aen who s a resdent of Denmark but
who s temporary present wthn the Unted States for the purpose
of teachng, ecturng, or nstructng at any unversty, coege, schoo,
or other educatona nsttuton, stuated wthn the Unted States
s, for a perod not e ceedng 2 years from the date of hs arrva n
the Unted States, e empt for ta abe years begnnng on or after
anuary 1, 19 , from Federa ncome ta on remuneraton receved
for such servces. It sha be deemed that such aen comng to the
Unted States for the purposes ndcated has, for a perod of not more
than 2 years mmedatey succeedng the date of hs arrva wthn
the Unted States for such purposes, the ta status of a nonresdent
aen n the absence of proof of hs ntenton to reman ndefntey
n the Unted States.
Sec. 7.96 . Credt ganst Unted States Ta Labty for
Dansh Ta . For the purpose of avodance of doube ta aton,
rtce provdes that, on the part of the Unted States, there sha
be aowed aganst the Unted States ncome ta a credt for the amount
of Dansh ta es descrbed n rtce I of the conventon mposed on
ncome derved from sources wthn Denmark for ta abe years be-
gnnng on and after anuary 1,19 . Such credt, however, s sub|ect
to the mtatons provded n secton 131 of the Interna Revenue
Code (reatng to the credt for foregn ta es). See sectons 29.131-1
to 29.131-9 of Reguatons 111 26 CFR 29.131-1 to 29.131-9 .
Sec. 7.96 . Recproca dmnstratve ssstance. (a) Gen-
era. y rtce II of the conventon, the Unted States and Den-
mark adopt the prncpe of e change of such nformaton as s
necessary for carryng out the provsons of the conventon or for the
preventon of fraud or for the detecton of practces whch are amed
at reducton of the revenues of ether country, but not ncudng n-
formaton whch woud dscose a trade, busness, ndustra or pro-
fessona secret, or trade process.
The nformaton and correspondence reatve to e change of n-
formaton may be transmtted drecty by the Commssoner of
Interna Revenue to the Chef of the Ta aton Department of the
Mnstry of Fnance (Generadrekt0ren for Skattevaesenet) of Dsn-
mark.
(b) Informaton to be furnshed n due course. Pursuant to such
prncpe, wthhodng agents sha, n the preparaton of wthhodng
returns, Form 10 2, report on such returns, for the caendar year 19 9
and each subsequent caendar year, n addton to the tems of ncome
upon whch ta has been wthhed at the source, those tems of ncome
ad to a nonresdent aen ndvdua resdent n Denmark, or to a
ansh corporaton, upon whch ta has not been wthhed at the
source. Such return sha show the same nformaton wth respect to
such tems of ncome upon whch ta has not been wthhed at the
source as s shown wth respect to tems of ncome upon whch the
ta has been wthhed at the source.
In accordance wth the provsons of rtce II of the conven-
ton, the Commssoner of Interna Revenue w transmt to the Chef
f the Ta aton Department of the Mnstry of Fnance of Denmark,
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
91
29.211-7.
as soon as practcabe after the cose of the caendar year 19 9, and of
each caendar year thereafter durng whch the conventon s n effect,
the foowng nformaton reatng to such caendar year: the names
and addresses of a persons whose addresses are n Denmark as ds-
cosed on such wthhodng return, Form 10 2, dervng from sources
wthn the Unted States dvdends, nterest (other than coupon bond
nterest), rents, royates, saares, wages, pensons, annutes, and
other f ed or determnabe annua or perodca profts or ncome, and
the amount of such ncome wth respect to such persons as dscosed on
such return, together wth ownershp certfcate, Form 1001-D, fed
n connecton wth coupon bond nterest. Such transmsson sha
consttute compance wth rtce II of the conventon and of
sectons 7.9 0 to 7.966 of these reguatons.
(c) Informaton n specfc cases. Under the provsons and m-
tatons of rtce II of the conventon, and sub|ect to the prov-
sons of rtce I and rtce II of the conventon, and upon
the request of the Chef of the Ta aton-Department of the Mnstry
of Fnance of Denmark, the Commssoner of Interna Revenue sha
furnsh to the Chef of the Ta aton Department nformaton ava-
abe to or obtanabe by the Commssoner of Interna Revenue rea-
tve to the ta abty of any person under the revenue aws of Den-
mark n any case n whch such nformaton s necessary to the ad-
mnstraton of the provsons of the conventon or for the preventon
of fraud or the admnstraton of statutory provsons aganst ta
avodance.
Sec. 7.966. Cams n Cases of Doube Ta aton. Under rtce
of the conventon, where the acton of the revenue authortes of
the contractng states has resuted n doube ta aton n respect of any
of the ta es to whch the conventon reates, the ta payer s entted
to odge a cam wth the country of whch he s a ctzen or, f he s
not a ctzen of ether country, wth the country of whch he s a res-
dent, or f the ta payer s a corporaton or other entty, wth the coun-
try n whch t s created or organzed. rtce further provdes
that shoud the cam be uphed, the competent authorty of the coun-
try wth whch the cam s odged may come to an agreement wth the
competent authorty of the other country wth a vew to equtabe
avodance of the doube ta aton. Such a cam on behaf of a
Unted States ctzen or corporaton or other entty, or on behaf of
a resdent of the Unted States who s not a Dansh ctzen, sha be
fed wth the Commssoner of Interna Revenue, Washngton 2 ,
D. C. The cam shoud be set up n the form of a etter and shoud
show fuy a facts on the bass of whch the camant aeges that such
doube ta aton has resuted. If the Commssoner of Interna Rev-
enue determnes that there s an approprate bass for the cam under
the conventon, he w take the matter up wth the Chef of the Ta -
aton Department of the Mnstry of Fnance of Denmark wth a vew
to arrangng an agreement of the character contempated by rtce
.
Snce the purpose of ths Treasury Decson s to make effectve the
provsons of the ncome ta conventon between the Unted States
and the ngdom of Denmark, procamed by the Presdent of the
Unted States on December ,19 , ths Treasury Decson s not sub-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.211-7. 92
|ect to the effectve date mtaton of secton (c) of the dmns-
tratve Procedure ct, approved une 11,19 .
(Ths Treasury Decson s ssued under the authorty of secton 62
of the Interna Revenue Code ( 3 Stat. 32; 26 U. S. C. 62).)
Geo. . Scoeneman,
Commssoner of Interna Revenue.
pproved March 16, 19 0.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster March 21, 19 0, : a. m.)
Secton 29.211-7: Ta aton of nonresdent 19 0-7-P 327
aen ndvduas. T. D. 77
( so Secton 231, Secton 29.231-1.)
TITL 2 INT RN L R NU : C PT R I. SU C PT R . P RT 7.
T TION PURSU NT TO TR TI S. SU P RT N T RL NDS, GINNING
NU RY 1, 19 7
Reguatons affectng the ta aton of nonresdent aens who are
resdents of the Netherands and of Netherands corporatons under
the ncome ta conventon bstween the Unted States and the
Netherands, procamed by the Presdent of the Unted States on
December , 19 .
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
On October 13, 19 9, notce of proposed rue makng under the
ncome ta conventon between the Unted States and the ngdom
of the Netherands, procamed by the Presdent of the Unted States
on December , 19 , was pubshed n the Federa Regster (13 F. R.
G220). fter consderaton of a such reevant matter as was pre-
sented by nterested persons regardng the proposa, the foowng
reguatons arc adopted for the purposes of such conventon.
Secton Tabe of Conte ts
7. 0. Introductory.
7.S 1. ppcabe provsons of the Interna Revenue Code.
7. 2. Scope of the conventon.
7. 3. Defntons.
7. . Scope of conventon wth respect to determnaton of Industra or com-
merca profts.
7. . Contro of a domestc enterprse by a Netherands enterprse.
7. 0. Income from operaton of shps and arcraft.
7. 7. empton from, or reducton n rate of, Unted States ta In the case of
dvdends, nterest, and royates.
7. . Government wages, saares, pensons, and smar remuneraton.
7. 9. Tensons and fe annutes.
7.S00. Compensaton for abor or persona servces.
7. 01. Dvdends and nterest pad by a Netherands corporaton.
7. 02. stng professors or teachers.
7. 03. Remttances.
7. . Natura resource royates and rea property rentas.
7. 0 . Credt aganst Unted States ta abty for ncome ta pad to the
Netherands.
7. G6. d|ustment of ta abty of nonresdent aens who are resdents of the
Netherands and Netherands corporatons.
7.S07. Recproca admnstratve assstance.
7.SG . Cams n cases of doube ta aton.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
93
29.211-7.
Secton 7. 0. Introductory. The ncome ta conventon between
the Unted States and the ngdom of the Netherands, sgned pr
29, 19 , procamed (wth reservatons thereto) by the Presdent of
the Unted States on December , 19 , and effectve on anuary 1,
19 7 (herenafter referred to as the conventon), provdes as foows:
rtce I
(1) The ta es whch are the sub|ect of the present conventon nre:
(a) In the case of the Unted States:
The Federa ncome ta es.
(6) In the case of the Netherands:
() For the appcaton of the provsons of the conventon other than
rtce , the ncome ta and the Netherands ta es credted aganst
t, the corporaton ta and the Netherands ta es credted aganst t,
the property ta , and the ta on fees of drectors and managers of
corporatons; and
() For the appcaton of rtce to III ncusve (e cept
rtces I and II), the capta accretons ta and the e traor-
dnary capta ta .
(2) The present conventon sha appy aso to any other ta es of a sub-
stantay smar character mposed by ether contractng state subsequenty to
the date of sgnature of the present conventon, or, by the government of any
overseas part of the ngdom (n the case of the Netherands) or overseas terr-
tory (n the case of the Unted States) to whch the present conventon s
e tended under rtce II, subsequenty to the date of the notfcaton of
e tenson.
(3) In the event of apprecabe changes n the fsca aws of ether of the
contractng states the competent authortes of the contractng states w
consut together.
rtce II
(1) In the present conventon, uness the conte t otherwse requres:
(a) The term Unted States means the Unted States of merca,
and when used n a geographca sense means the States, the Terrtores
of aska and of awa, and the Dstrct of Coumba.
(6) The term Netherands means ony the ngdom of the Netherands
n urope.
(c) The term Unted States corporaton means a corporaton, assoca-
ton, or other organzaton or |urdca entty created n the Unted States
or under the aws of the Unted States or of any State or Terrtory of
the Unted States.
(d) The term Netherands corporaton means a corporaton, assoca-
ton, or other organzaton or |urdca entty created n the Netherands
or under the aws of the Netherands.
(e) The terms corporaton of one contractng state and corporaton
of the other contractng state mean a Unted States corporaton or a
Netherands corporaton, as the conte t requres.
(/) The term Unted States enterprse means an ndustra or com-
merca enterprse or undertakng carred on n the Unted States by a
ctzen or resdent of the Unted States or by a Unted States corporaton.
(g) The term Netherands enterprse means an ndustra or com-
merca enterprse or undertakng carred on n the Netherands by a
ctzen or resdent of the Netherands or by a Netherands corporaton.
(ft) The terms enterprse of one of the contractng states and enter-
prse of the other contractng state mean a Unted States enterprse or
a Netherands enterprse, as the conte t requres.
() The term permanent estabshment, when used wth respect to an
enterprse of one of the contractng states, means a branch, factory, or other
f ed pace of busness, but does not ncude an agency uness the agent
has, and habtuay e ercses, a genera authorty to negotate and concude
contracts on behaf of such enterprse or has a stock of merchandse from
whch he reguary fs orders on behaf of such enterprse. n enterprse
of one of the contractng states sha not be deemed to have a permanent
estabshment n the other contractng state merey because t carres on
busness deangs n such other contractng state through a hona fde
commsson agent, broker, or custodan actng n the ordnary course of
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.211-7.
9
hs busness as such. The fact that an enterprse of one of te contractng
States mantans In the other contractng state a f ed pace of busness
e cusvey for the purchase of goods or merchandse sha not of Itsef
consttute such f ed pace of busness a permanent estabshment of such
enterprse. When a corporaton of one contractng state has a subsdary
corporaton whch s a corporaton of the other contractng state or whch
s engaged n trade or busuess n such other contractng state, such
subsdary corporaton sha not, merey because of that fact, be deemed to
be a permanent estabshment of ts parent corporaton.
(|) The term competent authorty or competent authortes means,
n the case of the Unted States, the Commssoner of Interna Revenue or hs
duy authorzed representatve ; n the case of the Netherands, the Dreeteur-
Generaa der eastngen or hs duy authorzed representatve; and, n
the case of any part or terrtory to whch provsons of the present con-
venton are e tended under rtce II, the competent authorty for the
admnstraton n such part or terrtory of the ta es to whch such
provsons appy.
(2) In the appcaton of the provsons of the present conventon by ether
of the contractng states, any term whch s not defned n the present conventon
sha, uness the conte t otherwse requres, have the meanng whch that term
has under the aws of such contractng state reatng to the ta es whch are
the sub|ect of the present conventon.
rtce III
(1) n enterprse of one of the contractng states sha not be sub|ect to
ta aton by the other contractng state n respect of ts ndustra or commerca
profts uness t s engaged n trade or busness n the other contractng state
through a permanent estabshment stuated theren. If t s so engaged the
other contractng state may mpose the ta ony upon the ncome of such enter-
prse from sources wthn such other state.
(2) Where an enterprse of one of the contractng states s engaged n trade
or busness In the other contractng state through a permanent estabshment
stuated theren, there sha be attrbuted to such permanent estabshment
the ndustra or commerca profts whch t mght be e pected to derve f t
were an ndependent enterprse engaged n the same or smar actvtes under
the same or smar condtons and deang at arm s ength wth the enterprse
of whch It Is a permanent estabshment, and the profts so attrbuted sha,
sub|ect to the aw of such other contractng state, be deemed to be Income from
sources wthn such other contractng state.
(3) In determnng the ndustra or commerca profts from Sources wthn
one of the contractng states of an enterprse of the other contractng state, no
profts sha be deemed to arse from the mere purchase of goods or merchandse
wthn the former contractng state by such enterprse.
( ) The competent authortes of the contractng states may ay down rues
by agreement for the apportonment of Industra or commerca profts.
rtce I
Where an enterprse of one of the contractng states, by reason of Its partcpa-
ton n the management, contro, or capta of an enterprse of the other contract-
ng state, makes wth or mposes on the atter enterprse, n ther commerca or
fnanca reatons, condtons dfferent from those whch woud be made wth
an ndependent enterprse, any profts whch woud, but for those condtons,
have accrued to one of the enterprses, may be ncuded n the ta abe profts
of that enterprse.
rtce
Income of whatever nature derved from rea property and nterest from mort-
gages secured by rea property sha be ta abe ony n the contractng state In
whch the rea property Is stuated.
rtce I
(1) Income whch an enterprse of one of the contractng states derves from
the operaton of shps or arcraft regstered n that state sha be ta abe ony n
the state n whch such shps or arcraft are regstered. Income derved by
such an enterprse from the operaton of shps or arcraft not so regstered sha
be sub|ect to the provsons of rtce III.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
9
29.211-7.
(2) The present conventon sha be deemed to suspend, for the duraton of
the conventon as between the partes to whch ths artce appes, the provsons
of the arrangement effected by e change of notes between the .Unted States and
the Netherands, dated September 13, October 19, and November 27, 1920, pro-
vdng for reef from doube ncome ta aton on shppng profts.
(3) In the event that the appcaton of ths artce s e tended to the Nether-
and Indes n accordance wth rtce II, the e change of notes between
the Unted States and the Netherands, dated March , May 23, and November
,1939, reatng to the appcatons to the Netherand Indes of the arrangement
referred to n paragraph (2) of ths artce, sha be deemed to be suspended for
so ong as ths artce contnues to be appcabe wth respect to the Netherand
Indes.
rtce II
(1) The rate of Unted States ta on dvdends derved from a Unted States
corporaton by a resdent or corporaton of the Netherands not engaged n trade
or busness n the Unted States through a permanent estabshment sha not
e ceed 1 percent: Provded that such rate of ta sha not e ceed percent f
such Netherands corporaton contros, drecty or ndrecty, at east 9 percent
of the entre votng power n the corporaton payng the dvdend, and not more
than 2 percent of the gross ncome of such payng corporaton s derved from
nterest and dvdends, other than nterest and dvdends from ts own subsdary
corporaton. Such reducton of the rate to percent sha not appy f the rea-
tonshp of the two corporatons has been arranged or s mantaned prmary
wth the ntenton of securng such reduced rate.
(2) Dvdends derved from sources wthn the Netherands by a resdent
or corporaton of the Unted States not engaged n trade or busness n the Nether-
ands through a permanent estabshment sha be e empt from Netherands ta .
(3) ther of the contractng states may termnate ths artce, by gvng wrt-
ten notce of termnaton to the other contractng state through dpomatc
channes, on or before the 30th day of une n any year after the frst year for
whch the present conventon becomes effectve. In such event ths artce
sha cease to be effectve on and after the 1st day of anuary n the year ne t
foowng that n whch such notce s gven.
rtce III
(1) Interest (on bonds, securtes, notes, debentures, or on any other form of
ndebtedness), other than nterest referred to n rtce of the present conven-
ton, derved from sources wthn the Unted States by a resdent or corporaton
of the Netherands not engaged n trade or busness n the Unted States through
a permanent estabshment, sha be e empt from Unted States ta ; but such
e empton sha not appy to such nterest pad by a Unted States corporaton
to a Netherands corporaton controng, drecty or ndrecty, more than 0
percent of the entre votng power n the payng corporaton.
(2) Interest (on bonds, securtes, notes, debentures, or on any other form
of ndebtedness), other than nterest referred to n rtce of the present
conventon, derved from sources wthn the Netherands by a resdent or
corporaton of the Unted States not engaged n trade or busness n the Nether-
ands through a permanent estabshment, sha be e empt from Netherands
ta ; but such e empton sha not appy to such nterest pad by a Netherands
corporaton to a Unted States corporaton controng, drecty or ndrecty,
more than 0 percent of the entre votng power n the payng corporaton.
rtce I
Royates for the rght to use copyrghts, patents, desgns, secret processes
and formuae, trade-marks, and other anaogous property, and royates, n-
cudng rentas, n respect of moton pcture fms or for the use of ndustra,
commerca, or scentfc equpment, derved from sources wthn one of the
contractng states by a resdent or corporaton of the other contractng state
not engaged n trade or busness n the former state through a permanent
estabshment, sha be e empt from ta mposed by the former state.
btce
resdent or corporaton of one of the contractng states, dervng from
sources wthn the other contractng state royates n respect of the operaton
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.211-7.
9G
of mnes, quarres, or natura resources, or rentas from rea property, may
eect for any ta abe year to be sub|ect to the ta of such other contractng
state, on a net bass, as f such resdent or corporaton were engaged n trade
or busness wthn such other contractng state through a permanent estabsh-
ment theren durng such ta abe year.
rtce I
resdent or corporaton of one of the contractng states not engaged In
trade or busness n the other contractng state sha be e empt from ta In
such other state on gans from the sae or e change of capta assets.
Ths artce deeted by reservaton ; see Presdent s Procamaton, herenafter.
rtce II
Dvdends and Interest pad by a Netherands corporaton sha be e empt
from Unted States ta e cept where the recpent s a ctzen, resdent, or
corporaton of the Unted States.
rtce III
Netherands corporaton sha be e empt from Unted States ta on
Its accumuated or undstrbuted earnngs, profts, ncome, or surpus f t
can prove to the satsfacton of the competent authortes of the Unted States
that ndvduas who are resdents of the Netherands (other than ctzens of
the Unted States) contro, drecty or ndrecty, throughout the ast haf of the
ta abe year, more than 0 percent of the entre votng power n such
corporaton.
Ths artce deeted by reservaton ; see Presdent s Procamaton, herenafter.
rtce I
(1) The Unted States ncome ta abty for any ta abe year begnnng
pror to anuary 1, 1936, of any ndvdua (other than a ctzen of the Unted
States) resdent n the Netherands, or of any Netherands corporaton, re-
manng unpad on the effectve date of the present conventon, may be ad|usted
on a bass satsfactory to the Unted States Commssoner of Interna Revenue:
Provded that the amount to be pad n settement of such abty sha not
e ceed the amount of the abty whch woud have been determned f
(a) the Unted States Revenue ct of 1936 (e cept n the case of a
Netherands corporaton n whch more than 0 percent of the entre votng
power was controed, drecty or ndrecty, throughout the atter haf of
the ta abe year, by ctzens or resdents of the Unted States), and
(6) rtces II and III of the present conventon had been n effect
for such year. If the ta payer was not, wthn the meanng of such Revenue
ct, engaged n trade or busness n the Unted States and had no offce
or pace of busness theren durng the ta abe year, the amount of nterest
and penates sha not e ceed 0 percent of the amount of the ta wth
respect to whch such nterest and penates have been computed.
(2) The Unted States ncome ta unpad on the effectve date of the present
conventon for any ta abe year begnnng after December 31, 193 , and pror
to the effectve date of the present conventon n the case of an ndvdua
(other than a ctzen of the Unted States) resdent of the Netherands, or
In the case of any Netherands corporaton, sha be determned as f the pro-
vsons of rtces II and III of the present conventon had been n effect
for such ta abe year.
(3) The provsons of paragraph (1) of ths artce sha not appy
(a) uness the ta payer fes wth the Commssoner of Interna Revenue
wthn a perod of 2 years foowng the effectve date of the present conven-
ton a request that such ta abty be so ad|usted and furnshes such n-
formaton as the Commssoner may requre; or
(6) n any case n whch the Commssoner s satsfed that any defcency
n ta s due to fraud wth ntent to evade the ta .
Ths artce modfed by reservaton; see Presdent s Procamaton, here-
nafter.
rtce
(1) Wages, saares and smar compensaton, and pensons and fe annutes,
pad ether drecty by, or from funds created by, one of the contractng states
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
97
29.211-7.
or the potca subdvsons or terrtores thereof to ndvduas n the other
contractng state sha be e empt from ta aton n the atter state.
(2) Prvate pensons and fe annutes derved from wthn one of the con-
tractng states and pad to ndvduas n the other contractng state sha be
e empt from ta aton n the former state.
(3) The term pensons as used n ths artce means perodc payments made
In consderaton for servces rendered or by way of compensaton for n|ures
receved.
( ) The term fe annutes as used n ths artce means a stated sum pay-
abe perodcay at stated tmes durng fe, or durng a specfed number of
years, under an obgaton to make the payments n return for adequate and fu
consderaton n money or money s worth.
btce I
(1) resdent of the Netherands sha be e empt from Unted States ta upon
compensaton for abor or persona servces performed wthn the Unted States
f he s temporary present wthn the Unted States for a perod or perods not
e ceedng a tota of 1S3 days durng the ta abe year and hs compensaton s
receved for abor or persona servces performed as a worker or empoyee of,
or under contract wth, a resdent of the Netherands, or a Netherands corpora-
ton, carryng the actua burden of the remuneraton.
(2) The provsons of paragraph (1) of ths artce sha nppy, mutats
mutands, to a resdent of the Unted States dervng compensaton for abor
or persona servces performed wthn the Netherands.
rtce II
Professors or teachers, resdents of one of the contractng states, who, n
accordance wth agreements between the contractng states or between teachng
estabshments n the contractng states for the e change of professors and
teachers, vst the other contractng state to teach, for a ma mum perod of
2 years, n a unversty, coege, or other teachng estabshment n such other
contractng state, sha not be ta ed by such other state wth respect to the
remuneraton whch they receve for such teachng.
btce III
Students or busness apprentces of one contractng state resdng n the other
contractng state e cusvey for purposes of study or for acqurng busness e -
perence sha not be ta abe by the atter state n respect of remttances re-
ceved by them from abroad for the purpose of ther mantenance or studes.
btce I
(1) Notwthstandng any provsons of the present conventon (other than
paragraph (1) of rtce when appcabe n the case of an ndvdua who
s deemed by each contractng state to be a ctzen thereof), each of the two
contractng states, n determnng the ta es, ncudng a surta es, of ts ctzens
or resdents or corporatons, may ncude n the bass upon whch such ta es
are mposed a tems of ncome ta abe under ts own revenue aws as though
ths conventon had not come nto effect.
(2) s far as may be n accordance wth the provsons of the Unted States
Interna Revenue Code, the Unted States agrees to aow as a deducton from
the ncome ta es mposed by the Unted States the approprate amount of ta es
pad to the Netherands, whether pad drecty by the ta payer or by wthhodng
at the source.
(3) s far as may be n accordance wth the provsons of Netherands aw,
the Netherands agrees to aow a deducton from Netherands ta wth respect
to ncome from sources wthn the Unted States, n order to take nto account
the Federa ncome ta es pad to the Unted States, whether pad drecty by the
ta payer or by wthhodng at the source.
btce
(1) persons who eft the Netherands between pr 30, 1939, and Decem-
ber 31,19 , ncusve (other than persons who were ctzens of the Unted States
at the tme of eavng the Netherands or Netherands sub|ects who by reason
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.211-7. .
9
of ther functon as governmenta offcas In estabshed servce resde abroad
and the members of ther famy vng wth them), and who are deemed to be
ta payers under the provsons of Netherands aw reatng to the capta
accretons ta or the e traordnary capta tn , and who became resdents of
the Unted States (accordng to the ncome ta aw of the Unted States) durng
that perod, and who dd not return to the Netherands on or before December 31,
) .r). to resume resdence In the Netherands (accordng to the ncome ta aw
of the Netherands), sha be ta abe by the Netherands:
(a) under the aw reatng to the capta accretons ta , ony n respect
of accretons arsng from ther property stuated n the Netherands (as
defned n that aw n the case of nonresdents) and from ther actvtes n
the Netherands;
(6) under the aw reatng to the e traordnary capta ta . ony n
respect of ther property stuated n the Netherands (as defned n that
aw n the case of nonresdents).
(2) persons who eft the Netherands between pr 30,1939, and December
31, 19 , ncusve, and who were ctzens of the Unted States at the tme of
eavng the Netherands, and who are deemed to be ta payers under the provsons
of Netherands aw reatng to the capta accretons ta or the e traordnary
capta ta , and who became resdents of the Unted States (accordng to the
ncome ta aw of the Unted States) on or before December 31, 19 , sha be
ta abe by the Netherands:
(a) under the aw reatng to the capta accretons ta , ony In respect
of accretons arsng from ther property stuated n the Netherands (as
defned n that aw n the case of nonresdents) and from ther actvtes
In the Netherands;
(6) under the aw reatng to the e traordnary capta ta , ony n
respect of ther property stuated n the Netherands (as defned n that
aw n the case of nonresdents).
(3) The provsons of ths artce sha be deemed to be effectve as though
the present conventon had entered nto force on the effectve date of the Nether-
ands aw reatng to the capta accretons ta or the e traordnary capta ta ,
as the case may be.
rtce I
The competent authortes of the contractng states sha e change such nfor-
maton (beng nformaton whch such authortes have n proper order at ther
dsposa) as s necessary for carryng out the provsons of the present conven-
ton or for the preventon of fraud or the admnstraton of statutory provsons
aganst ega avodance n reaton to the ta es whch are the sub|ect of the
present conventon. ny nformaton so e changed sha be treated as secret
and sha not be dscosed to any person other than those concerned wth the
assessment and coecton of the ta es whch are the sub|ect of the present
conventon. No nformaton as aforesad sha be e changed whch woud ds-
cose any trade, busness, ndustra or professona secret, or trade process.
rtce II
(1) The contractng states undertake to end assstance and support to each
other In the coecton of the ta es whch are the sub|ect of the present conven-
ton, together wth nterest, costs, and addtons to the ta es and fnes not beng
of a pena character.
(2) In the case of appcatons for enforcement of ta es, revenue cams of
each of the contractng states whch have been fnay determned may be ac-
cepted for enforcement by the other contractng state and coected n that
state n accordance wth the aws appcabe to the enforcement and coecton
of ts own ta es. The state to whch appcaton s made sha not be requred
to enforce e ecutory measures for whch there s no provson n the aw of the
state makng the appcaton.
(3) ny appcaton sha be accompaned by documents estabshng that
under the aws of the state makng the appcaton the ta es have been fnay
determned.
( ) The assstance provded for In ths artce sha not be accorded wth
respect to the ctzens, corporatons, or other enttes of the state to whch app-
caton s made, e cept as s necessary to Insure that the e empton or reduced
rate of ta granted under the conventon to such ctzens, corporatons, or other
enttes sha not be en|oyed by persons not entted to such benefts.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
99
29.211-7.
rtce III
(1) In no case sha the provsons of rtces I and II be construed
so as to mpose upon ether of the contractng states the obgaton
(a) to carry out admnstratve measures at varance wth the regua-
tons and practce of ether contractng state, or
(6) to suppy partcuars whch are not procurabe under ts own
egsaton or that of the state makng appcaton.
(2) The state to whch appcaton s made for nformaton or assstance
sha compy as soon as possbe wth the request addressed to t. Nevertheess,
snch state may refuse to compy wth the request for reasons of pubc pocy
or f compance woud nvove voaton of a trade, busness, ndustra or pro-
fessona secret, or trade process. In such case t sha nform, ns soon as possbe,
the state makng the appcaton.
btce I
Where the acton of the revenue authortes of the contractng states has re-
suted or w resut n doube ta aton contrary to the provsons of the present
conventon, the ta payer sha be entted to odge a cam wth the state of whch
he s a ctzen or sub|ect or, f he s not a ctzen or sub|ect of ether of the con-
tractng states, wth the state of whch he s a Resdent, or, f the ta payer s a
corporaton, wth the state n whch t s created or organzed. Shoud the
cam be uphed, the competent authorty of such state sha undertake to come
to an agreement wth the competent authorty of the other state wth a vew
to equtabe avodance of the doube ta aton n queston.
rtce
(1) The provsons of the present conventon sha not be construed to restrct
n any manner any e empton, deducton, credt or other aowance accorded
y the aws of one of the contractng states n the determnaton of the ta
mposed by such state.
(2) Shoud any dffcuty or doubt arse as to the nterpretaton or appcaton
of the present conventon, the competent authortes of the contractng states
sha undertake to sette the queston by mutua agreement.
(3) The ctzens or sub|ects of one of the contractng states sha not, whe
resdent In the other contractng state, be sub|ected theren to other or more
burdensome ta es than are the ctzens or sub|ects of such other contractng state
resdng n ts terrtory. The term ctzens or sub|ects as used n ths artce
ncudes a ega persons, partnershps, and assocatons dervng ther status
from, or created or organzed under the aws n force n, the respectve contract-
ng states. In ths artce the word ta es means ta es of every knd or de-
scrpton whether Nntonn, Federa, State, provnca, or muncpa.
btce I
(1) The authortes of each of the contractng states, n accordance wth the
practces of that state, may prescrbe reguatons necessary to carry out the pro-
vsons of the present conventon.
(2) Wth respect to the provsons of the present conventon reatng to e -
change of nformaton and mutua assstance n the coecton of ta es, the com-
petent authortes may, by common agreement, prescrbe rues concernng mntters
of procedure, forms of appcaton and repes thereto, converson of currency,
dsposton of amounts coected, mnmum amounts sub|ect to coecton, and
reated matters.
rtce II
(1) ther of the contractng states may, at the tme of e change of nstru-
ments of ratfcaton or thereafter whe the present conventon contnues n force,
by a wrtten notfcaton of e tenson gven to the other contractng state through
dpomatc channes, decare the desre of the government of any overseas part
of the ngdom (n the case of the Netherands) or overseas terrtory (n
the case of the Unted States), whch mposes ta es substantay smar n
character to those whch are the sub|ect of the present conventon, that the
operaton of the present conventon, ether n whoe or as to such provsons
thereof as may be deemed to have spaca appcaton, sha e tend to such
part or terrtory.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.211-7.
100
(2) In the event that a notfcaton s gven by one of the contractng states
n accordance wth paragraph (1) of ths artce, the present conventon, or
such provsons thereof as may be spscfed n the notfcaton, sha appy to
any part or terrtory named n such notfcaton on and after the 1st day of
anuary foowng the date of a wrtten communcaton through dpomatc
channes addressed to such contractng state by the other contractng state,
after such acton by the atter state as may be necessary n accordance wth
ts own procedures, statng that such notfcaton s accepted n respect of such
part or terrtory. In the absence of such acceptance, none of the provsons
of the present conventon sha appy to such part or terrtory.
(3) t any tme after the e praton of 1 year from the effectve date of an
e tenson made by vrtue of paragraphs (1) and (2) of ths artce, ether of
the contractng states may, by a wrtten notce of termnaton gven to the other
contractng sate through dpomatc channes, termnate the appcaton of the
present conventon to any part or terrtory to whch the conventon, or any
of ts provsons, has been e tended. In that case, the present conventon, or
the provsons thereof specfed n the notce of termnaton, sha cease to be
appcabe to the part or terrtory named n such notce of termnaton on and
after the 1st day of anuary foowng the e praton of a perod of 6 months
after the date of such notce: Provded, however, that ths sha not affect the
contnued appcaton of the conventon, or any of the provsons thereof, to
the Unted States, to the Netherands, or to any part or terrtory (not named
n the notce of termnaton) to whch the conventon, or such provson thereof,
appes.
( ) For the appcaton of the present conventon In reaton to any part or
terrtory to whch t s e tended by notfcaton gven by the Unted States or
the Netherands, references to the Unted States or to the Netherands or to
one or the other contractng state, as the case may be, sha be construed t rofer
to such part or terrtory.
rtce III
(1) The present conventon sha be ratfed and the nstruments of ratfcaton
sha be e changed at Washngton as soon ns possbe.
(2) The present conventon sha become effectve on the 1st day of anuary
In the year ast precedng the year n whch the e change of nstruments of rat-
fcaton takes pace. It sha contnue effectve for a perod of years begnnng
wth that date and ndefntey after that perod, but may bo termnated by ether
of the contractng states at the end of the -year perod or at any tme thereafter,
provded that at east 6 months pror notce of termnaton has been gven, the
termnaton to become effectve on the 1st day of anuary foowng the e pra-
ton of the 6-month perod.
Done at Washngton, n dupcate, n the ngsh and Dutch anguages, the two
te ts havng equa authentcty, ths 29th day of pr, 19 .
For the Government of the Unted States of merca :
G. C. Marsha, sea
For the Government of the ; gom of the Netherands:
. N. an effens. sea
PROCL M TION OF T PR SID NT OF T UNIT D ST T S
Dated December S, 19

nd whereas the Senate of the Unted States of merca, by ther resouton of
une 17, 19 , two-thrds of the Senators present concurrng theren, dd advse
and consent to the ratfcaton of the aforesad conventon sub|ect to certan
reservatons, as foows:
(1) The Government of the Unted States of merca does not accept
rtce I of the conventon reatng to gans from the sae or e change of
capta assets.
(2) The Government of the Unted States of merca does not accept
rtce III of the conventon reatng to Unted States ta aton of the
undstrbuted earnngs, profts, ncome, or surpus of a Netherands cor-
poraton.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
101
29.211-7.
(3) The Government of the Unted Stntos of merca does not accept
rtce I of the conventon reatng to settement of unpad Unted States
Income ta abty uness there be emnated therefrom, (a) references
now appearng theren to rtce III, and (6) any anguage whch mght
prevent the ta aton by Unted States of capta gans, f any, ta abe under
the revenue aws of the Unted States for the respectve years n whch such
gans were reazed.

nd whereas the respectve nstruments of ratfcaton of the aforesad con-
venton were duy e changed at Washngton on December 1, 10 S, and a protoco
of e change of nstruments of ratfcaton, n the ngsh and Dutch anguages,
was sgned on that date by the respectve penpotentares of the Unted States
of merca an the ngdom of the Netherands, the ngsh te t of whch proto-
co reads n part as foows:
The ratcaton by the Government of the Unted States of merca of
the conventon aforesad rectes n ther entrety the reservatons contaned
n the resouton of une 17, 10 S, of the Senate of the Unted States of
merca advsng and consentng to ratcaton of the conventon aforesad,
the te ts of whch reservatons were communcated by the Government of
the Unted States of merca to the Government of the ngdom of the
Netherands. The Government of the ngdom of the Netherands has ac-
cepted the reservatons aforesad. ccordngy, t s the understandng of
both Governments that rtce I and rtce III of the conventon afore-
sad sha be deemed to be deeted and of no eff|et and further that, wth
respect to rtce I , there sha be deemed to be deeted therefrom and of
no effect (a) n references theren to rtce III and (6) any anguage
whch mght prevent the ta aton of capta gans, f any, ta abe under the
revenue aws of ether of the two Governments for the respectve years n
whch such gans were reazed. (

Sec. 7. 1. pfca .e Provsons of the Interna Revenue
Code. The Interna Revenue Code provdes n part as foows:
C PT R I INCOM T

S C. 22. GROSS INCOM .

(b) cusons from Gross Income. The foowng tems sha not be In-
cuded n gross ncome and sha be e empt from ta aton under ths chapter:

(7) Income e empt under treaty. Income of any knd, to the e tent
requred by any treaty obgaton of the Unted Staes;

S C. C2. RUL S ND R GUL TIONS.
The Commssoner, wth the approva of the Secretary, sha prescrbe and
pubsh a needfu rues and reguatons for the enforcement of ths chapter.
Pursuant to secton 62 of the Interna Revenue Code, other prov-
sons of the nterna revenue aws, and to rtce I of the con-
venton, the foowng reguatons, whch are desgnated as sectons
7. 0 to 7. 0 , are hereby prescrbed and a reguatons nconsstent
herewth are modfed accordngy.
Sec. 7. 2. Scope of the Conventon. The prmary purposes of
the conventon, to be accompshed on a recproca bass, are to avod
doube ta aton upon ma|or tems of ncome derved from sources
n one country by persons resdent n, or by corporatons of, the other
country, and to provde for admnstratve cooperaton between the
competent ta authortes of the two countres ookng to the avodance
of doube ta aton and the preventon of fsca evason.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.211-7.
102
The specfc casses of ncome from sources wthn the Unted States
e empt under the conventon from Unted States ta where derved
from such sources on or after anuary 1,19 7, are:
(a) Industra and commerca profts of a Netherands enter-
prse havng no permanent estabshment n the Unted States
( rtce III) ;
(b) Income derved by a nonresdent aen who s a resdent
of the Netherands, or by a Netherands corporaton, from the
operaton of shps or arcraft regstered n the Netherands
( rtce I);
(c) Interest (other than nterest from mortgage notes (not
ncudng bonds) secured by rea property) and royates (n-
cudng fm rentas) derved by a nonresdent aen who s a
resdent of the Netherands or by a Netherands corporaton f
such aen or corporaton has no permanent estabshment n the
Unted States (but such e empton does not appy to nterest pad
to a Netherands corporaton controng the corporaton payng
such nterest) ( rtces III and I );
( ) Wages, saares, compensaton, pensons, and fe annutes
pad by, or out of funds created by, the Netherands to aens
present n the Unted States ( rtce );
(e) Compensaton, sub|ect to certan mtatons, for persona
servces derved by a nonresdent aen who s a resdent of the
Netherands ( rtce I):
(/) Prvate pensons and fe annutes derved by nonresdent
aen ndvduas resdng n the Netherands ( rtce (2)) ;
(ff) Dvdends and nterest pad by a Netherands corporaton
to a nonresdent aen or to a foregn corporaton ( rtce II);
(h) Remuneraton derved from teachng n the Unted States,
under certan condtons, for a perod of not more than 2 years
by a professor or teacher who s a resdent of the Netherands
but who s temporary present n the Unted States ( rtce
II);
() Remttances from sources outsde the Unted States re-
ceved n the Unted States by a nonresdent aen ndvdua who
s resdent n the Netherands but who s temporary present
n the Unted States for the purposes of study or for acqurng
busness e perence, such remttances beng for the purpose of
hs mantenance or studes ( rtce III).
The conventon aso reduces to 1 percent the rate of ta otherwse
mposed upon dvdends derved by a nonresdent aen who s a res-
dent of the Netherands or by a Netherands corporaton f such aen
or corporaton has no permanent estabshment n the Unted States.
s to e empton from wthhodng of the ta at the source n the
case of nterest, royates, pensons, and fe annutes, and reducton
n the rate of ta from 30 percent to 1 percent n the case of dvdends
see Treasury Decson 090 C. 1 . 1919-1, 92 , approved March 2,
19 9 26 CFR 7. 00 to 7. 10, ncusve .
The conventon does not affect the abty to Unted States ncome
ta aton of sub|ects of the Netherands who are resdents of the Unted
States e cept that such ndvduas are entted to the benefts of rtce
I (reatng to credt for Netherands ncome ta ), and of rtce
(reatng to equaty of ta aton). cept as provded n
rtce I , reatng to the credt for ncome ta , the conventon does
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
103
29.211-7.
not affect ta aton by the Unted States of a ctzen of the Unted States
or of a domestc corporaton, even though such ctzen s resdent n
the Netherands and such corporaton s engaged n trade or busness
n the Netherands.
Sec. 7. 3. Defntons. s used n sectons 7. 0 to 7. 6 , n-
cusve, uness the conte t otherwse requres the terms defned n the
conventon sha have the meanngs so assgned to them. ny term
used n such sectons whch s not defned n the conventon but whch
s defned n the Interna Revenue Code sha be gven the defnton
contaned theren uness the conte t otherwse requres.
s used n sectons 7. 0 to 7. 6 , ncusve:
(a) The term permanent estabshment means a branch, factory,
or other f ed pace of busness. The fact that a Netherands corpora-
ton has a domestc subsdary corporaton, or a foregn subsdary
corporaton havng a branch n the Unted States, does not of tsef
consttute ether subsdary corporaton a permanent estabshment of
the parent Netherands enterprse. The fact that a Netherands enter-
prse has busness deangs n the Unted States through a bona fde
commsson agent, broker, or custodan, actng n the usua course
of hs busness as such, or mantans n the Unted States an offce or
other f ed pace of busness used e cusvey for the purchase of goods
or merchandse, does not mean that such Netherands enterprse has a
permanent estabshment n the Unted States. If, however, a Nether-
ands enterprse carres on busness n the Unted States through an
agent who has, and habtuay e ercses, a genera authorty to nego-
tate and concude contracts on behaf of such enterprse or f t has an
agent who mantans wthn the Unted States a stock of merchandse
from whch he reguary fs orders on behaf of hs prncpa, then
such enterprse sha be deemed to have a permanent estabshment n
the Unted States. owever, an agent havng power to contract on
behaf of hs prncpa but ony at f ed prces and under condtons
determned by the prncpa does not necessary consttute a perma-
nent estabshment of such prncpa. The mere fact that an agent
(assumng he has no genera authorty to contract on behaf of hs
empoyer or prncpa) mantans sampes or occasonay fs orders
from ncdenta stocks of goods mantaned n the Unted States w
not consttute a permanent estabshment wthn the Unted States.
The mere fact that saesmen, empoyees of a Netherands enterprse,
promote the sae of ther empoyer s products n the Unted States or
that such enterprse transacts busness n the Unted States by means
of ma order actvtes, does not mean such enterprse has a permanent
estabshment theren. The term permanent estabshment as used
n the conventon mpes the actve conduct theren of a busness enter-
prse. The mere ownershp, for e ampe, of tmberands or a ware-
house n the Unted States by a Netherands enterprse does not mean
that such enterprse has a permanent estabshment theren. s to
the effect of the mantenance of a permanent estabshment wthn the
Unted States upon e empton from Unted States ta n the case of
nterest and royates and reducton n the rate of Unted States ta
n the case of dvdends, see secton 7. 7 of these reguatons.
(6) The term enterprse means any commerca or ndustra
undertakng whether conducted by an ndvdua, partnershp, cor-
poraton, or other entty. It ncudes such actvtes as manufactur-
ng, merchandsng, mnng, processng, and bankng. It does not
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.211-7.
10
ncude the rendton of persona servces. ence, a nonresdent aen
yvho s a resdent of the Netherands and who renders persona servces
s not, merey by reason of such servces, engaged n an enterprse
wthn the meanng of the conventon and hs abty to Unted States
ta s not affected by rtce III of the conventon.
(c) The term Netherands enterprse means an enterprse
carred on n the Netherands by a ctzen or resdent of the Nether-
ands or by a Netherands corporaton. The term Netherands
corporaton means a corporaton, assocaton, or other organzaton or
|urdca entty created n or under the aws of the Netherands.
(d) The term ndustra or commerca profts means profts
arsng from ndustra, commerca, mercante, manufacturng, and
ke actvtes of a Netherands enterprse as defned n ths secton.
Such term does not ncude rentas, royates, nterest, dvdends, fees,
compensaton for persona servces, nor gans derved from the sae or
e change of capta assets. Such enumerated tems of ncome are
not governed by the provsons of rtce III of the conventon.
Sec. 7. . Scope of Conventon Wth Respect to Determnaton
of Industra or Commerca Profts. (a) Genera. rtce III
of the conventon adopts the prncpe that an enterprse of one of
the contractng states sha not be ta abe by the other contractng
state upon ts ndustra or commerca profts uness t has a per-
manent estabshment n the atter state. ence, a Netherands enter-
prse s sub|ect to Unted States ta upon ts ndustra and commerca
profts to the e tent of such profts from sources wthn the Unted
States ony f t has a permanent estabshment wthn the Unted
States. From the standpont of Federa ncome ta aton, the artce
has appcaton ony to a Netherands enterprse and to the ndustra
and commerca ncome thereof from sources wthn the Unted
States. It has no appcaton, for e ampe, to compensaton for
abor or persona servces performed n the Unted States nor to
ncome derved from rea property ocated n the Unted States,
ncudng rentas and royates therefrom, nor to gans from the sae
or dsposton of such property, nor to nterest, dvdends, royates,
other f ed or determnabe annua or perodca ncome, and gans
derved from the sae or e change of capta assets.
(b) No Unted States permanent estabshment. nonresdent
aen (ncudng a nonresdent aen ndvdua, fducary, and partner-
shp) who s a resdent or ctzen of the Netherands or a Netherands
corporaton, carryng on an enterprse n the Netherands and havng
no permanent estabshment n the Unted States s not, wth respect
to ncome arsng on or after anuary 1,19 7, sub|ect to Unted States
ncome ta upon ndustra or commerca profts from sources wthn
the Unted States. For e ampe, f the Netherands enterprse
carred on by such aen or corporaton ses, n 19 , merchandse,
such as tup bubs, te tes, or quors, through a bona fde commsson
agent or broker n the Unted States actng n the ordnary course of
hs busness as such agent or broker, the resutng profts are, under
the terms of rtce III of the conventon, e empt from Unted States
ncome ta . Lkewse no permanent estabshment e sts and no
Unted States ncome ta attaches to such profts f such enterprse,
through ts saes agents n the Unted States, secures orders for ts
products, the saes beng made n the Netherands.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
10
29.211-7.
(c) Unted States permanent estabshment. nonresdent aen
(ncudng a nonresdent aen ndvdua, fducary, and partnershp)
who s a resdent or ctzen of the Netherands, or a Netherands cor-
poraton, whether or not carryng on an enterprse n the Netherands,
havng a permanent estabshment n the Unted States, s sub|ect to
ta upon ndustra or commerca profts from sources wthn the
Unted States to the same e tent as are nonresdent aens and foregn
corporatons engaged n trade or busness theren. In the determna-
ton of the ncome ta abe to such aen or foregn corporaton a
ndustra and commerca profts from sources wthn the Unted
States sha be deemed to be aocabe to the permanent estabshment
n the Unted States. ence, for e ampe, f a Netherands enterprse
havng a permanent estabshment n the Unted States ses n the
Unted States, through a commsson agent theren goods produced
n the Netherands, the resutng profts derved from Unted States
sources from such transactons are aocabe to such permanent estab-
shment even though such transactons were carred on ndependenty
of such estabshment. In determnng ndustra and commerca
profts no account sha be taken of the mere purchase of merchandse
wthn the Unted States by the Netherands enterprse. The ndus-
tra or commerca profts of the permanent estabshment sha be
determned as f the estabshment were an ndependent enterprse
engaged n the same or smar actvtes and deang at arm s ength
wth the enterprse of whch t s a permanent estabshment.
Sec. 7. . Contro of a Domestc nterprse by a Netherands
nterprse. rtce I of the conventon provdes, n effect, that f
a Netherands corporaton by reason of ts contro of a domestc enter-
prse mposes on such atter enterprse condtons dfferent from those
whch woud resut from norma busness reatons between ndepend-
ent enterprses, the accounts between the enterprses may be ad|usted
so as to ascertan the true net ncome of each enterprse. The purpose
s to pace the controed domestc enterprse on a ta party wth an
uncontroed domestc enterprse by determnng, accordng to the
standard of an uncontroed enterprse, the true net ncome from the
property and busness of the controed enterprse. The basc ob-
|ectve of the artce s that f the accountng records do not truy
refect the net ncome from the property and busness of such domestc
enterprse the Commssoner of Interna Revenue may ntervene and,
by makng such dstrbutons, apportonments, or aocatons as he
may deem necessary of gross ncome or deductons of any tem or
eement affectng net ncome as between such domestc enterprse and
the Netherands enterprse by whch t s controed or drected, de-
termne the true net ncome of the domestc enterprse. The prov-
sons of secton 29. -1, Reguatons 111 2G CFR 29. -1 , sha,
nsofar as appcabe, be foowed n the determnaton of the net
ncome of the domestc busness.
Sec. 7. 6. Income from Operaton of Shps and rcraft. The
ncome derved from the operaton of shps or arcraft regstered
n the Netherands by a nonresdent aen who s a resdent or ctzen
of the Netherands, or by a Netherands corporaton, and carryng on
an enterprse n the Netherands, s, wth respect to such ncome de-
rved on or after anuary 1, 19 7, e empt from Unted States ncome
ta under the provsons of rtce I of the conventon. owever,
93 0 0
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.211-7.
106
the profts, f any, derved by such aen or corporaton from the
operaton of shps or arcraft not so regstered are treated as are
ndustra and commerca profts generay. See rtce III of the
conventon and secton 7. of these reguatons.
Sec. 7. 7. empton from, or Reducton n Rate of, Unted
States Ta n the Case of Dvdends, Interests, and Royamtes.
(a) Dvdends. (1) Genera. The ta mposed by the Interna
Revenue Code n the case of dvdends receved on or after anuary 1,
19 7, from sources wthn the Unted States by () a nonresdent aen
(ncudng a nonresdent aen ndvdua, fducary, and partnershp)
who s a resdent of the Netherands, or () a Netherands corpora-
ton s mted to 1 percent under the provsons of rtce II (1)
(reatng to dvdends) f such aen or corporaton, at no tme durng
the ta abe year n whch such dvdends were so derved, was engaged
n trade or busness wthn the Unted States through a permanent
estabshment theren. Thus, f a nonresdent aen who s a res-
dent of the Netherands, performs persona servces wthn the Unted
States durng the caendar year 19 and has no permanent estabsh-
ment wthn the Unted States at any tme durng such year he s
entted to the reduced rate of ta wth respect to such dvdends
derved by hm from Unted States sources n that year even though
by reason of hs havng rendered persona servces wthn the Unted
States e s engaged n trade or busness theren n that year wthn
the meanng of secton 211 (b) of the Interna Revenue Code. If, for
e ampe, , a nonresdent aen who s a resdent of the Netherands,
derves n 19 , ,000 compensaton for such persona servces and
hs ony other ncome from sources wthn the Unted States conssts
of dvdends, the dvdends are sub|ect to ta at a rate not to e ceed 1
percent and hs earned ncome s sub|ect to norma ta and surta
wthout takng the dvdends nto account n determnng the ta on
such earned ncome.
(2) Dvdends pad by a Unted States subsdary corporaton.
Under the provsons of rtce II (1) of the conventon, dvdends
pad by a domestc corporaton to a Netherands corporaton are
sub|ect to ta at the rate of ony percent f () such Netherands
corporaton contros, drecty or ndrecty, at the tme the dvdend
s pad 9 percent or more of the votng power n such domestc cor-
poraton, () not more than 2 percent of the gross ncome of the
domestc corporaton for the 3-year perod mmedatey precedng the
ta abe year n whch the dvdend s pad conssts of dvdends and
nterest (other than dvdends and nterest pad to such domestc
corporaton by ts own subsdary corporatons, f any), and ()
the reatonshp between such domestc corporaton and such Nether-
ands corporaton has not been arranged or mantaned prmary
wth the ntenton of securng such reduced rate of percent.
(b) Interest and royates. (1) Genera. Interest (other than
nterest from mortgage notes (not ncudng bonds) secured by rea
property and other than nterest pad by a subsdary corporaton
to ts Netherands parent corporaton, as e paned n subparagraph
(2) of ths paragraph), whether on bonds, securtes, notes, deben-
tures, or any other form of ndebtedness (ncudng nterest on ob-
gatons of the Unted States and on obgatons o nstrumentates
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
107
29.211-7.
of the Unted States) and royates for the rght to use copyrghts,
patents, desgns, secret processes and formuae, trade-marks, and
other anaogous property, and royates (ncudng rentas n respect
of moton pcture fms) or for the use of ndustra, commerca, or
scentfc equpment receved on or after anuary 1, 19 7, from
sources wthn the Unted States by () a nonresdent aen (ncudng
a nonresdent aen ndvdua, fducary, and partnershp) who s
a resdent of the Netherands, or () a Netherands corporaton are
e empt from Unted States ta under the provsons of rtces III
and I of the conventon f such aen or corporaton at no tme dur-
ng the ta abe year n whch such nterest or royaty was so derved
had a permanent estabshment stuated wthn the Unted States.
Such nterest and royates are, therefore, not sub|ect to the wth-
hodng provsons of the Interna Revenue Code.
(2) Interest pad by subsdary corporaton to ts Netherands
parent corporaton. rtce III (1) of the conventon provdes, n
part, that the e empton from Unted States ta of nterest pad to
Netherands corporatons sha not appy to nterest pad by a domes-
tc corporaton to a Netherands corporaton f such Netherands
corporaton contros, drecty or ndrecty, more than 0 percent of
the entre votng power n such domestc corporaton.
(c) enefcares of an estate or trust. nonresdent aen who s
a resdent of the Netherands and who s a benefcary of a domestc
estate or trust sha be entted to the e empton, or reducton n the
rate of ta , as the case may be, provded n rtces II, III, and I
of the conventon wth respect to dvdends, nterest, and royates to
the e tent such tem or tems are ncuded n hs dstrbutve share of
ncome of such estate or trust f he s not engaged n trade or busness
n the Unted States through a permanent estabshment. In such
case such benefcary must, n order to be entted to the e empton
or reducton n the rate of ta , e ecute Form 1001-N or Form 1001 -N
(modfed to show dvdends where appcabe) and fe such form
wth the fducary of such estate or trust n the Unted States.
In any case n whch dvdends, nterest, or royates are derved
from Unted States sources by a Netherands estate or trust any
benefcary of such estate or trust who s not a resdent of the Nether-
ands, or who s engaged n trade or busness n the Unted States
through a permanent estabshment, s not entted to any e empton
under the conventon wth respect to such ncome ncuded n hs
dstrbutve share of the ncome of the estate or trust.
Sec. 7. . Government Wages, Saares, Pensons, and Smar
Remuneraton. rtce (1) of the conventon provdes that
wages, saares and smar compensaton, and pensons and fe an-
nutes, pad on and after anuary 1, 19 7, to an ndvdua ether
drecty by, or from funds created by, the Government of the Nether-
ands or by a potca subdvson or terrtory of the Netherands,
s e empt from Federa ncome ta . The provsons of ths artce
of the conventon are, however, sub|ect to the reservaton and e -
cepton contaned n rtce I of the conventon. No e empton
from Federa ncome ta as to such ncome, not otherwse aowed by
the nterna revenue aws, s granted to a ctzen or resdent of the
Unted States, e cept as to an ndvdua who occupes the dua status
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.211-7.
10
of a ctzen of the Unted States and a ctzen of the Netherands.
Thus, f , a Unted States ctzen, marres a Netherands sub|ect
and assumes the status of a Netherands sub|ect by reason of such
marrage wthout renqushng her Unted States ctzenshp, and
erforms persona servces, whether wthn or wthout the Unted
tates, for the Government of the Netherands, the compensaton for
such servces s e cuded from gross ncome. s to the ta aton,
generay, of compensaton of aen empoyees of foregn governments
see secton 116(h) of the Interna Revenue Code and secton 29.116 2,
Reguatons 111 26 CFR 29.11G-2 .
Sec. 7. 9. Pensons and Lfe nnutes. Under the provsons
of rtce (2) of the conventon, prvate pensons and fe an-
nutes derved on or after anuary 1, 1917, from sources wthn the
Unted States by a nonresdent aen ndvdua who s a resdent
of the Netherands are e empt from Federa ncome ta . The term
pensons s defned n rtce (3), and for the purposes of
rtce (2) does not ncude retred pay or pensons pad by the
Unted States or by any State or Terrtory of the Unted States. The
term fe annutes s defned n rtce ( ), and for the purposes
of rtce (2) does not ncude retred pay or pensons pad by
the Unted States or by any State or Terrtory of the Unted States.
Sec. 7. 60. Compensaton for Labok or Persona Servces,
rtce I of the conventon provdes, upon a recproca bass, that
a nonresdent aen who s a resdent of the Netherands s e empt
from Federa ncome ta upon compensaton (regardess of amount
of such compensaton) receved by such aen on or after anuary 1,
19 7, for abor or persona (ncudng professona) servces per-
formed durng the ta abe year wthn the Unted States f for such
ta abe year:
(a) Such aen s temporary present wthn the Unted States
for a perod or perods not e ceedng 1 3 days durng the ta abe
year, and
(b) Such servces are performed as a worker or empoyee of,
or under contract wth, a resdent of the Netherands or a Nether-
ands corporaton (even though such resdent or corporaton s
engaged n trade or busness wthn the Unted States) whch
resdent or corporaton actuay bears the e pense of such com-
pensaton and s not rembursed therefor by another person.
s to the source of compensaton for abor or persona servces, see
secton 119(a) (3), Interna Revenue Code.
Sec. 7. 61. Dvdends and Interest Pad by a Netherands Cor-
poraton. dvdend pad by a foregn corporaton consttutes n
whoe or n part ncome from sources wthn the Unted States and
hence s sub|ect to ta n the hands of a nonresdent aen or foregn
corporaton, f 0 percent or more of the gross ncome of the foregn
corporaton payng such dvdend s derved from sources wthn the
Unted States durng the perod prescrbed by the statute. Secton
119(a) (2) ( ), Interna Revenue Code, and secton 29.119-3(6), Reg-
uatons 111 26 CFR 29.119-3(b) . Interest pad by a resdent for-
egn corporaton consttutes n ts entrety ncome from sources wthn
| the Unted States, and hence s sub|ect to ta n the hands of a non-
I resdent aen ndvdua or foregn corporaton, f 20 percent or
more of the gross ncome of the foregn corporaton payng such n-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
1C9
: 29.211-7.
terest s derved from sources wthn the Unted States durng the
erod prescrbed bv the statute. Secton 119(a)(1)( ), Interna
evenue Code, and secton 29.119-2( ), Reguatons 111 26 CFR
29.119-2(b) .
Under the provsons of rtce II of the conventon dvdends and
nterest pad by a Netherands corporaton to any nonresdent aen
or to anv foregn corporaton, whether or not such aen s a resdent of
the Netherands, are not, on and after anuary 1,1917, sub|ect to Fed-
era ncome ta regardess of whether the corporaton payng such
dvdends or nterest s a resdent foregn (as to the Unted States) cor-
poraton and regardess of the percentage of ts gross ncome derved
from sources wthn the Unted States.
Sec. 7. G2. stng Professors or Teachers. Under rtce
II of the conventon, an aen who s a resdent of the Netherands
s e empt from Unted States ncome ta wth respect to remunera-
ton derved on or after anuary 1, 19 7. for teachng, ecturng, or
nstructng at any unversty, coege, schoo, or other educatona
nsttuton stuated wthn the Unted States for a perod not e ceed-
ng 2 years from the date of hs arrva n the Unted States, f he
s temporary present n the Unted Sates for such purposes and
because of an agreement between the Unted States and the Nether-
ands or an agreement between an educatona nsttuton stuated n
the Unted States and an educatona nsttuton stuated n the Nether-
ands, such agreement havng as ts ob|ect the e change of professors
and teachers between such nsttutons. It sha be deemed that such
aen comng to the Unted States for the purposes ndcated has. for
a perod of not more than 2 years mmedatey succeedng the date of
hs arrva wthn the Unted States for such purposes, the ta status
of a nonresdent aen n the absence of proof of hs ntenton to re-
man ndefntey n the Unted States.
Sec. 7. 63. Remttances. Under rtce III of the conven-
ton, nonresdent aen ndvduas who are resdents of the Netherands
but who are temporary present n the Unted States for the purposes
of study or for acqurng busness e perence are e empt from Federa
ncome ta upon amounts derved on or after anuary 1, 19-17, and
representng remttances from sources outsde the Unted States for
the purposes of ther mantenance, educaton, studes, and tranng.
Sec. 7. 6 . Natura Resource Royates and Rea Property
Rentas. Under rtce of the conventon, n any case n whch a
nonresdent aen (who s a resdent of the Netherands) or a Nether-
ands corporaton, derves from sources wthn the Unted States, on
or after anuary 1, 19 7, royates from the operaton of mnes, o
wes, quarres, or other natura resources, or rentas from rea prop-
erty stuated wthn the Unted States, such aen or corporaton may
eect, for the ta abe year n whch such ncome s so derved, to be
sub|ect to Federa ncome ta as f such aen or corporaton were en-
gaged n trade or busness wthn the Unted States by reason of havng
a permanent estabshment theren durng such ta abe year. Such
eecton sha be made by so sgnfyng on the return for such year.
The eecton so sgnfed sha be rrevocabe for the ta abe year for
whch such eecton s made. In such a case a return may be fed by
the nonresdent aen or foregn corporaton even though the soe
ncome of such aen or corporaton from sources wthn the Unted
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
S 29.211-7.
110
States s f ed or determnabe annua or perodca ncome upon whch
the ta has been fuy satsfed at the source and there e sts no neces-
sty for the fng of the return e cept for the purposes of securng
the benefts of rtce of the conventon. See secton 29.217-2,
Reguatons 111 26 CFR 29.217-2 .
Sec. 7. 6 . Credt ganst Unted States Ta Labty for In-
come Ta Pad to the Netherands. For the purpose of avodance
of doube ta aton, rtce I (2) of the conventon provdes that
there sha be aowed by the Unted States a credt aganst Unted
States ncome ta abty for the amount of the Netherands ta es
descrbed n rtce I(Z )() of the conventon mposed on ncome
derved on or after anuary 1, 19 7, from sources wthn the Nether-
ands. Such credt s, however, sub|ect to the mtatons provded n
secton 131 of the Interna Revenue Code (reatng to the credt for
foregn ta es). See sectons 29.131-1 to 29.131-9 of Reguatons 111
26 CFR 29.131-1 to 29.131-9 .
Sec. 7. C6. d|ustment of Ta Labty of Nonresdent ens
Who re Resdents of the Netherands and of Netherands Corpo-
ratons. rtce I (1) of the conventon as modfed by the reser-
vatons thereto (see secton 7. 0) confers upon the Commssoner of
Interna Revenue authorty to ad|ust the ta abty for ta abe years
begnnng pror to anuary 1,1936, of any nonresdent aen ndvd-
ua who s a resdent of the Netherands and of any corporaton or-
ganzed under the aws of the Netherands n any case n whch such
ta abty remaned unpad on anuary 1, 19 7 (the effectve date
of the conventon). Such provsons, however, w not appy uness
(a) the ta payer has fed wth the Commssoner of Interna
Revenue on or before December 31, 19 , a request that such ta
abty be so ad|usted, showng facts sufcent to apprse the
Commssoner of the bass of the request. The Commssoner may
aso requre a sworn statement showng for each year nvoved
and for such other years as he deems pertnent: (1) by tems and
casses of ncome, the amounts of dvdends, nterest, rents, sa-
ares, wages, premums, annutes, compensatons, remuneratons,
emouments, or other f ed or determnabe- annua or perodca
ncome, gans, profts, and ncome derved from sources wthn
the Unted States; (2) the busness transactons, f any, carred
on n the Unted States by or n behaf of the ta payer durng
each of such years; and (3) such further nformaton as the Com-
mssoner may requre n the partcuar case; and
(b) the Commssoner s satsfed that the addtona ncome
ta nvoved dd not arse by reason of fraud wth ntent to
evade the ta on the part of the ta payer concerned.
In any case n whch the Commssoner deems t approprate to e er-
cse the authorty thus conferred, the resutng ta abty for any
such year or years may not e ceed the amount of the abty whch
woud be determned had the foowng been gven effect for such year
or years:
() The Revenue ct of 1936 (e cept n the case of a Nether-
ands corporaton n whch more than 0 percent of the entre
votng power was controed, drecty or ndrecty, throughout
the atter haf of the ta abe year for whch the abty s beng
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
I
29.211-7.
determned, by ctzens or resdents of the Unted States), but the
ta aton of pans, f any, from the sae or e change of capta
assets n the respectve years sha be determned wthout regard to
that ct;
() rtce II of the conventon, e emptng from Unted
States ta dvdends and nterest pad by a Netherands corpora-
ton to nonresdent aens or foregn corporatons.
In any case n whch the Commssoner of Interna Revenue has
e ercsed hs authorty to appy the provsons of rtce I (1) of
the conventon, f the ta payer was not engaged n trade or busness
wthn the Unted States and had no offce or pace of busness theren
durng the ta abe year nvoved, the aggregate amount of nterest and
penates may not e ceed 0 percent of the amount of the ta wth
respect to whch such nterest and penates have been computed.
rtce I (2) of the conventon as modfed by the reservatons
thereto (see secton 7. 0), provdes that the Federa ncome ta
abty for ta abe years begnnng after December 31, 193 , and
pror to anuary 1,1917, whch remaned unpad on anuary 1, 19 7,
n the case of any nonresdent aen ndvdua, a resdent of the
Netherands, or of any Netherands corporaton, sha be determned
under the Unted States nterna revenue aw propery appcabe
thereto, e cept that rtce II (reatng to e empton from Unted
States ta of dvdends and nterests pad by a Netherands corpora-
ton) sha be treated as beng n effect for such years. (See secton
7. 61 of these reguatons.)
Sec. 7. 67. Recproca dmnstratve ssstance. (a) Gen-
era. y rtce I of the conventon, the Unted States and the
Netherands adopt the prncpe of e change of such nformaton as s
necessary for carryng out the provsons of the conventon or for the
preventon of fraud or for the detecton of practces whch are amed
at reducton of the revenues of ether country, but not ncudng n-
formaton whch woud dscose a trade, busness, ndustra or
professona secret, or trade process.
The nformaton and correspondence reatve to e change of n-
formaton may be transmtted drecty by the Commssoner of In-
terna Revenue to the Drecteur-Generaa der eastngen of the
Netherands.
(b) Informaton to be furnshed n due course. Pursuant to such
prncpe, every Unted States wthhodng agent sha make and fe
wth the coector, n dupcate, an nformaton return on Form 10 2 ,
n addton to the wthhodng return, Form 10 2, for the caendar
year 19 and each subsequent caendar year- wth respect to: (a)
dvdends from whch a ta of 1 percent was wthhed from persons
whose addresses are n the Netherands ( percent n the case of dv-
dends fang wthn the scope of the provso of rtce II (1) of the
conventon); (b) royates and ke amounts and nterest (other than
coupon bond nterest reported on Form 1001-N) from whch no ta
was wthhed from persons who have furnshed to the wthhodng
agent Form 1001 -N; and (c) a other f ed or determnabe annua
or perodca ncome pad to such persons.
In accordance wth the provsons of rtce I of the conventon,
the Commssoner of Interna Revenue w forward to the Drecteur-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.211-7.
112
Gen era a der eastngen of the Netherands, as soon as practcabe
after the cose of the caendar year 19 , and of each caendar year
thereafter durng whch the conventon s n effect, the foowng
nformaton reatng to such caendar year: the names and addresses
of a persons whose addresses are n the Netherands, who derved
from sources wthn the Unted States dvdends, nterest, rents,
royates, saares, wages, pensons, annutes, and other f ed or de-
termnabe annua or perodca profts or ncome, and the amount of
such ncome wth respect to such persons as dscosed on such return.
For these purposes the transmsson to the Drecteur-Generaa der
eastngen of nformaton return, Form 10 2 , and ownershp cer-
tfcate, Form 1001-N, for the caendar year 191 and subsequent
caendar years, sha consttute compance wth the provsons of
rtce I of the conventon and of sectons 7. 0 to 7. 6 of these
reguatons.
(c) 1 formaton n specfc cases. Under the provsons and m-
tatons of rtce I of the conventon, and sub|ect to the prov-
sons of rtce III and rtce I of the conventon, and
upon request of the Drecteur-Generaa der eastngen, the Comms-
soner of Interna Revenue sha furnsh to the Drecteur-Generaa
der eastngen nformaton avaabe to or obtanabe by the Com-
mssoner of Interna Revenue reatve to the ta abty of any per-
son under the revenue aws of the Netherands n any case n whch
such nformaton s necessary to the admnstraton of the provsons
of the conventon or for the preventon of fraud or the admnstra-
ton of statutory provsons aganst ega avodance.
Sec. 7. 0 . Cams n Casks of Doube Ta aton. Under rtce
I of the conventon, where the acton of the revenue authortes
of the contractng states has resuted or w resut n doube ta aton
contrary to the provsons of the conventon, the ta payer s entted
to odge a cam wth the country of whch he s a ctzen or, f he
s not a ctzen of ether country, wth the country of whch he s a
resdent, or f the ta payer s a corporaton, wth the country n whch
t s created or organzed. rtce I further provdes that
shoud the cam be uphed, the competent authorty of the country
wth whch the cam s odged sha undertake to come to an agree-
ment wth the competent authorty of the other country wth a vew
to equtabe avodance of the doube ta aton. Such a cam on be-
haf of a Unted States ctzen or corporaton or other entty, or on
behaf of a resdent of the Unted States who s not a Netherands
sub|ect, sha be fed wth the Commssoner of Interna Revenue,
Washngton 2 , D. C. The cam shoud be set up n the form of a
etter and shoud show fuy a facts on the bass of whch the cam-
ant aeges that such doube ta aton has resuted or w resut. If
the Commssoner of Interna Revenue determnes that there s an
approprate bass for the cam under the conventon, he w take the
matter up wth the Drecteur-Generaa der eastngen of the Nether-
ands wth a vew to arrangng an agreement of the character con-
tempated by rtce I .
Snce the purpose of ths Treasury Decson s to make effectve the
provsons of the ncome ta conventon between the Unted States
and the ngdom of the Netherands, procamed by the Presdent
of the Unted States on December , 19 , ths Treasury Decson s
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
113
1 292.
not sub|ect to the effectve date mtaton of secton (c) of the d-
mnstratve Procedure ct, approved une 11,19 .
(Ths Treasury Decson s ssued under the authorty of secton
62 of the Interna Revenue Code ( 3 Stat. 32; 26 U. S. C. 62).)
Fred S. Martn,
ctng Commssoner of Interna Revenue.
pproved March 16, 19 0.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster Marc 21,19 0, : a. m.)
SUPPL M NT I. FOR IGN CORPOR TIONS
S CTION 231. T ON FOR IGN CORPOR TIONS .
Secton 29.231-1: Ta aton of foregn cor-
poratons.
INT RN L R NU COD
Reguatons affectng the ta aton of Dansh corporatons under
the ncome ta conventon between the Unted States and the ng-
dom of Denmark, procamed by the Presdent of the Unted States on
December ,19 . (See T. D. 777, page 76.)
Secton 29.231-1: Ta aton of foregn cor-
poratons.
INT RN L R Nf COD
Reguatons affectng the ta aton of Netherands corporatons
under the ncome ta conventons between the Unted States and the
ngdom of the Netherands, procamed bv the Presdent of the
Unted States on December , 19 . (See T. D. 77 , page 92.)
SUPPL M NT M. INT R ST ND DDITIONS TO T T
S CTION 292. INT R ST ON D FICI NCI S
19 0- -13300
Ct. D. 1729
ncome ta nterna revenue code decson of supreme court
1. Interest on Defcency Intekest Not bated When Net
Operatng Loss Carry- ack bates Defcency.
Where a defcency and Interest have been vady assessed nncer
any appcabe statutory procedure, a subsequent carry-back of a net
operatng oss whch resuts n the abatement of the defcency does
not abate the nterest prevousy assessed on that defcency.
2. Decson Reversed.
Decson of the Unted States Court of ppeas, Thrd Crcut (172
Fed. (2d) 77 (19 )), reversng decson of the dstrct court,
D. N. . (76 Fed. Supp. 937 (19 )), reversed.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:
3
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
292.
11
Supreme Court of the Unted States
ohn . Mannng, as Coector of Interna Revenue for the Ffth Dstrct of New
ersey, pettoner, v. Seeey Tube o Co., a Corporaton of the State of
ctc ersey
On wrt of certorar to the Unted States Court of ppeas for the Thrd Crcut
February 6, 19 0
OPINION
Mr. Chef ustce nson devered the opnon of the Court.
The facts of ths case have been agreed upon by stpuaton. On December 1 ,
19 1, respondent ta payer, a New ersey corporaton, ed a corporate ta return
for ts fsca perod, anuary 1, 19 1, to September 30, 19 1. On anuary 12,
19 2, the Commssoner of Interna Revenue assessed the ta ,1 whch respondent
tmey pad. Respondent was ad|udged a bankrupt and a recever apponted on
uy 7, 19 3. On ugust 2, 19 3, the Commssoner, usng the acceerated pro-
cedure appcabe n bankruptcy cases,2 assessed defeonces n the 19 1 ta es
wth nterest from the date the ta was propery due to the assessment date.
On March 3, 19 , respondent fed ts return for the fsca perod from October
1, 19 2. to September 30, 19 3, showng a net operatng oss for that year. Ths
oss, when carred back n accordance wth secton 122(b)(1) of the Interna
Revenue Code, was suffcent to abate competey respondent s ta abty for
19 1. Respondent then fed cams for a refund of that part of the 1 1 ta
whch had aready teen pad, and for the abatement of the assessed defcency
and nterest. The Commssoner abated the defcency, but refused to refund
a the ta whch had been pad, retanng nu amount equa to the nterest whch
had been assessed on the defcency.
Respondent then sued the coector for the nterest. The dstrct court sus-
taned the coector, hodng that the payment of the nterest remaned au
1 The payment n queston ncuded corporate ncome ta , defense ta and e cess profts
ta . No queston s presented as to the correctness of the defense ta payment.
a Int. Rev. Code, secton 27 (a) : Upon the ad|udcaton of bankruptcy of any ta payer
n any bankruptcy proceedng or the appontment of a recever for any ta payer n any
recevershp proceedng before any court of the Unted States or of any State or Terrtory
or of the Dstrct of Coumba, any defcency (together wth a nterest, addtona
amounts, or addtons to the ta provded for by aw) determned by the Commssoner
n respect of a ta mposed by ths chapter upon such ta payer sha, despte the restrctons
mposed by secton 272(a) upon assessments be mmedatey assessed f such defcency has
not theretofore been assessed n accordance wth aw. In such cases the trustee n bank-
ruptcy or recever sha gve notce In wrtng to the Commssoner of the ad|udcaton of
bankruptcy or the appontment of the recever, and the runnng of the statute of mtatons
on the makng of assessments sha be suspended for the perod from the date of ad|udca-
ton n bankruptcy or the appontment of the recever to a date 0 days after the date upon
whch the notce from the trustee or recever s receved by the Commssoner; but the
suspenson under ths sentence sha n no case be for a perod n e cess of 2 years. Cams
for the defcency and such nterest, addtona amounts and addtons to the ta may be
presented, for ad|udcaton n accordance wth aw, to the court before whch the bank-
ruptcy or recevershp proceedng s pendng, despte the pendency of proceedngs for the
redetermnaton of the defcency n pursuance of a petton to the Ta Court: but no
petton for any such redetermnaton sha be fed wth the Ta Court after the ad|udca-
ton of bankruptcy or the appontment of the recever.
Defcences were assessed both as to the norma Income ta and as to the e cess profts
ta .
Further defcences were assessed March 21, 19 . The nterest on these defcences
amounted to 2.00 , whereas the nterest on the defcences assessed n ugust. 10 3,
totaed , 30.0 . We fee that any possbe dfference n resut attrbutabe to the tmng
of the assessment has tte effect on te amount to whch ta payer mght be entted n
ths ense. and we do not consder ths factor.
The record Is bare of any cam or payment of nterest from the date of the assessment
of the defcency unt the date of the cam of the refund. See Int. Rev. Code, sec-
ton 29 (b).
Respondent does not urge and we need not decde the appcabty of Cty of c York v.
Saper, 330 U. S. 32 (19 9) Ct. D. 171 . C. . 19 9-1. 1201. where we hed that under
the crcumstances of that case, bankruptcy termnated the runnng of nterest on cams
aganst the bankrupt. In vew of the acts that respondent was revested wth tte to ts
assets on une . 19 . nnd that te perod between the bankruptcy and the ma|or part of
the assessment was ess than a month, we do not fee that the hodng of that case coud
effect any sgnfcant change n the dsposton of the probem at hand.
Int. Rev. Code, secton 122(a) : s used n ths secton, the term net operatng oss
means the e cess of the deductons aowed by ths chapter over the gross ncome, wth
the e ceptons, addtons, and mtatons povded n subsecton (d).
Int. Rev. Code, secton 122(b)(1) : If for any ta abe year begnnng after December
31, 19 1. the ta payer has a net operatng oss, such net operatng oss sha (he a net
operatng oss carry-back for eae of the two precedng ta abe years,
The carrv-hack operated smary on the e cess profts ta . 20 U. S. C, sectons 710,
72s. 729 (11) 0). The entre e cess profts secton of the Code, passed n 19 0, 0 Stat
97 , was repeaed n 19 , 9 Stat. 0S.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
11
292.
obgaton of the ta payer, even though the assessed defcency had tsef been
abated. 76 Fed. Supp. 037 (10 ). The court of appeas reversed, hodng that
the carry-hack, n wpng out the debt of the ta defcency, must aso have
wped out the nterest whch had been assessed on that defcency. 172 Fed.
(2d) 77 (10 ). ecause of the frequency of the use of the carry-bark prov-
son of the Interna Revenue Code, we granted certorar. 337 U. S. 9 (19 9).
The genera statutory scheme whch presents the probem s as foows: s of
a certan date the ta payer has a duty to fe a return for the prevous fsca
year and pay the amount of the ta actuay due for that year. If ths return
s erroneousy cacuated and the payment s ess than the tu propery due, the
Commssoner, usng the procedure approprate to the partcuar stuaton, may
assess a defcency, the dfference between the ta mposed by aw and the ta
shown upon the return. Interest upon ths defcency at the rate of 6 percent
from the date the ta was awfuy due to the date of the assessment s assessed
at the same tme as the defcency. If a net operatng oss s subsequenty
sustaned, that oss may be carred back and added to the deductons for the two
prevous ta abe years, wth approprate ad|ustments n the ta abty for
those years. The probem wth whch we are concerned In ths case Is whether
the nterest on a vady assessed defcency s abated when the defcency tsef
s abated by the carry-back of a net operatng oss.
We hod that the nterest was propery wthhed by the coector. The subse-
quent canceaton of the duty to pay ths assessed defcency does not cance In
ke manner the duty to pay the Interest on that defcency. From the date the
orgna return was to be fed unt the date the defcency was actuay assessed,
the ta payer had a postve obgaton to the Unted States: a duty to pay ts
ta . See Rodgers v. ned States, 332 U. S. 371, 37 (19 7) ; Unted States v.
Chd . 266 . S. 30 , 300-310 (102 ) T. D. 3671, C. . I -1, 2 1 (102 ) ;
ngs v. Unted States, 232 U. S. 261, 2 -2 7 (191 ). For that perod the ta -
payer, by ts faure to pay the ta es owed, had the use of funds whch rghtfuy
shoud have been n the possesson of the Unted States. The fact that the
statute permts the ta payer subsequenty to avod the payment of that debt
n no way ndcates that the ta payer Is to derve the benefts of the funds for
the ntervenng perod. In the absence of a cear egsatve e presson to the
contrary, the queston of who propery shoud possess the rght of use of the
money owed the Government for the perod t s owed must be answered n
favor of the Government.
It s apparent from an nspecton of the Code that Congress ntended the
Unted States to have the use of the money awfuy due when t became due.
Severa sectons of the Code prescrbe penates and addtons to the ta for
neggence and fraud. ta payer who fes a tmey return but does not pay
the ta on tme must pay nterest on the ta unt payment. ven when the
Commssoner, at the request of the ta payer, authorzes an e tenson of the
tme of payment, nterest must be pad by the ta payer for the perod of the
e tenson. nd when the Commssoner assesses a defcency he aso may assess
nterest on that defcency from the date the ta was due to the assessment date.
The enactment of the carry-back provson n 10 2 dd not change ths pocy
of the statute requrng prompt payment Ths secton was Intended to afford
ta payers an opportunty to present for ta purposes a reastc, baanced
pcture of ther profts and osses. It permts a ta payer to add a net operatng
oss for one year to the deductons for the two prevous ta abe years. The
report of the Senate Commttee on Fnance states that the purpose of the secton
was to afford reef to cases where mantenance and upkeep e penses were
deferred to peacetme years because of wartme restrctons. S. Rept. No. 1631,
7th Cong., 2d sess. 1- 2 (19 2) C. . 19 2-2, 0 , 6- 7 . ut there Is no
ndcaton that Congress ntended to encourage ta payers to cease prompt pay-
ment of ta es. The same report, e panng the operaton of the secton whch
became the present carry-back provson, states, ta payer entted to a carry-
back of a net operatng oss or an unused e cess profts credt w
not be abe to determne the deducton on account of such carry-back unt the
cose of the future ta abe year n whch he sustans the net operatng oss or
See Int. Rev. Code, sectons 62(a), 3(a), 66(a). The ta may aso be pad n uartery
nstaments. Int Rev. Code, secton 6(b).
Int. Rev. Code, secton 271(a).
Int. ev. Code, secton 292(a).
. g.. Int. Rev. Code, sectons 291(a), 293 (a), (b).
Int. Rev. Code, secton 29 (a)(1).
u Int. Rev. Code, sectons 6(c) (1), 29 .
Int. Rev. Code, secton 292 (a).
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
292.
116
has the unused e cess profts credt. e must therefore fe hs return and pay
hs ta wthout regard to such deducton, and must fe hs cam for refund at
the cose of the succeedng ta abe year when he s abe to determne the amount
of such carry-back. S. Rept. No. 1631 at 123-12 C. . 19 2-2, 0 , 97 .
(Itacs added.) We can magne no cearer ndcaton of a congressona
understandng and ntent that the carry-back was not to be nterpreted as
deferrng or deayng the prompt payment of ta es propery due.
though t s true that for many purposes the carry-back s equvaent to a
do novo determnaton of the ta , our concuson that ths secton does not
retroactvey ater the duty of a ta payer to pay hs fu ta prompty s ampy
supported by secton 3771(e) of the Code. That secton, an ntegra part of the
carry-back provson, prohbts a ta payer who does pay a ta whch s subse-
quenty abated by a carry-back from camng nterest from the Government for
the ntervenng perod. It s cear, therefore, that Congress n 19 2 dd not
ntend to change the basc statutory pocy: the Unted States s to have the
possesson and use of the awfu ta at the date t s propery due.
To sustan respondent s contenton woud be to pace a premum on faure to
conform dgenty wth the aw. For then a ta payer.who dd not pay hs ta es
on tme woud receve the fu use of the ta funds for the ntervenng perod,
whe the ta payer who dd obey the statutory mandate and pay hs awfu ta es
prompty woud be prohbted by secton 3771(e) from havng the use of the
money for that perod. We cannot approve such a resut.
ny other nterpretaton woud be nconsstent wth the present structure of
the Code, as amended by secton (a) of the Ta d|ustment ct of 19 , 9
Stat. 19, now sectons 3779 and 37 0 of the Code. Pror to 19 , the Comms-
soner had power to authorze at the request of the ta payer, an e tenson of
tme for the payment of ta es, and nterest on such an e tenson was charged at
the rate of 6 percent. The Ta d|ustment ct of 19 was passed to mprove
the cash poston of ta payers by aowng them to defer current ta payments f
there was a reasonabe chance that these payments woud be returned to them
n the future because of busness osses, and to speed up the refund of ta es pad.
. It. Rept. No. 9, 79th Cong., 1st sess. 1-6 (19 ) C. . 19 , 66- 6 ; ont
Commttee on Interna Revenue Rept. No. 1, 79th Cong., 1st sess. 6-9 (19 ).
Under secton 3779 a corporaton fng ts return for the precedng ta year has
the rght to obtan an e tenson of tme for the payment of the ta for that
precedng year. Ths e tenson may be obtaned f the corporaton e pects to
suffer, n the fsca year n whch the return s fed, a net operatng oss suffcent
to dmnsh, by a carry-back, ts ta abty for the precedng ta years. t
the cose of that year, the ta payer may fe, under secton 37 0, an appcaton
for a tentatve read|ustment of ta es for precedng years ncudng a quck
refund of ta es pad or an abatement of ta es whch have been deferred.
corporaton whch does take advantage of these provsons s not competey ab-
soved from the payment of nterest on deferred ta es actuay abated. For
secton 3779 () e pressy provdes that the corporaton must pay 3 percent
nterest on deferred ta es actuay abated by the carry-back and 6 percent on
those not abated. gan t s apparent that the Code contempates tmey
payment of ta es and subsumes the rght of the Unted States to the nterm
use of the ta payments.
It s argued that the concuson that respondent s not entted to a refund
of the assessed nterest s unfar, aegedy dscrmnatng aganst a ta payer
whose defcency s assessed under the acceerated bankruptcy procedure n
favor of one whose defcency s assessed under secton 272(a)(1), the more
customary 90-day etter Ta Court procedure. Ths secton provdes that n
the usua case the Commssoner must notfy the ta payer that he ntends to
assess a defcency aganst hm. The ta payer s then aowed 90 days n
whch to fe a petton wth the Ta Court for a redetermnaton of the aeged
defcency, and the Commssoner s restraned from assessng any defcency
unt the decson of the Ta Court becomes fna. Nor may the Commssoner
assess more than the amount the Ta Court determnes to be the defcency.
Int. Rev. Code, secton 3771(e) : If the Commssoner determnes that any part of
an overpayment s attrbutabe to the ncuson n computng the net operatng oss deduc-
ton for the ta abe year of any part of the net operatng oss for a succeedng ta abe year
or to the ncuson In computng the unused e cess profts credt ad|ustment for the ta abe
year of any part of the unused e cess profts credt for a succeedng ta abe year, no
nterest sha be aowed or pad wth respect to such part of the overpayment for any
perod before the fng of a cam for credt or refund of such part of the overpayment or
the fng of a petton wth the Ta Court, whchever s earer;
Int. Rev. Code, sectons 0(c), 29 .
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
117
29.322-3.
Secton 292(a), provdng for nterest on defcences, states, Interest upon
the amount determned as a defcency sha be assessed at the same tme as
the defcency. The argument s that f there s no defcency there
can be no nterest, and, t s further urged, the Ta Court w normay arrve
at a resut of no defcency, for t w take nto consderaton the net operatng
oss carry-back n ts redetermnaton. Therefore, no nterest w be assessed.
t the tme of the prncpa assessment n ths case, however, the net operat-
ng oss had not yet been reported. Nor has the vadty of the defcency assess-
ment been chaenged at any tme throughout the tgaton. Thus, the compar-
abe stuaton to the nstant case woud be, f. before the net operatng oss was
camed, the Ta Court was confronted wth a defcency determned by the
Commssoner. We see no reason why that method of assessment, or any of
the others authorzed by statute, woud arrve at a dfferent fgure because of
an uncamed net operatng oss. Whether the anguage of the Code requres a
dfferent resut when the oss s camed before the attempted assessment of the
defcency s a queston whch s not consdered by us on ths record. We hod
that where a defcency and nterest have been vady assessed under any
appcabe statutory procedure, a subsequent carry-back wth an abatement
of the defcency does not abate the nterest prevousy assessed on that defcency.
Respondent aso paces great reance on the prncpe that nterest s an
accreton to and part of the ta , and, therefore, must be abated when the ta
s abated. The cases to whch we have been referred n support of ths prn-
cpe dea wth compromses of ta es whch were ncorrecty assessed at the
outset, and not, as here, wth a subsequent abatement of a ta correcty assessed.
s such, they are not persuasve of a contrary resut.
Two admnstratve rungs on the carry-back provson of the Revenue
ct of 191 , 0 Stat. 10 7, are cted as opposed to ths nterpretaton of the Code.
We see no need to dstngush these reguatons or decsons. Two rungs reat-
ng to a carry-back secton of 2 years ago, not repeated n the ntervenng
quarter-century, are not suffcent to force us to concude that Congress ntended
to mpart ther constructon of that secton to the present provson.
We have consdered the remander of the ponts rased by the court beow
and respondent, but for the foregong reasons are n accord that the |udgment
of the court of appeas must be reversed and the |udgment of the dstrct court
affrmed.
Reversed.
Mr. ustce Doug as took no part n the consderaton or decson of ths
case.
SUPPL M NT O. O RP YM NTS
S CTION 322. R FUNDS ND CR DITS
Secton 29.322-3: Cams for refund by 19 0- -13301
ta payers. T. D. 772
TITL 20 INT RN L R NU . C rT R I. SU C PT R , T RT 29.
INCOM T ; T L Y RS GINNING FT R D C M R 31, 19 1
mendng secton 29.322-3 of Reguatons 111, reatng to cams
for refund.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton , D. C.
To Coectors of Interna Revenue and Others Concerned:
Paragraph 1. Secton 29.322-3 of Reguatons 111, as amended by
Treasury Decson 6 0 C. . 19 9-1, 126 , approved December 2 ,
19 26 CFR 29.322-3 , s further amended as foows:
L. O. 111 , Cum. u. 11-2, 221 (1923) ; I. T. 1 7, Cum. u. 1-2, 220 (1922).
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29.322-3. 11
( ) y strkng out as provded n ths secton n the frst sen-
tence and nsertng n eu thereof the foowng: or an amended
return .
( ) y strkng from the second sentence of the second paragraph,
the foowng: and under oath .
(C) y nsertng mmedatey after such second sentence of the
second paragraph the foowng:
The statements of the grounds and facts must be under oath or verfed by a wrt-
ten decaraton that they are made under the penates of per|ury.
(D) y revsng the sentence n the second paragraph whch begns
wth the words If the ta payer eects to read as foows:
If the ta payer eects to have a or part of the overpayment shown by hs ncome
ta return apped to hs estmated ta for hs succeedng ta abe year, no n-
terest sha be aowed on such porton of the overpayment credted and such
amount sha be apped as a payment on account of the estmated ta for such
year or the nstaments thereof.
( ) y strkng out the sentence n the second paragraph whch
begns wth the e presson If the ta payer desres .
Par. 2. Inasmuch as the amendments made by ths Treasury Dec-
son merey reeve ta payers from a mtaton appcabe under e -
stng reguatons, t s found that t s unnecessary to ssue ths
Treasury Decson wth notce and pubc procedure thereon under
secton (a) of the dmnstratve Procedure ct, approved une
11 19 6, or sub|ect to the effectve date mtaton of secton (c) of
sad ct.
Ths Treasury Decson s ssued under the authorty contaned n
secton 62 of the Interna Revenue Code ( 3 Stat. 32; 26 U. S. C.
62).
Geo. . Schoeneman,
Commssoner of Interna Revenue.
pproved February 10, 19 0.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster February 1 , 19 0, : 7 a. m.)
Sect-ton 29.322-3: Cams for refund by ta - 19 0-12-13370
payers. G. C. M. 26
nterna revenue code and tror revenue aws
Interest and penates assessed and coected n connecton wth a
Federa ncome ta abty shoud not be credted or refunded even
though such ta abty s reduced or emnated by net operatng
oss carry-backs.
L. 0.111 (C. . II-2,221 (1923)) revoked.
Reconsderaton has been gven to L. 0.111 (C. . 11-2,221 (1923))
n the ght of the decson n Mannng v. Seeey Tube o Co. (33
U. S. 61, Ct. D. 1729, page 113, ths uetn).
L. O. 111 hods:
(1) Where a return contans a frauduent understatement of ta and there
s therefore a defcency n the ta , but the defcency s wped out by appyng
the deducton aowabe under secton 20 of the Revenue ct of 191 , the ad
vaorem fraud penaty provded n secton 2 0(b) of sad ct s not appcabe
snce upon the redetermnaton under secton 20 of the ct there s no defcency
wthn the meanng of secton 2 0(b) ; (2) where a ta s assessed and coected,
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
119
3 .71 -1, Regs. 12.
together wth the percent penaty and nterest at the rate of 1 per centum per
month, provded n secton 2 0(e) for faure to pay wthn 10 days after notce
and demand by the coector, and by reason of a redetermnaton as provded n
secton 20 the ta s reduced and a porton refunded, so much of the penaty and
nterest made a part of the ta by secton 2 0(c) as s appcabe to the amount
of the ta refunded may be credted or refunded as e cessve, as provded n
secton 2 2;
In the Seeey Tube o Co. case, supra, the Supreme Court of the
Unted States hed that where a defcency and nterest have been
vady assessed under any appcabe statutory procedure, a subse-
quent carry-back of a net operatng oss whch resuts n the abatement
of the defcency does not abate the nterest prevousy assessed on that
defcency. In concudng that the ureau was entted to nterest,
the Supreme Court necessary concuded that there was a rea def-
cency e stng pror to the occurrence of the carry-back oss snce the
rght to nterest s dependent upon the e stence of a defcency. Con-
sequenty, t appears to foow that for purposes of the penates m-
posed under sectons 291 and 293 of the Code, a rea defcency must
kewse be consdered to e st. If an amount representng nterest
or penates has been coected, t s beeved that, regardess of a sub-
sequent carry-back, the ureau s entted to retan such amount. The
statutory pattern requrng prompt payment of ta es was the founda-
ton of the opnon n the Seeey Tube o Co. case. The requre-
ment of prompt fng of returns s equay a statutory duty of a
ta payer. The carry-back provsons of the Code do not modfy that
duty. s ponted out by the Supreme Court, the Senate Commttee
on Fnance made t cear that a ta payer who s entted to carry back
a net operatng oss must fe hs return and pay hs ta wthout regard
to the deducton. (See Senate Report No. 1631, pages 123-12 , C. .
19 2-2. 0 , 97.)
In vew of the foregong, t s the opnon of ths offce that nterest
and penates assessed and coected n connecton wth a Federa n-
come ta abty shoud not be credted or refunded even though such
ta abty s reduced or emnated by net operatng oss carry-backs.
ccordngy, L. 0.111 (C. . II-2, 221 (1923)) s hereby revoked.
Chares Ophant,
Chef Counse, ureau of Interna Revenue.
C PT R 2. DDITION L INCOM T S
SU C PT R .- C SS PROFITS T
P RT I
S CTION 71 . UITY IN ST D C PIT L
Secton 3 .71 -1, Reguatons 12: Determ-
naton of day equty nvested capta
Money and property pad n.
nterna revenue code
Propertv receved as nducement to operate n the communty. (See
Ct. D. 1731, page 3 .)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
0 .201, Regs. 110. 120
C PT R 9. MPLOYM NT T S
SU C PT R D. COLL CTION OF INCOM T T SOURC ON W G S
S CTION 1621. D FINITIONS
Secton 0 .10 , Reguatons 116: mpoyee.
Status of professona modes. (See Mm. 619 , page 137.)
S CTION 1621(a). D FINITIONS: W G S
Secton 0 .101, Reguatons 116: Wages.
INT RN L R NU COD
Lvng quarters or meas furnshed empoyees. (See Mm. 6 72,
page 1 .)
Secton 0 .101, Reguatons 116: Wages.
INT RN L R NU COD
Contrbutons requred of empoyees under artce 9 of the New
York workmen s compensaton aw, assumed and pad by empoyers.
(See I. T. 010, page 30.)
S CTION 1622. INCOM T COLL CT D T SOURC
Secton 0 .201, Reguatons 116: Requre- 19 0-1-13291
ment of wthhodng. I. T. 399
( so Secton 1 01, Secton 02.30 , Regua-
tons 106.)
nterna revenue code
Tabe whch may be used by empoyers n wthhodng Federa
ncome ta and Federa Insurance Contrbutons ct ta from
weeky wages pad on and after anuary 1, 19 0.
mpoyers have requested permsson to use a tabe whch combnes
amounts to be wthhed as Federa ncome ta and Federa Insurance
Contrbutons ct ta on weeky wages pad on and after anuary 1,
19 0.
Permsson s hereby granted to empoyers to use the foowng tabe
n wthhodng Federa ncome ta and Federa Insurance Contrbu-
tons ct ta from weeky wages pad on and after anuary 1, 19 0:
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
121
0 .201, Regs. 116.
Weeky Wthhodng Tabe Combnng Income Ta and mpoyees Fedeba
Insubance Contrbutons ct Ta (1 Pebcent)
Ths tabe to be used ony f wages for ncome ta wthhodng and wages for
empoyees F. I. C. . ta are dentca
II wages are nd the number of wthhodng e emptons camed Is
-
0

2
3

6
7

9
10
t east
ut ess
than
The amount of Incomo ta and F. I. C. . ta to bo wthhed sha bo-
O
13 00
nus
I S of
1 of
I of
of
IM of
IMS ot
o;
I o.
1M of
I o
Of M
wr
www
WMra
0.20
0.20
13.00
13.67 .. .
2.20
0.30
0.20
0.20
0.20
0.20
0.20
0.20
0.20
S 13.07
1 .3 .....
2.31
.36
.21
.21
.21
.21
.21
.21
.21
.21
.21
1 .3
1 .00
2. 2
. 2
.22
.22
.22
.22
.22
.22
.22
.22
.22
11 .00
1 .67
2. 3
.63
.23
.23
.23
.23
.23
.23
.23
.23
.23
1 .67
f.3 -_...
2.6
.69
.2
.2
.2
.2
.2
.2
.2
.2
.2
SI6
17.00
2.7
.7
.2
.2
.2
.2
.2
.2
.2
2
.26
17.67
2. 6
.96
.26
.26
.26
.26
.26
.26
.26
.26
.26
I17.G7
1 .3
2.97
1.02
.27
.27
.27
.27
.27
.27
.27
.27
.27
13.3
19.00
3.0
1.0
.2
.2
.2
.2
.2
.2
.2
.2
.2
19.00
19.67
3.19
1.29
.29
.29
.29
.29
.29
.29.
.29
.29
.29
19.67
20.3
3.30
1.3
.30
.30
.30
.30
.30
.30
.30
.30
.30
20.3
21.00
3. 1
1. 1
.31
.31
.31
.31
.31
.31
.31
.31
.31
21.O0
21.67.
3. 2
1.62
.32
.32
.32
.32
.32
.32
.32
.32
.32
21.67
22.3
3.63
1.6
.33
.33
.33
.33
.33
.33
.33
.33
.33
22.3
23.00
3.7
1.7
.3
.3
.3
.3
.3
.3
.3
.3
.3
23.00
23.67
3.
1.9
.36
.3
.3
.3
.3
.3
.3
.3
.3
23.67
2 .3
3.96
2.01
.36
.36
.36
.36
.36
.36
.36
.36
.36
2 .3
2 .00
.07
2.07
.37
.37
.37
.37
.37
.37
.37
.37
.37
2 .00
2 .67
.1
2.2
.3
.3
.3
.3
.3
.3
.3
.3
.3
2 .67
26.3
.29
2.3
.39
.39
.39
.39
.39
.39
.39
.39
.39
26.3
27.00
. 0
2 0
. 0
. 0
. 0
. 0
. 0
. 0
. 0
. 0
. 0
27.00
27.67
. 1
2.61
.71
. 1
. 1
. 1
. 1
. 1
. 1
. 1
. 1
27.67.....
2 .3
.62
2.67
.72
. 2
. 2
. 2
. 2
. 2
. 2
. 2
. 2
2 .3
29.00
.73
2.73
. 3
. 3
. 3
. 3
. 3
. 3
. 3
. 3
. 3
29.00
29.67
.
2.9
1.0
.
.
.
.
.
.
.
.
29.67
30.3
.9
3.00
1.0
.
.
.
.
.
.
.
.
30.3
31.00
.06
3.06
1.16
. 6
. 6
. 6
. 6
. 6
. 6
. 6
. 6
31.00
31.07
.17
3.27
1.37
. 7
. 7
. 7
. 7
. 7
. 7
. 7
. 7
31.67
32.3
.2
3.33
1.3
.
.
.
.
.
.
.
.
32.3
33.00
.39
3.39
1. 9
. 9
. 9
. 9
. 9
. 9
. 9
. 9
. 9
(33.00
33.67
. 0
3.60
1.70
. 0
. 0
. 0
. 0
. 0
. 0
. 0
. 0
33.67
3 .3
.61
3.66
L 71
. 1
. 1
. 1
. 1
. 1
. 1
. 1
. 1
3 .3
3 .00
.72
3.72
1.S2
. 2
. 2
. 2
.62
. 2
. 2
. 2
. 2
3 .00
3 .67
. 3
3.93
2.03
. 3
. 3
. 3
. 3
. 3
. 3
. 3
. 3
3 .67
36.3 .
.9
3.99
2.0
.
.
.
.
.
.
.6
.
36
37.00
6.0
.0
2. 1
.
.
.
.6
.
.6
.
.
IS|OO
37.67
6.16
.26
2. 36
. 6
. 6
. 6
. 6
. 6
. 6
. 6
. 6
37.67
3 .3
6.27
.32
2.37
. 7
. 7
. 7
. 7
. 7
. 7
. 7
. 7
3 .3
39.00
6.3
. 3
2.
.
.
.
.
.
.
.
.
39.00
39.67
6. 0
. 9
2.69
.79
. 9
. 9
.69
. 9
. 9
. 9
. 9
39.67
0.3
6.60
.6
2.70
.7
.60
.60
.60
.60
.60
.60
.60
0.3
1.00
a 71
.71
2. 1
.91
.61
.61
.61
.61
.61
.61
.61
1.00
1.67.....
6. 2
.92
3.02
1.12
.62
.62
.62
.62
.62
.62
.62
1.67
2.3 .....
6.93
.9
3.03
1.0
.63
.63
.63
.63
.63
.63
.63
23
3.00
6.9
6.0
3. 1
1.2
.6
.6
.6
.6
.6
.6
.6
6
3.00
3.67
7.1
6.2
3.3
1.
.6
.6
.6
.6
.6
.6
3.67
.3
7.26
6. 31
3.36
1. 1
.66
.66
.66
.66
.66
.66
.66
M
.00
7.27
6.37
3. 7
1. 7
.67
.67
.67
.67
.67
.67
.67
1 .00
.67
7.
.
3.6
1.7
.6
.6
.6
.6
.6
.6
.0
.07
6.3
7. 9
.6
3.69
1.7
.69
.69
.69
.69
.69
.69
.69
6.3
7.00
7.60
.70
3. 0
1.90
.70
.70
.70
.70
.70
.70
.70
7.00
7.67
7. 1
.91
.01
2.11
.71
.71
.71
.71
.71
.71
.71
7.67
S.3
7. 92
.97
.02
2.07
.72
.72
.72
.72
.72
.72
.72
.3
9.00
7.93
6.03
.13
2.23
.73
.73
.73
.73
.73
.73
.73
9.00
9.67
6.1
6.2
.3
2.3
.7
.7
.7
.7
.7
.7
.7
9.67
0.3
.2
6.30
.3
2. 0
.7
.7
.7
.7
.7
. 7
.7
0.3
1.00
.26
6.36
. 6
2. 6
.76
.76
.76
.76
.76
.76
.76
1.00 ...
1.67
. 7
6. 7
.67
2.07
.77
.77
.77
.77
.77
.77
.77
1.67
2.3
.
6.63
.6
2.73
.7
.7
.7
.7
.7
.7
.7
13
63.00
. 9
6.69
.79
2. 9
.99
.79
.79
.79
.79
.79
.79
3.00
63.67
. 0
6.90
6.00
3.00
1.10
. 0
. 0
. 0
. 0
. 0
. 0
3.67
.3
.91
6.96
.01
3.06
1.11
. 1
. 1
. 1
. 1
. 1
. 1
.3
.00
.92
7.02
.12
3.22
1.32
. 2
. 2
. 2
. 2
. 2
. 2
.O0.._.
.67.....
6.13
7.23
.33
3.33
1. 3
. 3
. 3
. 3
.S3
. 3
. 3
.67
6.3
9.2
7.29
.3
3.39
L
.
.
.
.
.
.
6.3
7.00
0.2
7.3
.
3.
1.6
.
.
.
.
.
.
7 00
7.67
9. 6
7. 6
6.66
3.00
1.76
. 6
. 6
. 6
. 6
. 0
. 6
7.67
.3
9. 7
7.62
.07
3.72
1.77
. 7
. 7
. 7
. 7
. 7
. 7
.3
9.00
9.
7.6
.7
3.
1.9
.
.
.
.
.
.60
.
9.00
9.67
9.79
7. 9
.99
3.99
2.09
. 9
. 9
. 9
. 9
. 9
93 0 -
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
S 0 .201, Regs. 116.
122
Weeky Wthhodng Tabe Combnng Income Ta and mpoyees Federa
Insurance Contrbutons ct Ta (1 Percent) Contnued
If wages are
nd the number of wthhodng e emptons camed s
ut ess
0
1
2
3

1
9
The amount of Income ta and F. I. O.
. ta to be wthhed sha be-
60.3
9.90
7.9
6.00
.0
2.10
0.90
ta 90
0.9u
0.90
0.90
61.00
10.01
.11
6.21
.31
2. 1
.91
.91
.91
.91
.91
61.67
10.02
.12
6.22
.32
2. 2
.92
.92
.92
.92
.92
62.3
10.23
.2
6.33
.3
2. 3
.93
.93
.93
.93
.93
63.00
10.3
.
6.
.6
2.7
.9
.9
.9
.9
.9
63.67
10.3
.
6.
.6
2.7
.9
.9
.9
.6
.96
6 .3
10. 6
.61
6.66
.71
2.76
.96
.96
.96
.96
.96
6 .00
10.67
.77
a 7
.97
2.97
1.07
.97
.97
.97
.97
6 .67
10.6
.7
6.
.9
2.9
1.0
.9
.9
.9
.9
66.3
10. 9
.9
6.99
.0
3.09
1.1
.99
.99
.99
.99
11.00
9.10
7.20
.30
3.30
1. 0
1.00
1.00
1.00
1.00
67.67
11.01
9.11
7.21
.31
3.31
1. 1
1.01
1.01
1.01
1.01
6 .3
11.22
9.27
7.32
.37
3. 2
1. 7
1.02
1.02
1.02
1.02
69.00
11.33
9. 3
7. 3
6.63
3.63
1.73
1.03
1.03
1.03
1.03
69.67
11.3
9.
7.
.6
3.6
1.7
1.0
1.0
1.0
1.0
70.3
11.
9.60
7.66
.70
3.7
1. 0
1.0
1.06
1.0
1.06
71.00 ..
11.66
9.76
7. 6
6.96
3.96
2.06
1.06
1.06
1.06
1.06
71.67 .
11.67
9.77
7. 7
.97
3.97
2.07
1.07
1.07
1.07
1.07
72.3 .
11.
9.93
7.9
6.03
.0
2.13
1.0
1.0
1.0
1.0
73.00
11.99
10.09
.19
6.29
.29
2.39
1.09
1.09
1.09
1.09
73.67
12.00
10.10
a 20
6.30
.30
2. 0
1.10
L10
1.10
1.10
7 .3 ..
12.21
10.26
.31
6.36
. 1
2. 6
1.11
1.11
1.11
1.11
7 .00 ..
12.32
10. 2
. 2
6.62
.62
2.72
1.12
1.12
1.12
1.12
7 .67 .
12.33
10. 3
.63
6.63
.63
2.73
1.13
1.13
1.13
1.13
76.3
12.
10. 9
.6
6.69
.7
2.79
1.1
1.1
1.1
LU
77.00
12.6
10.7
.
6.9
.9
3.0
1.1
1.1
1.1
1.16
77.67
12.66
10.76
. 6
6.96
.96
3.0
1.16
1.16
1.16
1.16
7 3 .
12. 7
10.92
.97
7.02
6.07
3.12
1.17
1.17
1.17
L17
79.00
12.9
11.0
9.1
7.2
.2
3.3
1.
1.1
1.1
L1
79.67
12.99
11.09
9.19
7.29
6.29
3.39
1. 9
1.19
1.19
L19
0.3 ,
13.20
11.2
9.30
7.36
6. 0
3.
1. 0
1.20
1:20
1.20
1.00
13.31
11. 1
9. 1
7.61
.61
.71
1. 1
1.21
1.21
1.21
1.67
13.32
11. 2
9. 2
7.62
6.62
3.72
1. 2
1.22
1.22
1.22
2.3
13. 3
11.
9.63
7.6
6.73
3.7
1. 3
1.23
1.23
1.23
3.00
13.6
11.7
9.
7.9
.9
.0
2.1
1.2
1.2
L2
3.67
13.66
11.7
9.
7.96
6.9
.0
2.1
1.2
1.2
L2
.3
13. 6
11.91
9.96
.01
6.06
.11
2.16
1.26
1.26
1.26
.00
13.97
12.07
10.17
.27
6.27
.37
2. 7
1.27
1.27
1.27
.67
13.9
12.0
10.1
.2
6.2
.3
2.
1.2
1.2
1.2
6.3
1 .19
12.2
10.29
.3
6.39
.
2. 9
1.29
1.29
1.29
7.00
1 .30
12. 0
10. 0
.60
6.60
.70
2. 0
1.30
1.30
1.30
7.67
1 .31
12. 1
10. 1
.61
6.61
.71
2. 1
1.31
1.31
1.31
.3
1 . 2
12. 7
10.62
.67
6.72
.77
2. 2
1.32
1.32
1.32
9.00
1 .63
12.73
10. 3
.93
6.93
.03
3.13
1.33
1.33
1.33
9.67 .
1 .6
12.7
10.
.9
6.9
6.0
3.1
1.3
1.3
1.3
90 M
1 .
12.90
10.9
9.00
7.0
6.10
3.1
1.3
1.36
1.3
91.00
1 .96
13.06
11.16
9.16
7.26
6.36
3. 6
1. 6
1.36
1.36
91.67
1 .97
13.07
11.17
9.17
7.27
.37
3. 7
1. 7
1.37
1.37
92.3
1 .1
13.23
11.2
9.33
7.3
. 3
3.
1. 3
1.3
1.3
1 .29
13.39
11. 9
9. 9
7. 9
6.69
3.79
1. 9
1.39
1.39
93.67
1 .30
13. 0
11. 0
9. 0
7.60
6.70
3. 0
1.90
1. 0
1. 0
9 .3 ..
1 . 1
13. 6
11.61
9.66
7.71
6.76
3. 1
1. 6
1. 1
1. 1
9 .00
1 .62
13.72
11. 2
9. 2
7.92
6.02
.12
2.22
1. 2
1. 2
9 .67
1 . 3
13.73
11. 3
9. 3
7.93
6.03
.13
2.23
1. 3
1. 3
96.3
1 .
13. 9
11.9
9.99
.0
6.09
.1
2.19
1.
1.
97.00
1 .9
1 .0
12.1
10.1
.2
6.3
.
2.
1.
1. 6
97.67
1 .96
1 .06
12.16
10.16
.26
6.36
. 6
2. 6
1. 6
1. 6
9 .3
16.17
1 .22
12.27
10.32
.37
6. 2
. 7
2. 2
1. 7
1. 7
99.00
16.2
1 .3
12.
10.
.
6.6
.7
2.
1.
1.
99.67
16.29
1 .39
12. 9
10. 9
. 9
6.69
.79
2. 9
1. 9
1. 9
100.3
16. 0
1 .66
12.60
10.6
.70
6.7
. 0
2.
1. 0
1. 0
101.00
16. 1
1 .91
13.01
11.11
9.21
7.21
.31
3. 1
1. 1
1. 1
101.67
16. 2
1 .92
13.02
11.12
9.22
7.22
6.32
3. 2
1.62
1. 2
1023
16. 3
1 .93
13.03
11.13
9.23
7.23
6.33
3. 3
1. 3
1. 3
103.00
16.
1 .9
13.0
11.1
9.2
7.2
6.3
3.
1.6
1.
103.67
16.
1 .9
13.0
11.1
9.2
7.2
6.3
3.
1.
1.
10 .3
16. 6
1 .96
13.06
11.16
9.26
7.26
6.36
3. 6
1. 6
1. 6
10 .00
16. 7
1 .97
13.07
11.17
9.27
7.27
6.37
3. 7
1. 7
1. 7
10 .67
17.6
1 .6
13.7
11.
9.9
.0
6.1
.2
2.2
1.
1063
17.69
1 .69
13.79
11. 9
9.99
.09
6.19
.29
2.29
1. 9
107.00
17.70
1 .70
13. 0
11.90
10.00
.10
6.20
.30
2.30
1.60
107.67
17.71
1 .71
13. 1
11.91
10.01
.11
6.21
.31
2.31
1.61
10 .3 ....
17.72
1 .72
13. 2
11.92
10.02
.12
6.22
.32
2.32
1.62
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
123
0 .201, Regs. 116.
Weeky Wthhodng Tabe Combnng Income Tat and mpoyees Federa
Insurance Contrbutons ct Ta (1 Percent) Contnued
If wag
nd the number of wthhodng e emptons camed Is
0
1
2
3

6
7

9
10
t east
ut ess
than
The amount of ncome ta and F. I. C. . ta to be wthhed sha bc-
10 3 ....
109.00....
17.73
1 .73
13. 3
11.93-
10.03
.13
6.23
.33
2.33
1.63
1.63
109.00...-
109.67
17.7
1 .7
13.
11.9
10.0
.1
6.2
.3
2.3
1.6
1.6
1109.67
1110.3 ...
1 .1
16.20
1 .2
12.30
10.3
. 0
0.
. 0
166
1.6
1.6
110.3 ....
s 11 .oo
1 . 6
16. 6
1 .66
12.76
10.76
. 6
6.96
.06
3.16
1.66
1.66
I )....
M11.67....
1 . 7
16. 7
1 .67
12.77
10.77
. 7
6.97
.07
3.17
1.67
1.67
1111.67....
112.3
1 .
16.
1 .6
12.7
10.7
.
6.9
.0
3.1
1.6
1.6
1113 ....
SI 13.00
1 . 9
16.69
1 .69
12.79
10.79
. 9
6.99
.09
3.19
1.69
1.69
113.00
113.67
1 . 0
16.60
1 .70
12. 0
10. 0
.90
7.00
.10
3.20
1.70
1.70
913.67....
11 .3 ....
1 . 1
16.61
1 .71
12. 1
10. 1
.91
7.01
6.11
3.21
L 71
1.71
11 3 ....
11 .00
1 . 2
16.62
1 .72
12. 2
10. 2
.92
7.02
.12
3.22
1.72
1.72
11 :00...-
11 .67
19.33
17.33
1 . 3
13. 3
11.63
9.73
7. 3
6. 3
3.93
2.03
1.73
111 .67....
116 3
19.3
17.3
1 .
13.
11.6
9.7
7.
.
3.9
2.0
1.7
116-3 ....
117.00
19.3
17.3
1 .
13.
11.6
9.7
7.
.
3.9
2.0
1.7
W7 ....
117.67
19.36
17.36
1 . 6
13. 6
11.66
9.70
7. 0
. 6
3.96
106
1.76
117.67
11 .3
19.37
17.37
1 . 7
13. 7
11.67
9.77
7. 7
. 7
3.97
107
1.77
11 M
119.00
19.3
17.3
1 .
13.
11.6
9.7
7.
.
Z. S
2.0
1.7
fU.00
119.67
19.39
17.39
1 . 9
13. 9
11.69
9.79
7. 9
. 9
3.99
2.09
1.79
119.67....
120.3
19. 0
17.
1 .90
13.9
12.00
10.0
.10
0.1
.20
126
1. 0
1203 ....
121.00....
20.11
1 .21
16.31
1 . 1
12. 1
10. 1
.61
6.71
. 1
2.91
1. 1
121.00....
121.67
20.12
1 .22
16.32
1 . 2
12. 2
10. 2
.62
6.72
. 2
2.92
1. 2
121.67....
122.3
20.13
1 .23
16.33
1 . 3
12. 3
10. 3
.63
0.73
. 3
2.93
1. 3
122-3 ....
123.00....
20.1
1 .2
16.3
1 .
12.
10.
.6
6.7
. -1
2.9
1.
123.00....
123.67....
20.1
1 .2
16.3
1 .
12.
10.
.6
6.7
.
2.9
1. 6
123.67
12 .3 ....
20.16
1 .26
16.36
1 . 6
12. 6
10. 6
.66
6.76
. 6
2.96
1.
12 3 ___.
12 .00....
20.17
1 .27
16.37
1 . 7
12. 7
10. 7
.67
6.77
. 7
197
1. 7
12 M....
12 .67
20.
1 .9
17.0
1 .1
13.2
11.3
9. S
7.
.
3.6
1.
12 .67....
126.3 ...
20. 9
1 .99
17.09
1 .19
13.29
11.39
9. 9
7. 9
. 9
3.69
1. 9
1 -...
127.00
20.90
19.00
17.10
1 .20
13.30
11. 0
9. 0
7. 0
.60
3.70
1.90
127.00....
127.67
20.91
19.01
17.11
1 .21
13.31
11. 1
9. 1
7. 1
.61
3.71
1.91
127-67....
12 .3
20.92
19.02
17.12
1 .22
13.32
11. 2
9. 2
7. 2
.62
3.72
1.92
12 -3 ....
129.00
20.93
19.03
17.13
1 .23
13.33
11. 3
0. 3
7. 3
.63
3.73
1.93
129.00....
129.67
20.9
19.0
17.1
1 .2
13.3
11.
9.
7.
.6
3.7
1.9
129.67....
130.3 .. .
21.
19. 0
17.
1 .00
13.6
11.70
9.7
7. 0
.
3.90
1.9
130.3 .. __
131.00
21.70
19. 6
17.96
1 .96
1 .06
12. 16
10.26
.36
6. 6
. 6
2. 6
131-00....
131.07
21.77
19. 7
17.97
1 .97
1 .07
12.17
10.27
.37
6. 7
. 7
1 7
131.67....
132.3
21.7
19.
17.9
1 .9
1 . OS
12.1
10.2
.3
6.
.6
1
1313 ....
133.00
2 .79
19. 9
17.99
1 .99
1 .09
12. 19
10.29
.39
6. 9
.69
2. 9
133.00
133.67
21.
19.90
1 .00
16.00
1 .10
12.20
10.30
. 0
6. 0
.60
2.60
133.67....
13 .3
21. 1
19.91
1 .01
16.01
1 .11
12.21
10.31
S. 1
6. 1
.61
2.61
13 -3 ....
13 .00
21. 2
19.92
1 .02
16.02
1 .12
12.22
10.3t
. 2
6. 2
.62
2.62
percent of the e cess over 13 p us-
22.2
20.33
1 .3
16. 3
1 .
12. 3
10.
.63
6.6
.73
17
The foregong tabe conforms to the provsons of the Interna
Revenue Code. Snce the Code provdes no tabe method of deter-
mnng the amount of empoyees Federa Insurance Contrbutons
ct ta , the wage brackets shown n the tabe are functons of the y2
percent Federa Insurance Contrbutons ct ta rate, and amounts
of ta used n the tabe are shown to the nearest cent. The tabe s
desgned to cover weeky wages under 13 , but t can be e tended
to wages of 13 and over by utzng the same wage brackets and
addng the Federa Insurance Contrbutons ct ta at /2 percent
to the ncome ta to be wthhed. It shoud be noted that the ncome
ta for wage brackets such as 12 .3 to 12 and 12 to 12 .67 s
determned by reference to the ta tabe provded by the Code (see
page 13 of Crcuar WT Revsed 19 ). owever, n the case of
wage brackets such as 129.67 to 130.3 , whch fa wthn more than
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
0 .601, Regs. 116.
12
one bracket of the ncome ta wthhodng tabe provded by the Code,
the ncome ta s determned n accordance wth the percentage method
(see page 22 of Crcuar WT Revsed 19 ) whch permts the
roundng of wages to the nearest doar for purposes of computng
the amount to be wthhed.
The use of the combned wthhodng tabe resuts n the correct
aggregate wthhodng ony f wages for ncome ta and for Federa
Insurance Contrbutons ct ta . wthhodng are dentca. The
combned tabe shoud not be used wth respect to wages n e cess of
3,000 or n other nstances where the wages dffer.
Snce amounts equvaent to the Federa Insurance Contrbutons
ct ta coectons are approprated to trust fund accounts, a segre-
gaton of coectons must be mantaned, and empoyers must report
Federa Insurance Contrbutons ct ta es separatey from ncome
ta wthhed. For purposes of empoyer s quartery Federa ta re-
turns (Form 9 1), the ureau of Interna Revenue w nterpose no
ob|ecton, n the case of empoyers usng the combned wthhodng
tabe, to (1) determnng the amount of Federa Insurance Contrbu-
tons ct ta wthhed by appyng the I 2 percent Federa Insurance
Contrbutons ct ta rate to tota ta abe wages for Federa Insur-
ance Contrbutons ct purposes, and (2) determnng the amount of
ncome ta wthhed by subtractng the amount of Federa Insurance
Contrbutons ct ta wthhed from the tota ta wthhed.
Wth respect to wthhodng statements (Form W-2) n whch em-
poyers are requred to show the amount of ta abe wages for ncome
ta purposes and the amount of ncome ta wthhed, no ob|ecton
w t e nterposed to the determnaton of the amount of ncome ta
wthhed by subtractng y2 percent of the ta abe wages for purposes
of Federa Insurance Contrbutons ct ta es, but not n e cess of
, from the tota ta wthhed.
Secton 0 .201, Reguatons 11G: Requrement
of wthhodng.
INT RN L R NU COD
Premums on group-permanent fe nsurance poces. (See Mm.
6 77, page 10.)
C PT R 23. FIR RMS
SU C PT R . PISTOLS ND R OL RS
S CTION 2701. R TURNS
Sectton 0 .601, Reguatons 116: Return and
payment of ncome ta wthhed on wages.
INT RN L R NU COD
Power of attorney for e ecutng and fng returns. (See Mn.
C 7G, page 13 .)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
12
3072.
C PT R 36. COLL CTION
SU C PT R . LI N FOR T S
S CTION 3672. LIDITY G INST MORTG G S,
PL DG S, PURC S RS, ND UDGM NT CR DITORS
19 0-11-1336
G. C. M. 26 19
INT RN L R NU COD ND PRIOR R NU L WS
Notces of Federa ta ens aDd certfcates of dscharge of Fed-
era ta ens need not be acknowedged.
G. C. M. 266 (C. . I-2,10 (1927)) modfed.
Reconsderaton has been gven to G. C. M. 266 (C. . I-2, 10
(1927)), whch hods n part that the acknowedgment of a coector of
nterna revenue on Form 669 (certfcate of dscharge of ta en)
shoud be made before an offcer authorzed to take acknowedgments
by the aw of the partcuar State, Terrtory, or the Dstrct of Coum-
ba wthn whch the certfcate s to be fed. In connecton wth
reconsderaton of G. C. M. 266 , supra, consderaton has aso been
gven to the matter of acknowedgments on Form 66 (notce of ta
en).
cknowedgments are of statutory orgn and are not essenta to the
vadty of an nstrument n the absence of specfc statutory prov-
sons. cknowedgment of notces of ta ens and certfcates of ds-
charge of ta ens woud, therefore, not appear to be essenta nas-
much as there are no Federa statutory provsons specfcay requr-
ng acknowedgment of such nstruments; moreover, there are no
Federa statutes requrng the fng of certfcates of dscharge of
ta ens.
Secton 3672 of the Interna Revenue Code, whch provdes that a
notce of en sha not be vad uness fed n the offce n whch ts
fng s authorzed by State aw does not purport to gve a State
authorty to do more than desgnate a pace for fng the notce. Gen-
era provsons of State aws requrng the recordng of documents, or
otherwse requrng the acknowedgment of nstruments reatng to
tte to rea property, shoud not be construed as affectng a statute
specfcay passed, n conformty wth secton 3672 of the Code, for
the purpose of authorzng the fng of a notce of Federa ta en.
Such statute shoud be construed as settng up a specfc fng pro-
cedure whch s compete n and of tsef, and whch s not affected by
genera provsons of State aws reatng to recordng, fng, or tte
to property.
It s, therefore, the opnon of ths offce that t w no onger be
necessary for coectors of nterna revenue to acknowedge notces of
ta ens and certfcates of dscharge of ta ens. G. C. M. 266 ,
supra, s modfed to the e tent that t s nconsstent herewth.
Chares Ofant,
Chef Counse, ureau of Interna Revenue.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
3792.
126
C PT R 3 . MISC LL N OUS PRO ISIONS
S CTION 3792. P NS S OF D T CTION ND
PUNIS M NT OF FR UDS
19 0- -13303
T. D. 770
TITL 26 INT RN L R NU . C PT R I, SU C PT R , P RT 6.
R GUL TIONS UND R S CTION 3792, INT RN L R NU COD
Rewards for Informaton eadng to the detecton and punsh-
ment of persons voatng nterna revenue aws.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 2 , D. C.
To Coectors of Interna Revenue and Others Concerned:
Paragraph 1. The foowng reguatons reatng to secton 3792,
Interna Revenue Code, are hereby adopted:
S C. 3792. P NS S OF D T CTION ND PUNIS M NT OF
FR UDS. INT N L R NU COD , S M ND D Y
S CTION 12, PU LIC L W 271 ( IG TY-FIRST CONGR SS),
PPRO D UGUST 27, 19 9.
The Commssoner, under reguatons prescrbed by hm wth the ap-
prova of the Secretary, s authorzed to pay such sums, not e ceedng
n the aggregate the sum approprated therefor, as he may deem neces-
sary for detectng and brngng to tra and punshment persons guty
of voatng the nterna revenue aws, or connvng at the same, In
cases where such e penses are not otherwse provded for by aw.
Secton .1. Rewards for Informaton Leadng to the Detec-
ton and Punshment of Persons oatng Interna Revenue
Laws. The Commssoner of Interna Revenue s hereby authorzed
to pay such reward as he sha deem sutabe for nformaton that sha
ead to the detecton and punshment of persons guty of voatng the
nterna revenue aws, or connvng at the same. No person who was
an offcer or empoyee of the Department of the Treasury at the tme he
came nto possesson of hs nformaton or at the tme he dvuged t
sha be egbe for reward under these reguatons.
The rewards hereby authorzed are mted n ther aggregate to
the sum approprated therefor and sha be pad ony n cases not other-
wse provded for by aw. Payment of rewards w be made as
prompty as the crcumstances of the case permt. reevant fac-
tors, ncudng the vaue of the nformaton furnshed n reaton to
the facts deveoped by the nvestgaton of the voaton, are taken
nto account by the Commssoner of Interna Revenue n determnng
whether a reward sha be pad, and, f so, the amount thereof. No
person s authorzed under these reguatons to offer, promse, or other-
wse bnd the Commssoner as to the payment of any reward or the
amount thereof.
Informaton reatve to voatons of the nterna revenue aws, fur-
nshed by persons desrng to cam rewards under the provsons of
these reguatons, may be submtted n wrtng to the Commssoner of
Interna Revenue, Washngton 2 , D. C, or to the Offce of the Inte-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
127
3792.
gence Unt, the Technca Staff, the nterna revenue agent n charge
or the coector of nterna revenue, n the ocaty n whch the n-
formant resdes, or t may be gven n person to the Offce of the Chef
of the Integence Unt n Washngton, D. C, or to any of the above-
mentoned fed offces.
If the nformaton s gven n person, ether oray or n wrtng,
the name and offca tte of the person to whom t s gven shoud be
ascertaned, as ths nformaton, together wth the date on whch the
nformaton was gven, must be ncuded n the forma cam for re-
ward when fed.
n nformant who ntends to cam a reward shoud notfy the per-
son to whom he gves hs nformaton of such ntenton, and shoud fe
forma cam therefor as soon thereafter as practcabe. Cam for
reward under the provsons hereof sha be made on Form 211, whch
may be obtaned from coectors of nterna revenue, from the offce of
the nterna revenue agent n charge, from the Offce of the Integence
Unt, or from the ureau of Interna Revenue at Washngton 2 , D. C.
Such cams for reward shoud be transmtted to the Commssoner of
Interna Revenue, Washngton 2 , D. O, for the attenton of the Chef
Counse.
Par. 2. Treasury Decson 661 C. . 19 -2, 12 , approved Oc-
tober , 19 26 CFR .1 , s hereby revoked.
(Ths Treasury Decson s ssued under the authorty contaned n
secton 3791 and secton 3792 of the Interna Revenue Code ( 3 Stat.
67; 26 U. S. C. 3791, 3792).)
ecause ths Treasury Decson reates ony to the ureau proce-
dure and practce as to rewards, and merey makes technca changes
pursuant to amendments made by Pubc Law 271, ghty-frst Con-
fess C. . 19 9-2, 272 , approved ugust 27, 19 9, t s hereby
found that t s unnecessary to ssue ths Treasury Decson wth notce
of pubc procedure thereon under secton (a) of the dmnstratve
Procedure ct, approved une 11,19 6, or sub|ect to the effectve date
mtaton of secton (c) of sad ct.
Geo. . Scoeneman,
Commssoner of Interna Revenue.
pproved February 6,19 0.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster February 9, 1900, : a. m.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Msc.
12
MISC LL N OUS
19 0-3-132
Mm. 6
Income ta Informaton reeases
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton , D. C, December ,191,9.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
and Others Concerned:
1. perence has shown that there s occasonay a need for n-
formng the pubc of the ureau s genera poston wth respect to
the proper treatment of certan gans, e penses osses, etc., for Fed-
era ncome ta purposes. If such nformaton s to be of the greatest
beneft for the gudance of ta payers t must be furnshed prompty
and shoud be presented n nontechnca anguage. In order to fu-
f ths need, the Deputy Commssoner n charge of the Income Ta
Unt has been authorzed to prepare and reease such genera ncome
ta nformaton as n hs |udgment the crcumstances requre.
2. The reeases w be known as Income Ta Informaton Reeases,
and they w be numbered consecutvey. Lmted dstrbuton of
such reeases w be made to coectors of nterna revenue and nterna
revenue agents n charge. owever, f any coector of nterna
revenue or nterna revenue agent n charge desres addtona copes
for dstrbuton among the ta payers n hs dstrct or dvson, they
w be prompty supped upon recept of requstons.
3. Correspondence regardng ths mmeograph shoud refer to ts
number and to the symbos IT: IM.
Geo. . Schoeneman,
C ommssoner.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
129
23(c), rt. 23(c)-, Regs. 9 .
INCOM T RULINGS. P RT II
R NU CT OF 193 ND PRIOR R NU CTS
SU TITL . G N R L PRO ISIONS
P RT II. COMPUT TION OF N T INCOM
S CTION 23(c). D DUCTIONS FROM GROSS
INCOM : T S G N R LLY
rtce 23 (c)-, Reguaton 9 : Ta es. 19 0- -13302
( so rtce 1 1, Reguatons 77, and rtce L T. 3999
23(c)-, Reguatons 6.)
R NU CTS OF 1032, 193 , ND 1036
Deductons camed n Federa ncome ta returns for processng
ta es pad under the provsons of the grcutura d|ustment ct
( Stat. 31) are aowabe even though cams for refund of such
ta es have been fed under the provsons of Tte II of the Revenue
ct of 1936.
I. T. 3170 (C. . 193 -1, 13 ) revoked.
Reconsderaton has been gven to I. T. 3170 (C. . 193 -1, 13 ) n
the ght of G. C. M. 2 29 (C. . 19 7-2, 39), Mmeograph 6
(C. . 19 9-2, 11), and the decson n Stanard-Tton Mng Co. v.
Commssoner (3 T. C. 1026, acquescence, C. . 19 9-1, 3).
In I. T. 3170, supra t was hed that deductons for processng ta es
pad under the provsons of the grcutura d|ustment ct (
Stat. 31) w be dsaowed to the e tent that a cam for refund of
a or part of such ta es has been fed under the provsons of Tte II
of the Revenue ct of 1936. G. C. M. 2 29 , supra, hods (among
other thngs) that ta es whch quafy as aowabe deductons are
deductbe not ater than the tme of payment even though such ta es
are contested by the fng of a cam for refund and sut s nsttuted
for recovery of the amounts pad. Mmeograph 6 , supra, provdes
that n the absence of a statutory provson to the contrary, a deduc-
ton for ta es propery taken n a gven year w not be dsturbed on
account of a subsequent nvadaton of such ta es. In the Stanard-
Tton Mng Co. case, supra, the Ta Court hed n part and n
effect that processng ta es actuay pad are deductbe for the year
of payment, notwthstandng the fact that a cam for refund of such
ta es was subsequenty fed. The decson n that case and the prnc-
pes enuncated n G. C. M. 2 29 and Mmeograph 6 are n confct
wth the concuson stated n I. T. 3170, supra.
In vew of the foregong, t s hed that deductons camed n Fed-
era ncome ta returns for processng ta es pad under the provsons
of the grcutura d|ustment ct ( Stat. 31) are aowabe even
though cams for refund of such ta es have been fed under the pro-
vsons of Tte II of the Revenue ct of 1936. ccordngy, I. T.
3170, supra, s revoked.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
122 , rt. 22, Regs. 62.
130
SU TITL C. SUPPL M NT L PRO ISIONS
SUPPL M NT . COMPUT TION OF N T INCOM
S CTION 113. SIS FOR D T RMINING G IN
OR LOSS
rtce 60 , Reguatons 7 : Read|ustment of
partnershp nterests.
R NU CT OF 192
G. C. M. 10092 (C. . I-1, 11 (1932)) revoked. (See G. C. M.
26379, page .)
TITL II. INCOM T
P RT II. INDI IDU LS
S CTION 21 . IT MS NOT D DUCTI L
rtce 291, Reguatons and 62: Persona
and famy e penses.
R NU CTS OP 191 ND 1921
O. D. 9 1 (C. . , 209 (1921)) revoked and I. T. 1 (C. . 1-2,
1 (1922)) modfed. (See I. T. 39 , page 2 .)
S CTION 22 . FIDUCI RY R TURNS
rtce 22, Reguatons 02: Return by 19 0- -13292
guardan or commttee. I. T. 3996
R NU CT OF 1921
The estate of an ncompetent, hed by a commttee, s not, for
Federa ncome ta purposes, a ta abe entty separate and dstnct
from the ncompetent.
I. T. 1 S0 (C. . 1-2, 17 (1922)) modfed.
I. T. 1 0 (C. . 1-2, 17 (1922)), whch nvoved the queston
whether a former ncompetent or hs commttee shoud fe a Federa
ncome ta return for the year durng whch the ncompetent was
decared competent and the commttee was dscharged, hods that the
former ncompetent, rather than hs commttee, shoud fe the return.
I. T. 1 0 further hods that the commttee w be requred to fe a
fducary return on Form 10 1 f the net ncome receved by t was
suffcent to requre such a return. The atter concuson s equvaent
to a hodng that the estate of an ncompetent s, for Federa ncome
ta purposes, a ta abe entty separate and dstnct from the ncom-
petent.
Upon reconsderaton, t s hed that the estate of an ncompetent,
hed by a commttee, s not, for Federa ncome ta purposes, a ta -
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
131 1102, rt. 1322,Regs. 69.
abe entty separate and dstnct from the ncompetent. ccordngy,
I. T. 1 0, supra, s modfed nsofar as t mpedy hods that the
estate of an ncompetent s, for Federa ncome ta purposes, a ta abe
entty separate and dstnct from the ncompetent.
TITL L G N R L DMINISTR TI PRO ISIONS
S CTION 1102. R CORDS, ST T M NTS, ND
SP CI L R TURNS
rtce 1322, Reguatons 69: Offcers
authorzed to admnster oaths.
R NU CT OF 1926
G. C. M. 266 (C. . I-2, 10 (1927)) modfed. (See G. C. M.
26 19, page 12 .)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
ST T ND GIFT T S
GIFT T
S CTION 1000. IMPOSITION OF T
Secton 6.2, Reguatons 10 : Transfers 19 0-2-1327
reached. . T. 23
INT RN L R NU COD
Where the benefcary of a trust s entted to the ncome from the
trust property for fe and has a power to appont the trust corpus
by w to anyone, the e ercse by such benefcary of an addtona
power to appont the trust property durng hs fetme wthn a
mted cass consstng of hs chdren and ther descendants resuts
In a ta abe gft of the entre vaue of the property so apponted.
dvce s requested whether the e ercse of a mted power of
appontment of trust property by a fe benefcary, who aso has a
genera power of appontment, consttutes a ta abe gft for Federa
gft ta purposes. In the case under consderaton, a decedent who
ded after October 21, 19 2, eft property by w n trust wth drec-
tons to pay the ncome therefrom to hs wfe for fe. In addton,
the wfe was gven power to appont the entre trust property (1) by
deed, durng her fetme, wthn a cass consstng of her chdren
and ther descendants, or (2) by w to anyone, ncudng Iter estate.
The mted (frst) power was e ercsed by the trust benefcary.
The e ercse of the mted power to appont durng the fetme
of the benefcary s not n tsef a ta abe gft under the provsons
of secton 1000(c) of the Code, as added by secton 2(a) of the
Revenue ct of 19 2, snce such power ceary comes wTthn the e -
cepted powers defned n secton 1000(c)(1) of the Code. Such
e ercse, however, resuts n (1) the renqushment of the benefcary s
rght to receve the ncome from the property, and (2) the reease of
the genera power to appont by w to anyone, ncudng the estate
of the benefcary. The renqushment of the benefcary s fe estate
consttutes a transfer of property of the benefcary by gft, and t s,
therefore, ta abe under the provsons of secton 1000(a) of the Code.
The reease of the power to appont the entre corpus of the trust to
anyone s a ta abe gft under the provsons of secton 1000(c) of
the Code.
In vew of the above, t s hed that where the benefcary of a trust
s entted to the ncome from the trust property for fe and has a
power to appont the trust corpus by w to anyone, the e ercse by
such benefcary of an addtona power to appont the trust property
durng hs fetme wthn a mted cass consstng of hs chdren
and ther descendants resuts n a ta abe gft of the entre vaue of
the property so apponted. It foows that the e ercse of the mted
fower n the nstant case resuted n a transfer whch s sub|ect to
edera gft ta .
(133)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
MPLOYM NT T RULINGS
INT RN L R NU COD
C PT R 9, SU C PT R . F D R L INSUR NC CONTRI UTIONS
CT
Secton 1 01: Deducton of ta from wages.
Reguatons 10G, Secton 02.30 : Coecton of,
and abty for, empoyees ta .
Wthhodng tabe combnng Federa Insurance Contrbutons
ct ta and Federa ncome ta as to weeky wages pad on and after
anuary 1, 19 0. (See I. T. 399 , page 120.)
Secton 1 20: Coecton and payment of ta es. 19 0-7-1332
Reguatons 10G, Subpart F: Returns, payment Mm. 6 76
of ta , and records.
( so Subchapter C (Federa Unempoyment Ta
ct), Sectons 160 and 160 ; Reguatons 107,
Sectons 03. 01 and 03. 0 ; Subchapter
(Raroad Retrement Ta ct), Secton 1 30;
Reguatons 100, Chapter .)
Power of attorney Form 13 2 for use n grantng authorty to e -
ecute and fe returns under Subchapter (Federa Insurance
Contrbutons ct) ; Subchapter C (Federa Unempoyment Ta
ct) ; Subchapter (Raroad Retrement Ta ct) ; and Subchap-
ter D (Federa Income Ta Wthhed from Wages) ; of Chapter t) of
the Interna Revenue Code, as amended. (Supersedng Mmeograph
0S9 (C. . 19 0-2, 2 2) : Mmeograph TS0 (C. . 193 -1, 3 3) ;
Mmeograph 099 dated December 3, 1937.)
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, March 1,19 0.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
Other Offcers and mpoyees of the ureau of Interna Revenue,
and Others Concerned:
The attached form of power of attorney s to be used by ta payers
n grantng to an attorney n fact authorty confned to the e ecuton
and fng of returns under the Federa Insurance Contrbutons ct,
the Federa Unempoyment Ta ct, and the Raroad Retrement
Ta ct, and of the Federa ncome ta wthhed from wages. Such
form sha be used n eu of the power of attorney forms prescrbed
n Mmeograph 699 dated December 3,1937, Mmeograph 7 0 (C. .
193 -1, 3 3), and Mmeograph 0 9 (C. . 19 0-2, 2 2). owever,
new powers of attorney authorzng the e ecuton and fng of re-
turns w not be requred to repace those aready propery e ecuted
on forms heretofore prescrbed.
U3 )
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 106, Subpart F.
136
The form of power of attorney prescrbed n ths mmeograph s
to be used by the ta payer ony to deegate authorty to an attorney
n fact to e ecute and fe the returns desgnated. It s not to be used,
and w not be accepted, for other or addtona purposes, such as
the deegaton of authorty to sgn cams or to otherwse act for the
ta payer. Powers of attorney other than for the e ecuton and fng
of returns shoud be prepared n accordance wth the nstructons
contaned n the Conference and Practce Requrements, ureau of
Interna Revenue, revsed February, 19 2.
Pursuant to the provsons of Mmeograph 637 (C. . 1937-2,
C 6), whch modfed Mmeograph 07 (C. . -2, 0 (1936)),
the statement reatve to fees, to be fed wth each power of attorney,
w not be requred n ths nstance.
Coectors and nterna revenue agents n charge w be furnshed
wth an nta suppy of Form 13 2, Power of ttorney, for mme-
date use pendng the prntng and dstrbuton of the reguar suppy.
Coectors and nterna revenue agents n charge shoud estmate
ther needs for a 6 months perod and submt ther requstons on
Form 16 mmedatey.
Ths mmeograph supersedes Mmeograph 0 9, supra; Mmeograph
7 0, supra; and Mmeograph 699 dated December 3,1937.
Correspondence reatng to ths mmeograph shoud refer to ts
number and to the symbos mT: S: F.
Geo. . Schoeneman,
Commssoner.
Poweb or ttorney
FOR CUTING ND FILING R TURNS UND R SU C PT R (F D R L INSUR NC
CONTRI UTIONS CT) ; SU C PT R C (F D R L UN MPLOYM NT T CT) ; SU -
C PT R (R ILRO D R TIR M NT T CT) ; ND SU C PT R D (INCOM T
WIT LD FROM W G S) ; OF C PT R 9 OF T INT RN L R NU COD , S
M ND D
now Men by These Presents, that
(Name)
ocated at
(State whether ndvdua, partnershp or corporaton, etc.)
has made,
(Street address) (Cty) (State)
consttuted, and apponted, and by these presents does hereby make, consttute,
and appont
(Name) ( ddress)
(Its) (my) true and awfu attorney for (t) (me) and n (ts) (my) name,
pace and stead to e ecute and to fe on (ts) (my) behaf, returns
Under the Federa Insurance Contrbutons ct.
Under the Federa Unempoyment Ta ct.
(Check) Under the Raroad Retrement Ta ct.
Of Federa ncome ta wthhed from wages.
In deegatng authorty to the attorney In fact heren desgnated to e ecute
and fe the returns specfed above t s understood that each return (e cept the
return of Federa Income ta wthhed from wages) e ecuted by such attorney
n fact must ncude the ta abe remuneraton of LL empoyees of the empoyer-
ta payer for the ta abe perod covered by the return, regardess of where the
empoyees servces are performed, and that each return must be fed wth the
coector of nterna revenue at , n whose dstrct the
ta payer s prncpa pace of busness s ocated.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
137
Regs. 106 02.20 .
Dated at ths day of , 19-
(If a corporaton aff sea.)
ttest:
(Sgnature) (Name of ta payer)
y.
(Tte) (See Instructons) (Tte)
ecuted n the presence of:
y.
(Wtness) (Tte)
(Wtness)
cknowedged before me ths day of , 19
(Notara Sea)
(Sgnature of offcer admnsterng oath) (Tte)
Form 13 2
nstbuctons
Ths form must be fed by the attorney n fact wth the frst ta return e -
ecuted by hm as such attorney n fact. s ths form of power of attorney s
not vad for the purpose of representng the ta payer generay before the
Treasury Department, t w not be necessary that a statement reatve to fees
accompany t
power of attorney must be sgned by (1) the ndvdua, f the empoyer
s an ndvdua; (2) the presdent, vce presdent, or other prncpa offcer, If
the empoyer s a corporaton; (3) a responsbe and duy authorzed member or
offcer havng knowedge of ts affars, f the empoyer s a partnershp or other
unncorporated organzaton; or ( ) the fducary, f the empoyer s a trust or
estate. The power of attorney must aso ether be wtnessed by two dsnterested
ndvduas, or be acknowedged before a notary pubc or other offcer authorzed
to take acknowedgments.
The ta payer and the attorney n fact are responsbe for the return, or
returns, as made and ncur abty for the penates provded for fase or
frauduent returns.
Secton 1 26: Defntons. 19 0-9-133
Reguatons 106, Secton 02.20 : Who are em- Mn. 6 9
poyees.
( so Subchapter C (Federa Unempoyment Ta
ct), Secton 1607; Reguatons 107, Secton
03.20 ; Subchapter D (Coecton of Income Ta
at Source on Wages), Secton 1621; Reguatons
116, Secton 0 .10 .)
Status of certan professona modes for purposes of the Fed-
era empoyment ta es and of the ncome ta wthhodng under
secton 1622 of the Interna Revenue Code.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 2 , D. C, pr 3,19 0.
Coectors of Interna Revenue and Others Concerned:
1. It has been the poston of the ureau that generay ndvduas
performng modeng servces for photographc ustrators, adver-
tsng agences, merchandsng estabshments, and others are em-
poyees for purposes of empoyment ta es and ncome ta wthhodng.
2. In the case of arnaba Photographs Corporaton v. Unted
States, decded on une 2 ,19 9, by the Unted States Dstrct Court,
03SS0 0 10
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 107, 03. 01.
13
Southern Dstrct of New York, and affrmed on November 2 , 19 9,
by the Unted States Court of ppeas, Second Crcut, the queston
for decson was whether modes who performed servces under the
crcumstances and condtons detaed n the case were empoyees or
ndependent contractors. The factua stuaton consdered by the
court concerned professona modes engaged by a photographc us-
trator to pose for photographs prepared by hm for hs varous cents.
The modes performed servces whch requred professona tranng
and e perence; they hed themseves out through ther bookng agents
as avaabe for modeng engagements wth anyone desrng ther
servces; they worked for the pantff and for numerous other photo-
graphc ustrators and smar operators n snge engagements of
one or severa hours duraton and of rreguar occurrence; they had
no contnung or permanent reatonshp wth the pantff as each
engagement nvoved a new and separate agreement; they charged
for ther servces at houry rates f ed n advance by the modes or
ther agents n accordance wth ther abty, e perence, and popu-
arty ; they reserved the rght to decne engagements personay ds-
tastefu or unsutabe to them and to cance at ther dscreton any
bookngs made for them by ther agents; they mantaned e tensve
wardrobes and generay furnshed the wearng appare, accessores,
and make-up used by them n ther engagements; and, whe they
comped wth nstructons reatve to the resut to be accompshed by
ther work, they used ther own ntatve, abty, and e perence
n nterpretng and enactng the roes assgned to them n the us-
tratons for whch they pose. The court hed that the modes were
not empoyees but ndependent contractors.
3. The ureau s poston s changed to conform to the decson of
the court and ndvduas performng modeng servces under cr-
cumstances and condtons such as those present n the arnaba case
are not empoyees for purposes of empoyment ta es and the ncome
ta wthhodng.
. If doubt e sts as to the appcabty of ths mmeograph n any
case, the compete facts n the case shoud be presented to the ureau
wth a request for a rung.
. Inqures reatve to the contents of ths mmeograph shoud refer
to the number hereof and to the symbos raT: RR.
Fred S. Martn,
ctng Commssoner.
C PT R 9, SU C PT R . R ILRO D R TIR M NT T CT
Secton 1 30: Coecton and payment of ta es.
Reguatons 100, Chapter : Returns and payment
of ta .
Power of attorney form. (See Mm. C 76, page 13 .)
C PT R 9, SU C PT R C F D R L UN MPLOYM NT T CT
Secton 1G0 : Returns.
Reguatons 107, Secton 03. 01: Returns.
Power of attorney form. (See Mm. 6 76, page 13 .)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
139 Regs. 107, 03.20 .
Secton 160 : Payment of ta es.
Reguatons 107, Secton 03. 0 : Payment of ta .
Power of attorney form. (See Mm. 6 76, page 13 .)
Secton 1607: Defntons.
Reguatons 107, Secton 03.20 : Who are empoyees.
Status of professona modes. (See Mm. 6 9 , page 137.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
MISC LL N OUS T RULINGS
ST MP T S
INT RN L R NU COD
S CTION 3 2, S M ND D. CON Y NC S
Reguatons 71 (19 1), Secton 113. 0: Scope 1
of ta .
19 0-9-133 7
M. T. 39
Ta abty, for Federa stamp ta purposes, of conveyances of
rea property to or by a State or a potca subdvson or corporate
Instrumentaty thereof.
S. T. 97 (C. . 10 0-1, 2 6) revoked.
dvce s requested regardng the appcaton of the documentary
stamp ta mposed by secton 3 2 of the Interna Revenue Code to
conveyances of rea property to or by a State or a potca subdvson
It s hed that conveyances of rea property to or by a State or a
potca subdvson or corporate nstrumentaty thereof are not
e empt from documentary stamp ta merey by reason of the govern-
menta character of one of the partes to the transacton. ccord-
ngy, S. T. 97 (C. . 19 0-1, 2 6), n whch t was hed that a con-
veyance of reaty to a oca housng authorty, whch s an nstrumen-
taty of ether a State or a potca subdvson thereof, s not sub|ect
to stamp ta , s revoked.
Secton 3791 (b): Retroactvty of regua- 19 0-13-133 1
tons or rungs. M. T. 0
Nonretroactve appcaton of M. T. 9 (above), reatng to con-
veyances of rea property to or by a State or a potca subdvson
or corporate nstrumentaty thereof.
M. T. 39 (above) hods that conveyances of rea property to
or by a State or a potca subdvson or corporate nstrumentaty
thereof are not e empt from documentary stamp ta merey by
reason of the governmenta character of one of the partes to the trans-
acton. That rung revoked S. T. 97 (C. . 19 0-1, 2 6), n whch
t was hed that a conveyance of reaty to a oca housng authorty,
whch s an nstrumentaty of ether a State or a potca subdvson
thereof, s not sub|ect to stamp ta . ecause of the ong-standng
poston of the ureau and the consequent reance on ths rung n
transactons nvovng conveyances or rea property, t s hed that,
under the authorty contaned n secton 3791 (b) of the Interna Reve-
nue Code, the rung pubshed as M. T. 39, supra, w not be apped
retroactvey, e cept that any ta whch has been pad on conveyances
of rea property fang wthn the scope of that rung w not be
refunded.
(1 1)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
3791(b).
1 2
ccordngy, sub|ect to the mtatons stated above wth respect to
refunds, conveyances of rea property pror to May 1; 19 0, made to
or by a State or a potca subdvson or corporate nstrumentaty
thereof w not be sub|ect to the documentary stamp ta mposed by
secton 3 2 of the Code, as amended. owever, such conveyances
made on and after May 1, 19 0, w not be e empt from the ta m-
posed by that secton merey by reason of the governmenta character
of one of the partes to the transacton.
Geo. . Scoeneman,
Commssoner of Interna Revenue.
pproved une 1,19 0.
Thomas . Lynch,
ctng Secretary of the Treasury.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
1 3
Regs. 3 (19 1), 101.3.
DMISSIONS T
INT RN L R NU COD
S CTIONS 1700(a) ND 16 0, S M ND D. T ON DMISSIONS
rouz noNs 3 (19 1), Secton 101.3: Meanng 19 0-1-13271
of the term pace. Ct. D. 1726
( so Secton 101. .)
DMISSIONS T INT RN L R NU COD D CISION OF SUPR M COURT
1. dmsson to athnq each Operated Under uthorty of
State Consttutonaty op Ta .
Pettoner Is a park dstrct organzed and admnstered pursuant
to Inos statute, and operates a pubc bathng beacb under author-
ty conferred by the Inos egsature. Operaton and mantenance
of the area and ts varous servces are soey by the dstrct.
Charges for admsson are made to cover the e pense of mantenance
and operaton of the beach and of some capta mprovements, and
are not ntended to produce net ncome or proft to pettoner.
cd: Secton 1700(a) of the Interna Revenue Code Is appcabe
to the pad admttances to the bench. The fees charged were pad
for admsson to a pace as those terms are used n the secton.
It was not the ntent of Congress to e empt from ta admssons to
any actvty not conducted for gan or to any muncpay con-
ducted actvty. The secton Is not rendered nappcabe because
pettoner s authorty to make a charge to patrons s derved from a
State statute whch contempates a charge for use. The appca-
ton of the Federa admssons ta statute s not controed by such
characterzaton of the fee by oca aw. The mposton of the ta
s wthn the consttutona power of Congress.
2. Decson ffrmed.
Decson of the Unted States Court of ppeas, Seventh Crcut
(172 Fed. (2d) ), reversng decson of the dstrct court, N. D.
Inos, . D. (76 Fed. Supp. 02 ), affrmed.
Suprsme Court of the Unted States
Wmette Park Dstrct, pettoner, v. Nge D. Campbe, Coector of Interna
Revenue
On wrt of certorar to the Unted States Court of ppeas for the Seventh Crcut
December 12,19 9
opnon
Mr. ustce Cark devered the opnon of the Court.
Secton 1700(a)(1) of the Interna Revenue Code, as amended, provdes for
the mposton, e cept as to certan casses of persons under crcumstances not
Important here, of ta of 1 cent for each 10 cents or fracton thereof of the
amount pad for admsson to any pace, ncudng admsson by season tcket or
subscrpton. 1 Paragraph (2) of the subsecton decares that the ta sha be
pad by the person pnyng for such admsson. nd secton 171 requres that
very person recevng any payments for admsson sub|ect to the
ta Imposed by secton 1700 sha coect the amount thereof from the
person makng such payments.
w r ta rate of 1 cent for each cents or ma|or fracton thereof has been In effect
(IM ) 19 , pursuant t0 Revenue ct of 19 3, secton 02(a). 6 Stat. 21, 61
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 3 (19 1), 101.3.
1
Ts sut, brought to recover penates pad by pettoner for noncoecton of
Federa admssons ta , presents two questons for determnaton: Whether sec-
ton 1700(a) s appcabe to pad admttances to a bathng beach operated wth-
out purpose of gan by a oca park dstrct of Inos; and, f the Code provson s
to be so nterpreted, whether the mposton of admssons ta n connecton wth
such State actvty s wthn the consttutona power of Congress.
Pettoner s Wmette Park Dstrct, a body potc and corporate ocated wthn
the vage of Wmette, Cook County, 111. Organzed and admnstered pursuant
to Inos statutes, the dstrct ncudes wthn ts |ursdcton four park areas.
The argest, Washngton Park, e tends for appro matey three-fourths of a me
aong Lake Mchgan and was acqured party by grant from the State of Inos,
party by purchase, and party by e ercse of the power of emnent doman. t
the north end of Washngton Park, pettoner has operated a pubc bathng beach
durng the summer months for many years, under authorty conferred by the I-
nos Legsature. The beach has been used prmary by resdents of the dstrct,
but aso has been open to nonresdents.
mong the factes whch the dstrct provded at the beach durng the perod
under revew were a bath house, automobe parkng area, fe-savng equpment,
food ghtng, drnkng fountans, showers, spectator benches, bcyce racks, frst
ad, and suppes. The operaton and mantenance of the area and Its varous
servces were soey by the Dstrct, whch empoyed the necessary personne.
Pettoner charged a persons for admttance to the beach. Its charges were of
two types: a day fee of 0 cents on weekdays and 1 on Saturdays, Sundays and
hodays, for whch no tcket was ssued; and a fat rate for a season tcket whch
coud be purchased on an ndvdua or famy bass. These charges were made
to cover the e pense of mantenance nnd operaton of the beach and of some
capta mprovements. Over the years the charges were ntended merey to ap-
pro mate these costs and not to produce net ncome or proft to pettoner; dur-
ng the perod 19 0-19 the accounts of the beach, mantaned on a cash recepts
and dsbursements bass, refected an e cess of recepts over e pendtures of
2.11.
In uy 19 1 the coector notfed pettoner to coect a ta of 10 percent on
o tckets to the beach sod on or after uy 2 of that year. Pettoner had not
prevousy coected such ta es, and t refused to do so after the coector s notce.
Subsequenty the Commssoner under secton 171 of the Code assessed over pet-
toner s protest penates n the amount of the ta whch the Commssoner
camed shoud have been coected under secton 1700(a) from uy 2 , 19 1
through 19 , pus Interest and sums due under secton 30 (b) of the Code for
faure to pay the ta on demand. These penates amounted to 0,139.93 and
were pad out of pettoner s genera funds rased by property ta es.
Pettoner fed tmey cams for refund whch were re|ected, and In 19 C
brought ths sut aganst the coector. The dstrct court entered |udgment for
pettoner. 70 Fed. Supp. 92 . The Court of ppeas for the Seventh Crcut re-
versed. 172 Fed. (2d) . ecause the questons presented have mportance
n the admnstraton of the admssons ta sectons of the Code, we granted
certorar. 337 U. S. 937.
Frst. The Government rases no ssue as to pettoner s standng to sue for
refund. s recovery s here sought of penates pad from pettoner s genera
revenue fund after ts faure to coect the ta , we deem pettoner s fnanca
nterest ceary suffcent.
Second. Secton 1700(a) s appcabe f the charge made by pettoner for ad-
mttance to the beach was, wthn the meanng of the statutory anguage, an
amount pad for admsson to any pace.
The words of the provson when taken In ther ordnary and famar meanng
refect a egsatve purpose of comprehensve appcaton. y ts terms the sec-
ton embraces every payment made n order to secure admttance to a specfc oca-
ton. nd ths purpose of broad appcaton s not ess certan because of any-
thng n the egsatve hstory of the nta adopton of that anguage. In ths
The dstrct court aowed recovery ony of payments made snce anuary 1, 19 , when
respondent took offce as coector. These payments were based on pettoner s operatons
after October 1, 19 1, through 19 . Pror to anuary 1, 19 , pettoner pad 7.20 on
the bass of operatons from uy 2 . 19 1, to October 1. 19 1.
See 2 111. L. Rev. 1 , 19- 20 (19 ).
Tho report of the ouse Commttee on Ways and Means reatng to the War Revenue
ct of 1917 recommended that ths ta be Imposed upon a paces to whch admsson
s charged, such as moton-pcture shows, theaters, crcuses, entertanments, cabarets, ha
games, athetc games, etc., but not upon admssons a the proceeds of whch w go
e cusvey to the beneft of regous or chartabe Insttutons or for agrcutura purposes.
. U. Rept. No. 0, 0 th Cong., 1st scss. (1 17). See 63 Cong. ec. 21 (191-7).
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
1
Regs. 3 (19 1), 101.3.
vew It Is unnecessary to consder whether pettoner s beach area can be dstn-
gushed from a spectator entertanment, for we are unabe to accept pettoner s
argument that Congress ntended n secton 1700(a) to ta ony admssons to
We thnk t cear that a beach area may be a pace n the sense of secton
1700(a) (1). Pettoner s beach park, ncudng the ad|acent shoa waters, was
poced and ghted; the and area was defned, and entrance was through gates.
payment was made by patrons of the beach as the condton of adrttance
to a specfc area wth defnte physca mts. Thus the fee whch pettoner
charged was pad for admsson to a pace as those terms are used n secton
1700(a)(1).
We cannot agree wth pettoner s suggeston that Congress ntended to e empt
from ta admssons to any actvty not conducted for gan. Secton 1701 of
the Code dd aow certan e emptons pror to ther termnaton on October 1,
19 1, pursuant to the Revenue ct of 19 1, secton 1(b). Stat. 6 7, 710.
In secton 1701 Congress e empted admssons to certan casses of events and
admssons a the proceeds of whch nured e cusvey to the beneft of desg-
nated casses of persons or organzatons. ut snce Congress dd not e empt
a actvtes not for proft as t ready mght have done, t appears that adms-
sons to such actvtes are not for that reason outsde the admssons ta scheme.
moor Country Cub v. nted States, 119 Fed. (2d) 961 (C. . 7th Cr. 19 1).
Nor Is there greater force n pettoner s contenton that the admssons ta
was not ntended to appy n the case of actvtes conducted by a muncpaty.
In nterpretng Federa revenue measures e pressed n terms of genera appca-
ton, ths Court has ordnary found them operatve In the case of State actvtes
even though States were not e pressy ndcated as sub|ects of ta . See con-
currng opnon n New York v. nted States, 326 U. S. 72. and n. 3 (19 6).
nd n Zen v. Regents of the Unversty System of Georga, 30 U. S. 39 (193 )
Ct D. 13 , C. . 193 -1, 30 , t was decded that the admssons ta aw was
appcabe In connecton wth actvtes carred on by an agency of a State,
athough t does not appear that the ssue of egsatve purpose was there ds-
puted. owever, we are unabe to dscover that there has been any desgn to
e empt admssons to muncpay conducted actvtes. We regard the Interpreta-
tve ssue as controed by a ong contnued admnstratve constructon, e pressy
denyng such e empton, whch has been foowed by repeated reenactment of
In the admssons ta provsons of the Code, words restrctng the Imposton of ta
to certan casses of paces appear ony n subsectons other than (a) of ecton 1700.
Secton 1700(b) Imposes a ta of 11 percent on the permanent use or ease of bo es or
seats n an opera bouse or any pace of amusement ; such ta s n eu of that provded
for under secton 1700(a). Secton 1700(c) mposes on the sae outsde bo ofces. of
tckets to theaters, operas, and other paces of amusement a ta of 11 rereent of the
prce n e cess of the bo offce prce ; such ta s n addton to the ta mposed by secton
1700(a). Secton 1700(d) mposes a ta of SO percent on the amount of saes n e cess of
reguar prce by the management of any opera house, theater, or other pace of amuse-
ment. Secton 1700(e) mposes a ta of percent on amounts pad for admsson, refresh-
ment, servce, or merchandse, at any roof garden, cabaret, or other smar pace fur-
nshng a pubc performance for proft ; n such cases no ta may be mposed under
secton 1700(a).
Compare moor Country Cub v. Unted States, 119 Fed. (2d) 901 (C. . 7th Cr.
19 1) ; Twn Fas atatorum v. nted States, 22 Fed. (2d) 30 (S. D. Idaho 1927) ;
Unted State v. oer, 2 7 Fed. 1 (W. D. Wash. 1921).
ccord: Dashote v. arrson. 1910 P- . paragraph 72. 0 (N. D. 111. 19 0).
though an e empton was aowed by secton 1701 of the Interna Revenue Code pror
to October 1. 19 1, of admssons n the proceeds of whch nure e cusvey
to the beneft of socetes or organzatons conducted for the soe purpose
of mprovng any cty, town, vage, or other muncpaty. we need not O ter-
mne whether te e empton was propery Interpreted as Inappcabe to actvtes con-
ducted by a muncpa corporaton. See Treas. Reg. 3 (192 ed.). rt. 22 : Id. (1932 ed.
rt. 22; Id. (19 0 ed.) secton 101.2 . The provson became nappcabe pror to the
perod for whch pettoner made payments whch coud be recovered aganst the present
respondent. See note 2. supra.
Pettoner has argued that the specfc e empton beneftng muncpa Improvement
socetes was Intended to afford them the same e empton whch Congress thought apped
to muncpa corporatons ; thus, t Is urged, repea of the socetes e empton st woud
eave the e empton In the case of muncpay conducted actvtes. If Congress assumed
that any such muncpa corporaton e empton e sted by mpcaton, t seems key that
It dd so beeause of consttutona consderatons whch we notce hereafter and not because
of a beef or purpose that the ta was not apncabe to actvtes conducted by any pubc
agency. Thus Congress, In adoptng 9 Stat. 17 7, 1792 (1936) and Stat. 303. 3 0
(19 1), apparenty assumed that an e press e empton was necessary In order to wthdraw
admssons to Natona Parks from the ta statue. Cf. Stat. 6 7. 710 (19 1), termnat-
ng such e emptons of park admssons.
Treas. Reg. 3 (1919 ed. Part 1), rt. 2: d. (1921 ed. Part 1) rt. 2: d. (1 22
ed. Part 1) rt. 26: d. (192 ed. Tart 1) rt. 26; d. (1926 ed. Part 1) rt. 26: Id. (192
ed.) rt. 2 ; d. (1932 ed.) rt. 2 ; Id. (19 0 ed.) secton 101.27: d. (19 1 ed.) secton
101.16.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs; 3 (19 1), 101.3. 1 6
the reevant anguage wthout change. Cf. everng v. Wnm, 30 U. S. 79
(193 ) Ct. D. 136 , C. . 193 -2,212 .
Fnay, secton 1700(a) (1) Is not rendered Inappcabe because beach patrons
make use of a beach and ts factes, thus affordng characterzaton of tbe
admsson fee as a use charge. Few f any admssons ta abe under secton
1700(a) are not accompaned by a use of the property or equpment to whch
the admttee s cense e tends. though tabe accommodatons for whch a
charge s made are usuay thought of as ob|ects of a patron s use, yet Congress
n secton 170 of the Code has decared that for purposes of the admssons
ta aw a charge for ther use must be treated as a charge for admsson and
not as a renta charge. smar resut must obtan when payment s pre-
requste, as t was at pettoner s beach, to both admsson to and use of a specfc
area. Chmney Rock Co. v. Unted States, 63 Ct. Cs. 660 (1927) T. D. 07 ,
C. . I-2, 303 , cert dened, 27 U. S. 2 (1927) ; Tcn FaU Natatorum v.
Unted States, 22 Fed. (2d) 30 (D. Idaho 1927) T. D. 127, C. . II-1, 292 .
The tra court, n aowng |udgment for pettoner n vew of the use made
of the beach, consdered the fee a use ta . ut f there s no ta e empton
for admssons to a muncpay conducted actvty, then a muncpaty may
not escape ta by camng that ts admsson fee s a use ta when a smar
prvate busness coud not advance such cam. Nor does t matter that pet-
toner s authorty to make any charge to beach patrons s derved from a statute
whch contempates a charge for use. 111. Rev. Stat. c. 10 , secton -7d
(19 7). The appcaton of the Federa admssons ta statute s not controed
by the characterzaton of pettoner s fee by oca aw. Cf. Morgan v. Com-
mssoner, 309 U. S. 7 , 1 (19 0) Ct. D. 1 1, C. . 19 0-1, 229 .
We concude that secton 1700(a) s appcabe.
Thrd. The consttutonaty of admssons ta eved n connecton wth an
actvty of a State nstrumentaty was before ths Court n en v. Regents of
the Unversty System of Georga, 30 U. S. 39 (193 ). We there found no
consttutona nhbton aganst a nondscrmnatory mposton of such ta on
admssons to an athetc e hbton conducted n connecton wth a State educa-
tona admnstraton and n the performance of a governmenta functon.
The en decson foowed soon after everng v. Gerhardt, 30 U. S. 0
(193 ) Ct. D. 13 3, C. . 193 -1, 2 6 , whch decared two prncpes mtng
State mmunty from Federa ta aton. Id. at 19. The frst of these, nvoked
n the en decson, was dependent upon the nature of the functon beng
performed by the State agency and e cuded from mmunty such actvtes as
mght be thought not essenta for the preservaton of State government. We
need not consder here the appcabty of that doctrne, for the pettoner s
asserton of mmunty must be re|ected on the second restrctve prncpe
reaffrmed n the Gerhardt decson. Ths prncpe, e empfed by those cases
where the ta ad upon ndvduas affects the State ony as the burden s passed
on to t by the ta payer, forbds recognton of the mmunty when the burden on
the State s so specuatve and uncertan that f aowed t woud restrct the
Federa ta ng power wthout affordng any correspondng tangbe protecton to
the State government. 30 U. S. at 19- 20. ccordng to ths prncpe, the
State s not necessary protected from a ta whch we may be substantay
or entrey absorbed by prvate persons. Id. at 20.
Whe the en decson assumed that the admssons ta there mposed was a
drect burden on the State, that assumpton was requred ony for the purpose
of consderng the frst prncpe of mtaton of mmunty as formuated n the
Gerhardt case. Such an assumpton need not be made here. It s true, of
course, that uness there s a shft n demand for admssons to pettoner s beach,
mposton of the ta may to an undetermnabe e tent adversey affect the
voume of admssons. Insofar as ths occurs, the sen-ces of the dstrct w
be ess wdey avaabe and ts revenues from beach admssons w be reduced.
ut admssons ta , whch s pad by the person payng for such admsson,
s so mposed as to factate absorpton by patrons of the beach rather than
Revenue ct of 191 . secton 00, 0 Stat. 10 7, 1120; Revenue ct of 1921, secton
00, 2 Stat. 227, 2 9 ; Revenue ct of 192 , secton 00, 3 Stat. 2 3, 320 : Revenue ct
of 1926, secton 00. Stat. 9. 91 ; Revenue ct of 192 , secton 11, Stat. 791, 63;
Revenue ct ot 1932, secton 711, 7 Stat. 109, 271 ; Pub. Res. No. 36, une 2 . 193 ,
9 Stat. 31 ; I. R. C. sectons 1700, 1701 (1939) ; Revenue ct of 19 1, secton 1,
Stat. 6 7. 710.
10 See uguenot Yacht Cub v. Unted States, 32 Fe. Supp. 3 7, 3 (S. D. N. Y. 19 0) ;
Lent. The dmssons Ta , 1 Nat. Ta . 31, 3 -30 (19 ) ; 61 arv. L. Rev. 9 (19 ).
u See Lent, note 10, supra, at 0- 2.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
1 7
Regs. 3 (19 1), 101.3.
by the dstrct, and we have no evdence that the dstrct w be forced to absorb
the ta n order to mantan the voume of ts revenues and the avaabty of
ts benefts. Cf. Metcaf v. Mtche, 269 U. S. 1 , 26 (1926). The mere fact
that the economc burden of such ta es may be passed on to a State government
and thus Increase to some e tent, here whoy con|ectura, the e pense of ts
operaton, nfrnges no consttutona Immunty. Such burdens are but norma
ncdents of the organzaton wthn the same terrtory of two governments, each
possessed of the ta ng power. everng v. Oerhardt, supra, 30 U. S. at 22.
s t foows that there Is no consttutona ob|ecton to the ta penates
assessed aganst pettoner, the decson of the court of appeas must be
ffrmed.
Mr. ustce Dougas and Mr. ustce Mnton took no part In the consderaton
or decson of ths case.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
MISC LL N OUS RULINGS
S CTION 3 OF T INSON CT ( ST T. 03, 0 ), S
M ND D Y T CT OF UN 2 ,1936 ( 9 ST T. 1926),
ND Y T CT OF PRIL 3,1939 ( 3 ST T. , 60)
19 0-2-1327
I. T. 3991
ffect of the renegotaton of Government contracts or subcon-
tracts upon the determnaton of e cess proft under the proft
mtaton provsons of the nson ct ( Stat. 03, 0 ), as
amended.
I. T. 39 7 (C. . 19 0-1, 2C2) revoked.
Secton 622(b) of the Natona Mtary stabshment ppropra-
ton ct, 19 0 (63 Stat. 9 7, 1021; C. . 19-19-2, 2 1), approved Oc-
tober 29, 19 9, provdes as foows:
(b) Notwthstandng any agreement to the contrary, the proft mtaton
provsons of the ct of March 27, 193 ( Stat. 03, 0 ), as amended and
suppemented, sha not appy to any contract or subcontract whch s sub|ect
to the Renegotaton ct of 19 .
In vew of the foregong provsons of the Natona Mtary stab-
shment ppropraton ct, 19 0, the rues and procedure set forth
n L T. 39 7 (C. . 19 9-1, 262) for determnng the abty for
e cess proft under secton 3 of the nson ct ( Stat. 03 . 0 ) as
amended, n the case of any contract or subcontract whch s sub|ect
to the Renegotaton ct of 19 , now have no appcaton. ccord-
ngy, I. T. 39 7, supra, s hereby revoked.
( 9)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Msc.
1 0
MISC LL N OUS
19 0-7-13321
Mm. 6 6
Transfer of dutes n connecton wth ncome ta wthhodng
under secton 1622 of the Interna Revenue Code from Income Ta
Unt to mpoyment Ta Unt.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 2 , D. C, March 16,19 0.
Offcers and mpoyees, ureau of Interna Revenue, and Others
Concerned:
ffectve pr 1, 19 0, a dutes heretofore performed by the In-
come Ta Unt n connecton wth the admnstraton of ncome ta
wthhodng under secton 1622 of the Interna Revenue Code are
transferred to the mpoyment Ta Unt. Ths transfer ncudes
the admnstraton of a provsons of Subchapters D and of Chap-
ter 9 of the Code, as we as the provsons of Reguatons 116. It
does not, however, ncude |ursdcton over questons arsng wth re-
spect to the abty of any ndvdua under Chapter 1 of the Code.
If a queston whether a partcuar amount pad to an ndvdua
consttutes wages sub|ect to wthhodng requres a determnaton of
whether such amount consttutes ncome to the ndvdua under Chap-
ter 1 of the Code, such queston, n the absence of a ceary appcabe
precedent, sha be referred by the mpoyment Ta Unt to the In-
come Ta Unt for consderaton and advce.
Geo. . Scoeneman,
Commssoner.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
1 1 Regs. 3, 1 2.6(6), et .
INDUSTRI L LCO OL
INT RN L R NU COD
Reguatons 3, Sectons 1 2.6(6), re 19 0-12-13371
T.D. 7
TITL 26 INT RN L R NU . C PT R I, SU C PT R C. P RT 1 2.
INDUSTRI L LCO OL
mendng Reguatons 3
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 2 , D. C.
To Dstrct Supervsors and Others Concerned:
L Reguatons 3, approved March 6, 19 2 (26 CFR, Part 1 2), as
amended, are hereby amended as foows:
(a) Sectons 1 2.6(b), 1 2. 3, 1 2.10 , 1 2.109, 1 2.133 (ff),
( ), 1 2.226(1), 1 2.229(6), 1 2.262(a)( ), 1 2.33 , 1 2.339,
1 2.3 0,1 2.3 1,1 2.3 2,1 2.3 ,1 2.3 6,1 2.3 2,1 2.3 ,1 2.3 ,
1 2.3 6, 1 2.3 9, 1 2.360, 1 2.361, 1 2.367, 1 2.371(d), 1 2.372,
1 2.377(d), 1 2.37 , 1 2.3 3(d), 1 2.3 , 1 2.3 9(d), 1 2.391,
1 2. 00,1 2. 01,1 2. 0 ,1 2. 0 ,1 2. 06,1 2. 12,1 2. 1 ,1 2. 1 ,
1 2. 23,1 2. 36,1 2. 37,1 2. 3,1 2. ,1 2. 0,1 2. 1,1 2. 2,
1 2. ,1 2. ,1 2. 6,1 2. 9,1 2. 61,1 2. 6 ,1 2. ,1 2. 9,
1 2. 90,1 2. 91,1 2. 9 ,1 2. 96,1 2. 02,1 2. 1 ,1 2. 19,1 2. 26,
1 2. 0,1 2. 1,1 2. ,1 2. 6,1 2. 9,1 2. 60,1 2. 61,1 2. 62,
1 2. 6 , 1 2. 70, 1 2. 7 d, 1 2. 76, 1 2. 2, 1 2. , 1 2. 7,
1 2.602, 1 2.610, 1 2.620, 1 2.621, 1 2.622, 1 2.630c, 1 2.6 2,
1 2.6 3,1 2.6 ,1 2.6 6,1 2.6 7,1 2.6 9,1 2.6 7,1 2.66 ,1 2.66 ,
1 2.669, 1 2.671, 1 2.672, 1 2.69 , 1 2.69 , 1 2.696, 1 2.7 9,
1 2.7 0, 1 2.7 1, 1 2.7 3, 1 2.7 , 1 2.7 7, 1 2.7 1, 1 2.7 ,
1 2.7 7(e), 1 2.7 , 1 2.7 9, 1 2. 10, 1 2. 11, 1 2. 13, 1 2. 19,
1 2. 21,1 2. 22,1 2. 23,1 2. 33,1 2. 3 ,1 2. 73,1 2. 7 ,1 2. 76,
1 2. 9 , 1 2. 97,1 2. 9 ,1 2.9 0, 1 2.9 1, 1 2.1000 are amended;
(6) Sectons 1 2.31a, 1 2. 01a, 1 2. 01b, 1 2. 0 a, 1 2. 0 b,
1 2. 0 c, 1 2. 0 d, 1 2. 0 e, 1 2. 0 f, 1 2. 0 g, 1 2. 0 h, 1 2. 0 ,
1 2. 0 , 1 2. 0 k, 1 2. 0 1,1 2. 0 m, 1 2. 0 n, 1 2. 0 o, 1 2. 0 p,
1 2. 0 q, 1 2. 0 r, 1 2. 0 s, 1 2. 0 t,1 2. 0 u, 1 2. 0 v, 1 2. 0 v,
1 2. a, 1 2. b, 1 2. 6a, 1 2. 90a, 1 2. 9 a, 1 2. 9 b, 1 2. 6a,
1 2. 60a, 1 2. 76a, 1 2.6 3a, 1 2.6 3b, 1 2.6 3c, 1 2.6 3d, 1 2.6 3e,
1 2.6 3f, 1 2.6 3g, 1 2.6 3h, 1 2.69 a, 1 2.696a, 1 2.69 b. 1 2.C9 c,
1 2.7 9a, 1 2.7 2a, 1 2.7 2b, 1 2.7 2c, 1 2.7 2d, 1 2.7 a, 1 2.7 b,
1 2.7 c, 1 2.7 d, 1 2.7 e, 1 2. 11a, 1 2. 11b, 1 2. 11c, 1 2. 3 a,
1 2. 3 b are added; and
(c) Sectons 1 2. 02,1 2. 03,1 2. 3,1 2. ,1 2. 60,1 2. 7,
1 2. 77, 1 2.6 , 1 2.7 6, 1 2.96 , and 1 2.966 are revoked.
Defntons
Sc. 1 2.6. Defntons. s used In ths part, the foowng words and phrases
sha have the meanngs as heren defned:
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 3, 1 2.6(b), etc.
1 2
(6) ppcaton sha mean a forma, wrtten, verfed request, supported
by a verfed statement of facts, when necessary, for a permt for one or more
of the prveges authorzed by aw. ....

(Sees. 310 , 312 , 3176, I . C.)
Constructon
INDUSTRI L LCO OL PL NTS
Sec. 1 2.31a. Ta -Pad Storeroom. Where acoho n packages, after ta -pay-
ment, s to be temporary retaned on the ndustra acoho pant premses
pendng remova, the propretor must provde n connecton wth the ndustra
acoho pant a separate room for the storage of such acoho ta -pad at the
pant. The ta -pad storeroom, f contguous to the recevng room, or to the
temporary storage room authorzed by secton 1 2.31, must be separated there-
from by sod and unbroken parttons or foors of substanta constructon con-
formng to the provsons of sectons 1 2.17 and 1 2.1 . Where a bonded ware-
house on the same premses as the ndustra acoho pant has a ta -pad
storeroom prescrbed by secton 1 2. 2, t may be used aso for the temporary
storage of ta -pad packages fed n the Industra acoho pant (Sees. 3100,
312 (a) (6), 3176, I. R. C.)
qupment
ndustra acoho pants
Sec. 1 2. 3. Coors fob Ppe Lnes. The ppe nes n the ndustra acoho
pant used for conveyng the foowng substances sha be panted and kept
panted n the coors ndcated:
ack coho.
ue apor, ow wnes, hgh
wnes, or other unfn-
shed sprts.
Red Fermented mash or beer.
Gray Moasses or other fer-
mentng matera.
rown Spent beer or sop.
Yeow Fuse o.
Yeow wth red strpe ther.
Yeow wth green strpe uty acoho.
Yeow wth purpe strpe cetone.
Whte Water.
umnum Steam.
Orange r.
Ove green Carbon do de.
Purpe Refrgerants.
These coors ape ntended for such ppe nes ony, and are prescrbed for the
purpose of dstngushng such ppe nes from each other and from a other
ppe nes on the premses whch are panted but for whch coo s are not pre-
scrbed. The pantng n one of the prescrbed coors, or a coor smar thereto,
of a ppe ne for whch a coor s not prescrbed s prohbted. Ppe nes for
ether, buty acoho, and acetone sha be strped conspcuousy n the pre-
scrbed coors. Ppe nes for whch coors are not prescrbed may be panted
n sectons of contrastng coors. (Sees. 3103, 310 , 312 (a) (6), 3176, I. R. C.)
uafyng Documents
ndustra acoho pants, bonded warehouses, and denaturng pants
Sec. 1 2.10 . ppcaton, Form 1 31. very person desrng the estabsh-
ment of an ndustra acoho pant; an ndustra acoho bonded warehouse; a
denaturng pant; an ndustra acoho pant and bonded warehouse; an n-
dustra acoho pant and denaturng pant; an ndustra acoho pant, bonded
warehouse, and denaturng pant; or an Industra acoho bonded warehouse
and denaturng pant, must fe Form 1 31, ppcaton by Propretor of In-
dustra coho Pant, onded Warehouse, or Denaturng Pant. Ths ap-
pcaton must be fed, n trpcate, wth the dstrct supervsor of the dstrct
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
1 3 Regs. 3, 1 2.6(b), etc.
n whch the premses are ocated for a basc permt to engage n such busness.
cept as provded n Secton 1 2.117 n the case of amended and suppementa
appcatons, a of the Informaton ndcated by the nes on the form and the
nstructons prnted thereon or ssued n respect thereto, and as requred by the
reguatons n ths part, sha be furnshed. ppcatons on Form 1 31 must be
fed n accordance wth the nstructons, prnted on the form, and be sworn to
before an offcer authorzed to admnster oaths: Provded, That f the form
offcay prescrbed for such appcaton contans theren a provson for verf-
caton by a wrtten decaraton that such appcaton s made under penates of
per|ury, such appcaton sha be verfed by the e ecuton of such decaraton,
and such decaraton so e ecuted sha be n eu of the oath requred heren
for verfcaton. Such appcatons must be numbered seray, commencng
wth number 1 and contnung n reguar sequence for a appcatons thereafter
fed, whether annua, amended, or suppementa. data, wrtten statements,
affdavts, and other documents submtted n support of the appcaton Sha be
deemed to be a part thereof. (Sees. 3100, 3101, 3102, 310 , 311 (a), 312 (a) (6),
317G,3S09, I. R. C.)
Sec. 1S2.109. Day Producton. The estmated ma mum quantty of each
knd of matera that the propretor of an ndustra acoho pant ntends to
mash n a day of 2 hours, and the estmated ma mum quantty In proof gaons
of acoho that w be produced from such materas n a ke perod sha be
stated on Form 1 31. Where the propretor ntends to mash dfferent knds of
materas than those covered by Form 1 31, or a arger quantty of specfed
materas than the ma mum ndcated on such form, or to produce a arger
quantty of acoho than the ma mum ndcated on the form, he must fe wth
the dstrct supervsor an amended appcaton, Form 1 31, n trpcate, and f the
ta on the quantty of acoho to be produced durng a perod of 1 days w e ceed
the pena sum of the bond (f such pena sum s ess than the ma mum as set
forth n secton 1S2.133), a new or addtona bond. Form 1 32- , must be fed,
as provded n secton 1 2.133 (h). Lkewse, where the quantty of acoho
actuay produced durng any perod of 1 days e ceeds the estmated ma mum
quantty to be produced durng such perod, the propretor must fe an amended
appcaton, Form 1 31, and, where requred, a new or addtona bond, Form
1 32- , n accordance wth secton 1 2.133(7). (Sees. 3100, 310 , 311 (a),
312 (a) (6), 3176, I. R. C.)
Sec. 1 2.133. Pena Sum.

(g) Industra acoho pants. The pena sum of the bond to cover the opera-
ton of an ndustra acoho pant sha not be ess than the amount of the
nterna revenue ta at the rate prescrbed by aw on the ma mum quantty of
acoho (n proof gaons) that w be produced n the ndustra acoho pant
durng a perod of 1 days of 2 hours each: Provded, That the ma mum pena
sum of the bond sha be 100,000.
( ) Increase n pena sum of bond. Where the permttee has not furnshed
bond n the ma mum pena sum, n accordance wth paragraphs (a) to (g) of
ths secton, and he ntends to produce, or have on hand, n transt, or unac-
counted for a arger quantty of acoho than that covered by hs bond, he must
fe a new or addtona bond n a suffcent pena sum to cover the ta on the
ncreased quantty to be produced. Lkewse, where the quantty of acoho
actuay produced durng any perod of 1 days n the case of an ndustra
acoho pant, or the quantty of acoho, or specay denatured and recovered
or restored denatured acoho actuay on hand, n transt, and unaccounted
for at any one tme at the bonded warehouse or denaturng pant, as the case may
be, e ceeds the pena sum of the bond on fe, he must furnsh mmedatey a new
or addtona bond n a suffcent penn sum, effectve as of the begnnng of such
perod. If an addtona bond s furnshed n ether case, t must be n ac-
cordance wth secton 1 2.203. (Sees. 310 , 311 (a), 312 (a) (6), 3176, I. R. C.)
asc Permts
G N R L
Sec. 1 2.220. Scope of rtce. The provsons of ths artce are appcabe
to a basc permts coverng operatons ncuded n ths part, whch are as
foows:
(1) Permt to Operate Industra coho Pant, onded Warehouse, or De-
naturng Pant, Form 1 33. ( snge basc permt w be ssued for an ndus-
33 0 0 11
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 3, 1 2.6( ), etc. 1
tra acoho pant; an ndustra acoho bonded warehouse; a denaturng pant;
ndustra acoho pant and bonded warehouse If ocated on the same premses;
Industra acoho pant and denaturng pant If ocated on the same premses;
Industra acoho pant, bonded warehouse and denaturng pant f ocated on
the same premses; or bonded warehouse and denaturng pant f ocated on the
same premses.)

(Sees. 310 , 312 (a) (6), 3176,1. R. C.)
ssuance of orgna basc permt
Sec. 1 2.229. Lmtatons Under Permt.
-
(6) Permt to Procure coho Free of Ta by the Unted States or Govern-
menta gency Thereof, Form - |. Permts on Form 1 w not mt the
quantty of acoho authorzed to be procured. Such permts, however, sha
name the propretor of the ndustra acoho pant or bonded warehouse, the
number and ocaton thereof, from whch acoho, free of ta , sha be procured.
If t s desred to procure acoho from more than one ndustra acoho pant
or bonded warehouse a separate permt must be procured, authorzng wthdrawa
from each such pant or warehouse.

(Sees. 310 ,3107,311 ,312 (a)(6),3176,1. R. C.)
Requrements Governng Changes n Name, Propretorshp, Contro, Loca-
ton, Premses and qupment; and n the Tte to Industra coho
Pant or onded Warehouse Property or the ncumbrance Thereof
change n propretorshp
Sec. 1 2.262. Change n Propretorshp. (a) Suspenson.

( ) Fnshed, acoho. In the case of an Industra acoho pant, draw off,
brand and mark, and remove a fnshed acoho n the ndvdua, frm, or cor-
porate name, or trade name or stye, under whch t was produced n accordance
wth secton 1 2. 7.

(Sees. 3100, 3101, 3102, 3103, 10 , 311 , 312 (a) (6), 3176, I. R. C; sec. 3, 9
Stat. 97 (27 T . S. C 203).)
Operaton of Industra coho Pants
dstng materas
Sec 1 2.33 . Weghng Materas Receved. cept as provded n secton
1 2.63, the propretor w weg or, n the case of quds, wegh or measure a
materas receved on the ndustra acoho pant premses Intended for use n
the producton of acoho. e w prepare weght or quantty sps of a such
materas receved and furnsh sgned copes to the storekeeper-ganger. e w
mantan a commerca record of a such materas receved, showng the date
of recept, the name of the concern or person from whom the materas were pur-
chased, and the knd and quantty of each matera, and w report on Form
1 2 the tota quantty of each knd of materas receved durng the month,
provded, however, that the Commssoner may. n hs dscreton, requre that
recepts of materas be reported day on Form 1 2. (Sees. 3103, 310 ,
312 (a) (6), 3176, 1. R. C.)
Sec. 1 2.339. Stobekeeper-Gauger s Record of Materas Receved. The
storekceper-gauger w record on Form 1GS6, T . S. Storekeeper-Gauger s Rec-
ord of Operatons at Regstered Dstery or Industra coho Pant, the tota
quantty of each knd of materas receved on the premses, durng the month,
ntended for use n the producton of acoho. ntres w be made from the
propretor s weght or quantty sps. The storekeeper-ganger w verfy such
sps by comparson wth the propretor s commerca records and hs Form
1 2. (Sees. 310 , 312 (a) (6), 3176, 1. R. C.)
Sec. 1 2.3 0. Weghng Materas Used. The propretor w wegh, or In
the case of quds, wegh or measure, a materas used n the producton of
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
1 Regs. 3, 1 2.6(6), etc.
acoho. e w prepare weght or quantty sps of a such materas and w
furnsh sgned copes to the storekeeper-gauger. The saccharne content of
moasses mashed must be reported. The acoho content of fermented quor,
nne, or other dstng materas must be shown and the same sha be deter-
mned from sampes taken under such condtons as w afford a proper test
of the partcuar ot or ots dsted. The materas used w be recorded by
the propretor on Form 1 2. The quantty of resdue returned to a brewery
w aso be entered on Form 1 2. (Sees. 3103, 310 , 312 (a) (6), 3176, I. R. C.)
Sec. 1 2.3 1. Use of Materas Other Tan for the Producton of co-
ho. Where materas are used prmary for the producton of substances other
than ethy acoho, such as buty acoho, sopropy acoho, acetone, etc., and
such materas produce a sma amount of ethy acoho as a byproduct, a sep-
arate record w be kept on Forms 1 2 and 16 6 for each process or fermenta-
ton, showng the materas used and the resutng producton of ethy acoho
and chemcas therefrom. (Sees. 3103, 310 , 312 (a) (6), 3176, I. R. C.)
Sec. 1S2.3 2. Storekeeper- auger s Record of Materas Used. The store-
keeper-gauger w record on Form 16S0 a materas used n the producton of
acoho. ntres w be made from the propretor s weght or quantty sps.
The storekeeper-ganger w verfy such sps by comparson wth the propretor s
commerca records and hs Form 1 2. The quantty of resdue returned to a
brewerv w be entered by the storekeeper-gauger on Form 16 6. (Sees. 3103,
310 , 312 (a)(6), 3176, I. R. C.)
Sec. 1 2.3 . Remova or Destructon of Fermentng or Dstng Mate-
ra. (a) Sae or transfer of fermentng matera. If fermentng matera s
stored on the premses and t s desred to remove the same or any porton thereof
from the premses for any purpose whatever, the storekeeper-gauger sha be
notfed by the propretor, pror to the remova of such materas, of the knd
and quantty to be removed and the reasons therefor. The remova of such
materas w be entered by the propretor on Form 1 2 and by the storekeeper-
gauger on Form 16 6.
(6) Destructon of dstng matera. Dstng materas must not be de-
stroyed unt permsson therefor has been obtaned from the dstrct supervsor
and the same has been nspected by a Government offcer, uness destructon wth-
out supervson s authorzed by the dstrct supervsor. If the matera s found
by an nspectng Government offcer to be useess for dstaton, he w supervse
destructon thereof and submt a wrtten report of hs acton to the dstrct super-
vsor. The destructon of the matera w be entered by the propretor on
Form 1 2 and by the storekeeper-gauger on Form 16 6.
(c) Destructon of fermented mat quor and wne. Fermented mat quor
and wne whch have become unft for dstaton sha not be destroyed unt
nspected by a Government offcer and a chemca anayss s made pursuant to
the nstructons of the dstrct supervsor. If destructon s authorzed, t w
be entered by the propretor on Form 1 2 and by the storekeeper-gauger on
Form 1C 6. (Sees. 3030, 310 , 312 (a) (6), 31 0, 3176, I. R. C.)
T STINO
Sec. 1 2.3 6. Materas for Yeast Mash. Materas capabe of producng
acoho whch are used n preparng yeast mash w be weghed or measured by
the propretor, who w furnsh weght or quantty sps to the storekeeper-gauger
and w make proper record on Form 1 2. If the materas used n a yeast mash
have been ncuded n the materas weghed or measured by the propretor for
use n the producton of the man mash, a notaton shoud be made on the sp
to that effect and no entry w be made on Forms 1 2 and 16 6. Such weght
or quantty sps w be fed by the storekeeper-ganger for record and reference
purposes. (Sees. 3103, 310 , 312 (a) (6), 3176, I. R. C.)
F RM NTING
Sec. 1 2.3 2. Test of eer and Sop. t the tme of dstaton, the propre-
tor w thoroughy agtate the contents of each fermenter and the storekeeper-
gauger w then take a sampe of beer or other dstng matera from each
fermenter to determne the acohoc content of the beer or other dstng mate-
ra. e w aso take day severa representatve sampes of sop or spent beer
after the same has come from the st and determne the acohoc content of each
sampe. e w make the test of beer or other dstng matera and sop and
compute the cacuated yed n-accordance wth the nstructons on Form 16 6
(Sees. 310 , 312 (a) (6), 3176, I. R. C.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 3, 1 2 6(0), etc. 1 6
dstaton
Sec. 1 2.3 . Gaugng or Unfnshed coho t ndustra acoho pants
where unfnshed acoho, hgh wnes and ow wnes (herenafter desgnated unfn-
shed acoho), n the course of dstaton are run Into tanks In the pant for
temporary depost preparatory to competng the dstaton thereof, and where
2 -hour supervson s mantaned by the storekeeper-gauger, a day gauge of
such unfnshed acoho w not be requred. Where 2 -hour supervson s not
mantaned, the storekeeper-gauger, pror to eavng the premses, w gauge
(measure and proof) the unfnshed acoho retaned n each tank, make an offce
record of the quantty and proof of the unfnshed acoho theren, and attach
ocks n accordance wth secton 1 2.91 : Provded, That where such tanks are
encosed n a room or budng equpped for ockng n accordance wth secton
1S2.26, such room or budng w be ocked n eu of gaugng the unfnshed
accho. Upon hs return to the premses the storekeeper-gauger w gauge the
unfnshed acoho n the tanks prevousy gauged and compare the quantty and
proof wth the offce record. ny matera dscrepancy w be reported mme-
datey to the dstrct supervsor. cept as authorzed by the reguatons n
ths part, unfnshed acoho may not be stored n such tanks, but may be deposted
theren ony temporary n the course of dstaton. t the cose of the month
the storekeeper-gauger w make an accurate gauge of a unfnshed acoho on
hand and report the tota quantty on Form 16 6. (Sees. 310 , 312 (a) (6), 3176,
I. R.C.)
Sec. 1 2.3 . Redstaton of coho.
(a) uthorzaton and procedure. The dstrct supervsor may, n hs ds-
creton, provded he deems t proper so to do and sub|ect to such condtons and
restrctons as he may mpose, authorze the transfer of acoho from an ndus-
tra acoho pant or a bonded warehouse to an ndustra acoho pant for
redstaton. In makng the request for such speca authorzaton the propr-
etor of the ndustra acoho pant desrng to redst acoho w submt to
the supervsor of hs dstrct a statement n trpcate showng the source and
quantty of the acoho and the necessty for redstaton. The dstrct super-
vsor w note hs approva or dsapprova on a copes of the appcaton. e
w return the orgna to the propretor, retan one copy for fe and attach the
remanng copy to the Commssoner s copy of Form 1 2 for the mouth n whch
the transfer s made. Where the acoho for redstaton s to be receved from
an ndustra acoho bonded warehouse on the Industra acoho pant premses,
the procedure prescrbed by the reguatons n ths part governng the transfer
of acoho from an ndustra acoho pant to a bonded warehouse w be
foowed nsofar as appcabe. See partcuary secton 1 2. 0 b. Where the
acoho for redstaton s to be receved from an ndustra acoho bonded
warehouse not on the same premses or from another Industra acoho pant,
the procedure prescrbed by the reguatons n ths part w be foowed nsofar
as appcabe. See partcuary sectons 1 2. 0 c and 1 2. 0 d. The transfer
appcaton and permt Form 1 36 w be appropratey modfed.
(6) Records and reports. The acoho for redstaton w be weghed and
proofed. The number of proof gaons w be reported on Form 1 -12, Form
1 3- , or Form 1 3- , as the ease may be, as a remova for redstaton and
on Forms 1 2 and 1GS6 as a recept for redstaton. The redstaton of the
acoho w aso be reported on Forms 1 2 and 16 6. (Sees. 3103, 310 ,
312 (a) (6), 3176, I. R. C.)
Sec. 1 2.3 6. Dstaton of Lqud Chemcas. If, n the producton of
ethy acoho, other qud chemcas are produced, such as buty acoho, sopropy
acoho, acetone, ether, etc., each such chemca or product must be deposted
n separate recevng tanks provded therefor, n order that the day producton
thereof may be gauged and approprate entres made on Forms 1 2 and I 6,
kept n accordance wth secton 1 2.3 1. The day nventory sha be made
by the propretor In the mmedate presence of the storekeeper-gauger.
(a) Dsposton. chemcas drawn from the recevng tanks sha be
gauged (weghed or measured) by the propretor n the presence of the store-
keeper-gauger. Remova of such chemcas w be n such contaners as the
propretor may desre. The knd and quantty of chemcas gauged and removed
from the premses w be reported on Forms 1 2 and 16S0.
(6) Markng of contaners. The contaners n whch chemcas are removed
from ndustra acoho pant premses sha have marked thereon the regstry
number, name and address of the propretor, the knd of chemca, and the quan-
tty of wne gaons n such package.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
1 7
Regs. 3, 1 2.0(6), etc.
(c) Test for acoho. The chemcas produced, such as buty acoho, sopropy
acoho, acetone, ether, etc., must be tested for the purpose of determnng the
presence of ethy acoho, n accordance wth the appcabe requrements of
sectons 1 2.30 -1S2.3 , or by such other method or methods as may be pre-
scrbed by the Commssoner. (Sees. 3103, 310 , 312 (a) (6), 3170, I. R. C.)
D POSIT OF LCO OL IN R C I ING T N S
Sec. 1 2.3 9. Immedate Depostt Requred. fnshed acoho must be
deposted n recevng tanks n the recevng room mmedatey upon competon
of manufacture. The quantty of fnshed acoho produced w be determned
and entered day on Forms 1 2 and 10 0. (Sees. 310 , 312 (a)(0), 3176,
I. R. C.)
Sec. 1 2.360. Recevng Tanks Not To I e Used for Storage. Rscevng tanks
are not ntended to be used for storage purposes and a acoho must be drawn
from the recevng tanks on or before the thrd day foowng the depost of the
same theren: Provded, That where emergency condtons over whch the
propretor has no contro woud prevent the competon of such wthdrawa
wthn the specfed perod, the dstrct supervsor may, n hs dscreton, author-
ze the retenton of the acoho for such perod n e cess of 3 days as he may
deem necessary to meet the partcuar stuaton. (Sees. 2 20, 3103, 310 ,
312 (a)(0), 3170, I. R. C.)
comparson of actua yed wth cacuated yed
Sec. 1. 2.301. bnorma Dfferences To e Investgated. The storekeeper-
gauger w compare the quantty of acoho produced and deposted n the
recevng tanks wth the cacuated yed for the respectve fermenters. The
comparson w be made by snge fermenters where It s possbe so to do.
Where, by reason of the mode of operaton, t s not possbe to make the
comparson by snge fermenters, t w be made by groups of fermenters, ds-
ted day f possbe. If t s not possbe to make the comparson ether by
snge fermenters or by groups of fermenters, dsted day, the comparson
w be made on a monthy bass or for such esser perods as may be feasbe.
Where the dfference between the cacuated yed and the actua yed s more
than that determned by e perence to be the norma dfference for the partcu-
ar pant, the storekeeper-gauger assgned to supervse dstng operatons and
the storekeeper-gauger n charge w make a thorough nqury to determne the
reason or reasons therefor and w make a fu report of ther fndngs on Form
16SG. Where the facts warrant, the offcers w make a report by etter to the
dstrct supervsor and w submt t wth Form 1 2 forwarded to the dstrct
supervsor. If the fndngs of the offcers do not fuy e pan the dscrepancy,
the dstrct supervsor w cause such further nvestgaton to be made as may be
deemed advsabe. (Sees. 310 , 312 (a) (0), 3176, I. R. O.)
COLL CTION ND R MO L OF FUS L OIL
Sec. 1 2.367. Washng and Purfyng. The fuse o-acoho m ture must be
thoroughy washed and purfed wth water to separate the o and acoho m ture
before the o s removed from the tanks n whch t s deposted or stored.
a) Dsposton of cashwatcr. The water used for washng and purfyng the
o n the tanks may be conveyed drecty to the st, or t may be run nto a tank,
beer we, or sewer, or t may be otherwse destroyed on the premses under the
supervson of the storekeeper-gauger. If the washwater s run nto a st, tank,
or beer we, the quantty w not be entered on Form 1 2 or 10S0. If the wash-
water s run nto the sewer or otherwse destroyed, the acohoc content and the
quantty w be reported on Form 1 0. ntry of such dsposton w be made
on Forms 1 2 and 10 0. (Sees. 310 , 312 (a) (6), 3176,1. R. C.)
Sec 1S2.371. Remova.

( f) Record of remova The propretor w prepare Form 1 0 coverng
removas of fuse o. Such removas w be entered on Forms 1 2 and 16 6
(Sees. 310 , .312 (a) (6), 3176, I. R. C.)
PRODUCTION ND R MO L OF UTYL LCOnOL
Sec. 1 2.372. Recevng Tanks. If buty acoho Is produced at the ndustra
acoho pant. It must be run nto ocked recevng tanks provded therefor and
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 3, 1 2.6(6), etc. 1
retaned theren unt tested and removed from the pant premses or transferred
to storage tanks. The day producton of buty acoho must be determned, and
approprate entres made on Forms 1 2 and 16 6, kept n accordance wth secton
1 2.3 1. The day nventory sha be made by the propretor n the mmedate
presence of the storekeeper-gauger. (Sees. 310 , 312 (a) (6), 3176,1. R. C.)
Sec. 1 2.377. Remova.

(d) Record of remova. The propretor w report buty acoho removed from
the premses on Form 1 2. (Sees. 310 , 312 (a) (6), 3176,1. R. C.)
PRODUCTION ND R MO L OF C TON
Sec. 1 2.37 . Recevng Tanks. If acetone s produced at the ndustra acoho
pant, t must be run nto ocked recevng tanks provded therefor and retaned
theren unt tested and removed from the pant premses or transferred to storage
tanks. The day producton of acetone must be determned and approprate
entres made on Forms 1 2 and 16 6, kept n accordance wth secton 1 2.3 1.
The day nventory sha be made by the propretor n the mmedate presence of
the storekeeper-gauger. (Sees. 310 , 312 (a) (6), 3176,I. R. C.)
Sec. 1 2.3 3. Remova.

(d) Record of remova. The propretor w report acetone removed from the
premses on Form 1 2. (Sees. 310 , 312 (a) (6), 3176,1. R. C.)
PRODUCTION and remova of ether
Sec. 1 2.3 . Recevng Tanks. If ether s produced at the ndustra acoho
pant, t must be run nto ocked recevng tanks provded therefor and retaned
theren unt tested and removed from the pant premses or transferred to storage
tanks. The day producton of ether must be determned and approprate entres
made on Forms 1 2 and 16 6, kept n accordance wth secton 1 2.3 1. The day
nventory sha be made by the propretor n the mmedate presence of the store-
keeper-gauger. (Sees. 310 , 312 (a) (6), 3176, I. R. C.)
Sec. 1 2.3 9: Remova.

(d) Record of remova. The propretor w report ether removed from the
premses on Fonn 1 2. (Sees. 310 , 312 (a) (6), 3176,1. R. C.)
R CO RY ND R MO L OF C R ON DIO ID
Sec. 1 2.391. Procedure. Carbon do de may be recovered from fermenters
and removed from the pant premses provded t s frst thoroughy washed or
scrubbed and purfed to remove the acoho therefrom. Where carbon do de Is
recovered, the washwater may be coected n a recevng tank and transferred by
ppe ne to a fermenter or to a beer we. Where the washwater s transferred to
a fermenter, the transfer must be made pror to the testng of the beer by the
storekeeper-gauger at the tme of dstaton. Where the washwater s trans-
ferred to a beer we after the cacuated yed has been determned, the acohoc
content, the number of gaons, and the cacuated yed thereof w be determned
by the storekeeper-gauger, and nterned n Part 1 of Form 16 6. The acohoc
content of the washwater w be determned n accordance wth an approved
method. The number of gaons w aso be nterned n Part 1 of Form 1 2.
If the washwater s not utzed n the manufacture of acoho, t w be run nto
the sewer or otherwse destroyed on the premses under the supervson of the
storekeeper-gauger. ntry of such dsposton w not be made on Forms 1 2
and 16 6. (Sees. 310 ,312 (a) (6), 3176,1. R. C.)
R MO L of acoho from ndustra acoho pant
Sec. 1 2. 00. uthorzed Removas. coho produced at ndustra acoho
pants, after depost n the recevng tanks, may be removed for the foowng
purposes:
(1) Transferred by means of ppe nes to storage tanks In a bonded
warehouse on the bonded premses where produced, as authorzed by secton
1 2. 0 b or to acoho storage tanks or m ng tanks n a denaturng pant
ocated on the bonded premses where produced, as authorzed by secton
1 2. 0 f.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
1 9
Regs. 3, 1 2.6(6), etc.
(2) Drawn nto tank cars or other approved contaners (e cept cases con-
tanng one-haf pnt to 1-gaon bottes) or drawn nto tank trucks and
transferred to any bonded warehouse for storage theren, as authorzed by
sectons 1 2. 0 b-1 2. 0 d, or to any denaturng pant for denaturaton
as authorzed by sectons 1 2. 0 f-1 2. 0 h.
(3) Wthdrawn n packages or tank cars, upon payment of ta , as au-
thorzed by sectons 1 2. 0 -1 2. 0 1, and ta -pad and transferred by ppe
ne to a rectfyng pant on contguous or nearby premses, as authorzed
by sectons 1 2. 0 m and 1 2. 7 a-1 2. 7 g.
( ) Wthdrawn ta -free for scentfc purposes, use of hosptas, States,
etc., as authorzed by sectons 1 2. 0 n-1 2. 0 p.
(a) Wthdrawn for use by the Unted States or governmenta agency
thereof, as authorzed by sectons 1 2. 0Sq-1 2. 0St.
(0) Wthdrawn for e portaton, as authorzed by sectons 1 2. 0 u and
1S2. -1 2.619.
(7) Transferred to a customs manufacturng bonded warehouse, as au-
thorzed by sectons 1 2. 0 v and 1 2.G20-1 2.C30.
( ) Wthdrawn ta -free for use on certan vesses and arcraft, as au-
thorzed by sectons 1 2. 0 w and 1 2.030a-1 2.030n.
fSecs. 2 , 2S91, 3070(a), 3103, 310 , 3100, 3107, 310 , 312 (a) (6), 3176, I. R. C.;
sec. 309(a), Tarff ct of 1930 (19 U. S. C. 1309).)
Sec. 1 2. 01. pproved Contaners. coho may be drawn nto any ap-
proved contaner e cept cases contanng one-haf pnt to 1-gaon bottes. The
contaners must conform to the appcabe requrements of sectons 1 2. 06-
1 2. 09 and sectons 1 2. 11-1S2. 1 . (Sees. 310 , 312 (a)(6), 3176, I. R. C.)
Sec. 1 2. 01a. Marks, rands, and Stamps. The contaners nto whch aco-
ho s drawn must be marked, branded, and stamped n accordance wth the
appcabe provsons of sectons 1 2. 1 -1 2. 32. (Sees. 310 , 312 (a)(6),
3176, I. R. C.)
Sec. S2. 01b. Transportaton. (a) In bong. coho shpped n bond from
an ndustra acoho pant to an ndustra acoho bonded warehouse n con-
taners other than tank trucks sha be transported to the premses of the re-
cevng warehouse by the propretor of the shppng pant; or by a raroad or
steamshp company, or an e press company operatng thereon; or by a motor
farrer who hods a permt to transport ta -free or specay denatured acoho
or who has quafed wth the Interstate Commerce Commsson as a sef
nsurer ; or by other carrers, ncudng motor and barge nes, who are
actvey and reguary engaged n the egtmate busness of transportaton
and who possess adequate factes to nsure safe devery at destnaton of any
acoho transported by them, and who are approved by the dstrct supervsor.
coho shpped n bond to a bonded warehouse or to a denaturng pant n
tank trucks sha be transported to the premses of the recevng bonded ware-
house or denaturng pant by the propretor of the shppng pant, or by the
propretor of the recevng bonded warehouse or denaturng pant, or by a
motor carrer, who hods a permt, Form 1 , to transport undenatured ethy
acoho n tank trucks.
(6) Ta -free. coho wthdrawn from an ndustra acoho pant free of
ta for denaturaton, e port, transfer to customs manufacturng bonded ware-
house, use on vesses and arcraft, use of the Unted States or any governmenta
agency thereof, the severa States and Terrtores or any muncpa subdvson
thereof, or the Dstrct of Coumba, hosptas, sanatorums, coeges, abora-
tores, scentfc purposes, etc., must be transported to the premses of the con-
sgnee, or, f wthdrawn for e port, to the port of e port, by the propretor of
the ndustra acoho pant or a carrer hodng permt on Form 1 to trans-
port ta -free acoho: Provded, That the consgnee may transport the acoho
from the premses of the deverng carrer at the pace of destnaton to hs
own premses, or, n the case of e port, or use on vesses and arcraft, to the
pont of adng.
(c) Method of transportaton. coho shpped n bond or ta -free n accord-
ance wth paragraphs (a) and (6) of ths secton, must be transported by the
propretor of the ndustra acoho pant or the authorzed carrer personay, or
by some person reguary and e cusvey n ther empoy, and the rght to the
possesson of any vehce used for such transportaton must be vested n the
vendor or carrer.
(d) Responsbty for devery. The consgnor w be responsbe for proper
devery of acoho shpped n bond or ta -free to an authorzed carrer, or to
the premses of the consgnee when devery s made by the consgnor. The con-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 3, 1 2.6(6), etc. 160
sgnec w kewse be responsbe for the proper devery to bs permt premses
of acoho shpped to hm n bond or ta -free and transported by hm from the
premses of the authorzed carrer. Faure to make such devery w be
deemed to be grounds for ctaton for revocaton of the basc permt of the per-
son responsbe for the proper devery of the acoho.
(e) Certfcate n b of adng, wayb, etc. When acoho s transported by
a carrer, as authorzed heren, the propretor of the shppng ndustra acoho
pant sha ncude n hs b of adng, wayb, e press recept, etc., a statement
to the foowng effect: efore makng devery, the agent of the deverng car-
rer at destnaton must have receved from the consgnee a certfed copy of the
wthdrawa permt authorzng ths shpment.
(1) cepton: Wrtten statement. Where no b of adng Is Issued, as In
the case of devery by oca e press company, a wrtten statement to the above
effect, sgned by the shpper, sha be devered to the carrer. (Sees. 3070(a),
310 , 3107, 310 , 311 , 312 (a) (6), 3176, I. R. C.)
DR WING OFF, G UGING, ND R MO L OF LCO OL
Sec. 1 2. 0 . Drawng Off coho. When acoho Is to be drawn from a
recevng tank, the storekeeper-gauger w see that the vave In the ppe ne
controng the fow of acoho nto the tank Is cosed and ocked before the
acoho n the tank Is reduced and proofed and that such vave remans cosed
and ocked unt the acoho has been removed. Whenever acoho Is to be drawn
from recevng tnnks or transferred nto or out of other tanks secured wth Gov-
ernment ocks, the storekeeper-gauger w open and cose the ocks, bnt It sha
be the duty of the propretor to manpuate the stopcocks or vaves controng
the fow of the acoho. The storekeeper-gauger assgned to the recevng room
Is requred to be present and personay supervse the drawng off of a acoho
n the recevng tanks, the markng and brandng of a packages of acoho fed
therefrom, and the stampng of a packages ta -pad or e ported drecty
from the recevng room. e w aso see that a mechanca dutes connected
wth such operaton are propery performed, as provded n ths part and n the
Gaugng Manua (26 CFR, Part 1 6). (Sees. 310 , 312 (a)(6), 3176, I. R. C.)
Sec. 1 2. 0 . Gaugng of coho. Where acoho Is drawn from recevng
tanks Into drums, barres, or smar contaners, the packages sha be gauged
n accordance wth the provsons of the Gaugng Manua (26 CFR, Part 1 6).
Where acoho Is drawn Into tank cars, drawn nto tank trucks, or s transferred
by ppe ne as authorzed by ths part, such acoho sha be gauged n accordance
wth ths part and the Gaugng Manua; and the weght of the acoho w be
determned by means of weghng tanks, as provded In secton 1 2. 07.
acoho drawn from recevng tanks w be proofed and weghed by the propretor
and the packages marked n accordance wth ths part, In the mmedate presence
of the storekeeper-gauger. The storekeeper-ganger w verfy the proof, weght,
and gaonage of a acoho and w see that the Instructons n the Gaugng
Manua respectng the proofng of acoho are strcty foowed n order that the
proof may be accuratey determned. The propretor sha provde, at hs own
e pense, accurate and standard hydrometers, hydrometer cups, and thermometers
for the purpose of gaugng acoho. fractona parts of a gaon ess than
one-tenth, shown n the Gaugng Manua, sha be dsregarded n gaugng acoho.
For e ampe, a package of 190 proof acoho, weghng 326 pounds not. sha
be reported on Form 1 0 ns contanng 7.90 wne gaons and 91.10 proof gaons.
package contanng 190 proof acoho, weghng 3 0 pounds net, sha be re-
ported as contanng 0 wne gaons and 9 proof gaons. The detas of a
acoho gauged n the bonded warehouse sha be recorded by the propretor on
Form 1 0 as provded n ths part. (Sees. 2 0 , 3103, 310 , 3107, 3121(a) (6),
3176, I. R. C.)
Sec 1 2. 06. Tme of Remova From Recevng Room. Where acoho s
removed from the recevng room drecty to the bonded wnrehouse or denaturng
pant on the same premses t must be so removed on the same day It s drawn
from the recevng tanks. Where acoho Is drawn nto approved contaners for
ta -payment or for e portaton or other awfu ta -free purposes or s drawn
nto such contaners for transfer to a bonded warehouse or denaturng pant off
the ndustra acoho pant premses, t must be removed on the same day t s
drawn from the recevng room: Provded however, the same may be paced In
a temporary storage room wthn the recevng room, authorzed by secton 1 2.31,
and permtted to reman theren for such perod as may be reasonaby necessary
to accompsh ta -payment, ta -free remova, or transfer n bond, but not more
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
161 Regs. 3, 1 2.6(6), etc.
than 3 days, e cept n cases of emergency, and then ony wth the approva of
the dstrct supervsor. Whe acoho s stored n such temporary storage room
t w be kept securey ocked at a tmes, e cept when necessary to be opened
for the depost or remova of acoho. The entrance door w be secured wth a
Government sea ock, the key to whch w reman at a tmes In the custody
of the storekeeper-gauger. (Sees. 3103, 310 , 312 (a) (6), 3176,1. R. C.)
TR NSF R OF LCO OL IN OND TO INDUSTRI L LCO OL OND D W R OUS S
Sec. 1 2. 0 a. Genera. coho may be transferred n bond from any ndus-
tra acoho pant to any ndustra acoho bonded warehouse, as provded n
sectons 1 2. 0 b-S2. 0 d. (Sees. 310 , 3106, 3107, 312 (a) (6), 3170, I. R. C.)
Sec. 1 2. 0S1). Depost n onded Warehouse on Same Premses. coho
may be wthdrawn from an ndustra acoho pant and transferred to a bonded
w arehouse on the same premses wthout the necessty of procurng wthdrawa
permt, Form 1 36. coho may be so transferred by ppe ne to storage
tanks n the bonded warehouse n accordance wth secton 1 2. S9, or n approved
contaners (other than cases contanng one-haf pnt to 1-gaon bottes) n
accordance wth secton 1 2. 90. Where the bond for the bonded warehouse
s n an amount ess than the ma mum pena sum prescrbed by ths part, and
the basc permt, Form 1 33, for the bonded warehouse mts the quantty of
acoho that may be on hand, n transt and unnccounted for at any one tme,
the dstrct supervsor w nform the storekeeper-gauger n charge of such m-
taton n accordance wth secton 1S2. SS, and the storekeeper-gauger w see
Uat the quantty of ncoho deposted n the warehouse does not e ceed that
authorzed by the bond and the basc permt. When the acoho Is gauged for
depost n the warehouse, the propretor w prepare Form 1 0, n dupcate.
The form w bear the notaton ntry. fter depost of the acoho n the
warehouse, Form 1 0 w be dsposed of n accordance wth secton 1 2. 90a.
(Sees. 310 , 3106,3107,312 (a) (6), 3176,1. R. C.)
Sec. 1 2. 0 c. Transfer to onded Warehouses Located on Other Premses
n Same Supervsory Dstrct. coho w be transferred n bond from an
Industra acoho pant to any ndustra acoho bonded warehouse ocated on
other premses pursuant to wthdrawa permt, Form 1 36, n accordance wth
sectons 1 2. 1-1 2. . coho may be so transferred n approved contaners
(other than cases contanng one-haf pnt to 1-gaon bottes) after the con-
taner has been correcty weghed and the acoho proofed to determne the
e act contents of such contaner. The propretor w prepare Form 1 0 n
quadrupcate. The form w bear the notaton ntry and wthdrawa. e
w dever a copes to the storekeeper-gauger n charge who sha upon shp-
ment of the acoho forward one copy to the dstrct supervsor, and gve one
copy to the propretor of the ndustra acoho pant for fng n accordance
wth secton 1 2. b. In the case of transfer n contaners other than tank
trucks, the storekeeper-gauger n charge sha ma the remanng two copes
to the storekeeper-gauger n charge of the recevng warehouse. In the case of
transfers n tank trucks, he sha ma one copy to the storekeeper-gauger n
charge of the recevng warehouse, and encose the other copy of Form 1 0 n
a seaed enveope addressed to the storekeeper-gauger n charge and gve the
same to the drver of the tank truck for devery to the storekeeper-gauger n
charge. fter depost of the acoho n the warehouse, Form 1 0 w be ds-
posed of n accordance wth secton 1 2. 9 . (Sees. 310 , 3100, 3107, 312 (a) (6),
3176.1.R. C.)
Sec. 1 2. 0 d. Transfer to onded Warehouse Located n Dfferent Super-
vsory Dstrct. coho w be transferred n bond from an ndustra acoho
pant to any ndustra acoho bonded warehouse ocated n a dfferent super-
vsory dstrct pursuant to wthdrawa permt, Form 1 36, n accordance wth
sectons 1S2. 1-1S2. . coho may be so transferred n approved contaners
(other than cases contanng one-haf pnt to 1-gaon bottes) after the con-
taner has been correcty weghed and the acoho proofed to determne the
e act contents of such contaner. The propretor w prepare an orgna and
four copes of Form 1 0. The form w bear the notaton ntry and wth-
drawa. e w dever a copes to the storekeeper-gauger n charge who
sha upon shpment of the acoho forward one copy to the supervsor of the
dstrct n whch the shppng pant s ocated, one copy to the supervsor of
the dstrct n whch the recevng warehouse s ocated, and gve one copy to
the propretor of the ndustra acoho pant for fng n accordance wth sec-
ton S2. b. In the case of transfers n contaners other than tank trucks
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 3, 1 2.6(6), etc. 162
the storekeeper-gauger In ehnrge sha ma the remanng two copes to the
storekeeper-gauger n charge of the recevng warehouse. In the case of trans-
fers n tank trucks he sha ma one copy to the storekeeper-gauger n charge
of the recevng warehouse and encose the other copy of Form 1 0 n a seaed
enveope addressed to the storekeeper-gauger n charge and gve the same to
the drver of the tank truck for devery to the storekeeper-gauger n charge.
fter depost of the acoho n the warehouse, Form 1 0 w be dsposed of
In accordance wth secton 1 2. 0 b. (Sees. 310 , 3106, 3107, 312 (a) (6), 3176,
I.R.C.)
WIT DR W L FO D N TUR TION
Sec. 1 2. 0 e. Genera. coho may be wthdrawn free of ta for denatura-
ton n any denaturng pant, as provded n sectons 1 2. 0 f-S2. 0Sh. (Sees.
3070(a), 310 . 3106, 3107. 310 (a). 311 (a), 312 (a) (6), 3176, I. R. C.)
Sec. 1 2. 0Sf. Transfer to Denaturng Pant on Same Premses. coho
may be wthdrawn from an ndustra acoho pant and transferred to a de-
naturng pant on the same premses wthout the necessty of procurng wth-
drawa permt, Form 1 63. coho may e so transferred by ppe ne to storage
or m ng tanks n the denaturng pant n accordance wth secton 1 2.69 ,
or n approved contaners (other than cases contanng one-haf pnt to 1-gaon
bottes) n accordance wth secton 1 2.60 . Where the bond for the denaturng
pant s n an amount ess than the ma mum pena sum prescrbed by ths part,
and the basc permt, Form 1 33, for the denaturng pant mts the qunntty
of acoho, specay denatured acoho, and recovered or restored denatured
acoho that may be on hand, n transt, and unaccounted for at any one tme,
the quantty of acoho so transferred to the denaturng pnnt durng a caendar
month, sha not e ceed the quantty bo mted n the basc permt, and the
storekeeper-gauger w see that such mtatons are observed. When the a-
coho s gauged for transfer to the denaturng pant, the propretor w prepare
Form 1 10, n dupcate. The form w bear the notaton Wthdrawa and
the purpose shown as For denaturaton. Upon recept of the acoho at the
denaturng pant, Form 1 0 w be dsposed of n accordant wth secton
1 2.60 a. (Sees. 3070(a), 310 , 3106, 3107, 310 (a), 312 (a) (6), 3176. I. R. C.)
Sec. S2. 0.Sg. Transfer to Denaturng Pant Located on Othf.r Premses
n the Same Supervsory Dstrct. coho w be transferred In bond from
an ndustra acoho pant to any denaturng pant on other premses pursuant
to wthdrawa permt, Form 1 03. n accordance wth sectons 1 2.6 6-1 2.690.
coho may be so transferred n approved contaners (other than cases contanng
one-haf pnt to 1-gaon bottes) after the contaner has been correcty weghed
and the acoho proofed to determne the.e act contents of such contaner.
Such shpments may not be made unt the propretor of the ndustra acoho
pant has receved from the denaturer te wthdrawa permt, Form 1 63, namng
hm as vendor, and then ony n the quantty specfcd n the wthdrawa permt.
Upon shpment, the propretor of the ndustra acoho pant w enter the shp-
ment on the permt and return t to the denaturer, uness he has been authorzed
by the denaturer to retan the permt for the purpose of makng future shpments.
The propretor w prepare Form 1 0 n quadrupcate. The form w bear the
notaton Wthdrawa and the purpose shown as For denaturaton. e w
dever a copes to the storekeeper-gauger n charge who sha upon shpment
of the acoho forward one copy to the dstrct supervsor and gve one copy to
the propretor of the ndustra acoho pant for fng n accordance wth secton
S2. b. In the case of transfers n contaners other than tank trucks the
storekeeper-gauger n charge sha ma the remanng two copes to the store-
keeper-gauger n charge of the recevng denaturng pant. In the case of trans-
fers n tank trucks he sha ma one copy to the storekeeper-gauger In charge
of the recevng denaturng pant and encose the other copy of Form 1 0 n a
seaed enveope addressed to the storekeeper-gauger n charge and gve the same
to the drver of the tank truck for devery to the storekeeper-gauger n charge.
Upon recept of the acoho at the denaturng pant Form 1 0 w be dsposed
of n accordance wth secton 1 2.696a. (Sees. 3070(a), 310 , 3106, 310 (a),
311 (a), 312 (a) (6), 3176,1. R. C.)
Sec. 1 2. 0Sh. Transfer to Denaturng Pant Located n Dfferent Super-
vsory Dstrct.- coho w be transferred In bond from an ndustra acoho
pant to any denaturng pant ocated n a dfferent supervsory dstrct pursu-
ant to wthdrawa permt. Form 1 63, n accordance wth sectons 1 2.6S6-
1 2.690. coho may be so transferred n approved contaners (other than
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
163
Regs. 3, 1 2.6(6), etc.
eases contanng one-haf pnt to 1-gaon bottes) after the contaner has been
correcty weghed and the acoho proofed to determne the e act contents of
such contaner. Such shpments may not be made unt the propretor of the
ndustra acoho pant has receved from the denaturer the wthdrawa permt,
Form 1 63, namng hm as vendor, and then ony In the quantty specfed n
the wthdrawa permt Upon shpment, the propretor of the ndustra acoho
pant w enter the shpment on the permt and return t to the denaturer, uness
he has been auhorzed by the denaturer to retan the permt for the purpose of
makng future shpments. The propretor w prepare an orgna and four
copes of Form 1 0. The form w bear the notaton Wthdrawa and the
purpose shown as For denaturaton. e w dever a copes to the store-
keeper-gauger n charge who sha upon shpment of the acoho forward one
copy to the supervsor of the dstrct In whch the shppng pant s ocated, one
copy to the supervsor of the dstrct n whch the recevng pant s ocated, and
gve one copy to the propretor of the ndustra acoho pant for fng n ac-
cordance wth secton 1 2. b. In the case of transfers n contaners other
than tank trucks the storekeeper-gauger n charge sha ma the remanng
two copes to the storekeeper-gauger n charge of the recevng denaturng pant.
In the case of transfers n tank trucks he sha ma one copy to the storekeeper-
gauger n charge of the recevng denaturng pant and encose the other copy of
Form 1 0 n a seaed enveope addressed to the storekeeper-gauger n charge
and gve the same to the drver of the tank truck for devery to the storekeeper-
gauger n charge. Upon recept of the acoho at the denaturng pant Form 1 0
w be dsposed of n accordance wth secton 1 2.69 c. (Sees. 3070(a), 310 ,
3106,310 (a), 311 (a), 312 (a)(6), 3176,1. R. C.)
T -P YM NT OF LCO OL IN P C G S
Sec. 1S2. 0 L Gaugng of Packages. Whenever the propretor desres to wth-
draw acoho n packages on payment of ta , he sha correcty wegh and proof
the acoho and determne the e act contents of each package n proof gaons.
e sha prepare Form 1 0, n quadrupcate, gvng the detas of the gauge,
and dever a copes thereof to the storekeeper-gauger In charge for e amnaton.
If the forms are n proper order, the storekeeper-gauger w retan one copy and
return three copes to the propretor, who w forward a three copes to the co-
ector of nterna revenue wth remttance n cash or by certfed check or post
offce money order for the ta . (Sees. 3103, 310 , 3106, 312 (a) (6), 3176, 36 6(a),
I. R. C.)
Sec. 1 2. 0 . Issuance of Ta -Pad Stamps. The coector w ssue the
ta -pad stamps. ach ta -pad stamp sha bear the sgnature of the coector,
who sha wrte or stamp thereon the date of payment of the ta , by whom pad,
the number of gaons and tenths of gaons of proof sprts, and sera number
of the package. Facsmes of sgnatures of coectors may be aff ed by the
use of hand stamps to the ta -pad stamps, care beng taken to use ony such
nk as w nether fade nor bur. The coector w enter the sera numbers of
the stamps n the approprate spaces on a three copes of Form 1 0, e ecute the
certfcate of ta -payment on a copes, retan one copy, and return the reman-
ng two copes of the form to the propretor of the ndustra acoho pant wth
the stamps. fSecs. 3103, 310 , 3106, 312 (a) (6), 3176, I. R. C.)
Sec. 1 2. 0 k. Remova of coho The propretor sha dever a copes
of Form 1 0 wth the ta -pad stamps to the storekeeper-gauger, who w
verfy the data thereon wth hs retaned copy of Form 1 0, and, f no ds-
crepances are found, he w note the sera numbers of the stamps on the
retaned copy of Form 1 0, and aff hs sgnature to each stamp. Facsmes
of sgnatures of storekeeper-gaugers may be aff ed by the use of hand stamps,
care beng taken to use ony such nk as w nether fade nor bur. The store-
keeper-gau| r w then return the stamps to the propretor, who w stamp
and mark the packages, as provded n sectons 1 2. 2 , 1 2. 27, and 1 2. 2
and n the Gaugng Manua (26 CFR, Part 1 6), after whch the propretor
w mmedatey remove the acoho from the premses or to hs ta -pad store-
room, f one has been provded. When the acoho has been removed, the
storekeeper-gauger w forward one copy of Form 1 0 to the dstrct super-
vsor, and return two copes to the propretor who sha fe one copy n accord-
ance wth secton 1 2. b. and f he so desres, furnsh the remanng copy to
the vendee. (Sees. 3103, 310 , 3100, 312 (a) (6), 3176, I. R. C.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 3, 1 2.6(6), etc. 16
T -P ID WIT DR W LS IN T N C S
Sec. 1 2. 0 1. Procedure. Whenever the propretor desres to wthdraw aco-
ho from recevng tanks for ta -payment and remova n raroad tank cars,
the procedure prescrbed by sectons 1 2. 66-1 2. 7 w be foowed. (Sees.
3103, 310 , 3106, 312 (a) (6), 3176, 36 6, L R. C.)
T -P ID WIT DR W LS Y PIP LIN TO R CTIFYING PL NT
Sec. 1 2. 0 m. Procedure. Where a ppe ne has been nstaed and approved
for the transfer of acoho, after ta -payment, drect from the weghng tank
n the ndustra acoho pant to a contguous rectfyng pant or rectfyng
pant n the mmedate vcnty, as provded n secton 1 2. 2a, and the pro-
pretor desres to so transfer acoho, the procedure prescrbed by sectons
1 2. 7 a-1 2. 7 g w be foUowed. (Sees. 3103, 310 , 3106, 312 (a)(6), 3176,
I. R. C.)
T -FR WIT DR W LS FOR SCI NTIFIC PURPOS S, US OF OSPIT LS, ST T S, TC.
Sec. 1 2. 0 n. Who May Procure. Under the aw, acoho may be wth-
drawn n accordance wth ths part n approved contaners (other than cases
contanng one-haf pnt to 1-gaon bottes), from any ndustra acoho pant,
ta -free for use by the severa States and Terrtores, or any muncpa sub-
dvson thereof, or by the Dstrct of Coumba, or for the use of any scentfc
unversty or coege of earnng, any aboratory for use e cusvey n scentfc
research, or for use n any hospta or sanatorum, or for the use of any cnc
operated for charty and not for proft, ncudng use n the compoundng of
bona fde medcnes for treatment outsde of such cncs of patents thereof,
but not for sae, pursuant to permt, Form 1 0, n the possesson of the pro-
pretor and namng hm as vendor. Wthdrawas sha be made n accordance
wth sectons 1 2. 0 o and 1 2. 0 p. The propretor of the ndustra acoho
pant makng shpment of ta -free acoho sha enter on the wthdrawa permt,
Form 1 0, the date and number of proof gaons shpped. Future ke shp-
ments may be made under such permt durng the perod for whch ssued
unt the fu quantty for whch the permt was ssued has been wthdrawn.
The wthdrawa permt, Form 1 0, may, at the opton of the permttee-con-
sgnee, be returned to the propretor of the Industra acoho pant after each
shpment from the pant, or t may be retaned at the pant to cover addtona
shpments therefrom. If retaned at the pant, the permt must be returned
to the permttee by the propretor of the pant when the fu quantty of acoho
authorzed thereby has been obtaned or when the permt has e pred or has
been otherwse termnated or revoked. Where the same wthdrawa permt.
Form 1 0, covers wthdrawas from an ndustra acoho pant and a bonded
warehouse on the same premses, the permt may be retaned at the warehouse
pursuant to secton 1 2. 79. (Sees. 3103, 310 , 3106, 310 (b), (c), 312 (a) (6),
3176, I. R. C.)
Sec. 1 2. 0 o. Intradstrct Wthdrawas. Where the ndustra acoho
pant and the consgnee are ocated n the same supervsory dstrct, the pro-
pretor w prepare Form 1 0 n trpcate. The packages sha be marked
n accordance wth sectons 1 2. 1 -1 2. 26. The propretor w dever a
copes of Form 1 0 to the storekeeper-gauger n charge who sha upon remova
of the acoho forward one copy of Form 1 0 to the dstrct supervsor and one
copy to the consgnee. e w gve the remanng copy to the propretor for
fng n accordance wth secton 1 2. b. The dstrct supervsor, upon recept
of Form 1 1 from the permttee, sha check the same aganst Forms 1 0
coverng acoho shpped to the permttee, to determne that a acoho wth-
drawn by the permttee has been duy receved and accounted for. (Sees. 3103,
310 , 3106, 310 (b), (c), 312 (a) (6), 3176, I. R. C.)
Sec. 1 2. 0 p. Interdstrct Wthdrawas. Where the ndustra acoho
pant and the consgnee are ocated n dfferent supervsory dstrcts, the pro-
pretor w prepare Form 1 0 n quadrupcate. The packages sha be marked
n accordance wth sectons 1 2. 1 -1 2. 26. The propretor w dever a
copes of Form 1 0 to the storekeeper-gauger n charge who sha upon remova
of the acoho forward one copy of Form 1 0 to the supervsor of the dstrct
n whch the ndustra acoho pant s ocated, one copy to the supervsor of
the dstrct n whch the consgnee s ocated, and one copy to the consgnee.
e w gve the remanng copy to the propretor for fng n accordance wth
secton 1 2. b. The supervsor-consgnee upon recept of Form 1 1 from
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
16
Regs. 3, 1 2.6(6), etc.
the permttee, sha check t aganst a Forms 1 0 coverng acoho shpped to
the permttee, to determne that a acoho wthdrawn by the permttee has b en
duy receved and accounted for. e sha take approprate acton concernng
any osses n transt e sha note on each copy of Form 1 0 coverng recepts
shown on Form 1 1 for the month that the shpment was reported receved.
e w then send a such copes of Form 1 0 to the supervsor-consgnor.
(Sees. 3103, 310 , 3106, 310 (b), (c), 312 (a) (0), 3176, I. R. C.)
T -FR WIT DR W LS Y T UNIT D ST T S O GO RNM NT L G NCY
Sec. 1 2. 0 q. Genera. coho may be wthdrawn n approved contaners
(other than cases contanng one-haf pnt to 1-gaon bottes) from any n-
dustra acoho pant ta -free for use of the Unted States or any governmenta
agency thereof, n accordance wth sectons S2. 0Sr-S2. 0 t. (Sees. 310 ,
310S(b), 312 (a) (0), 3176, I. It. C).
Sec. 1 2. 0 r. Permt, Form 1 . The propretor of the pant may not shp
acoho to the Unted States or governmenta agency thereof uness he s named
as vendor n the basc permt, Form 1 , and such permt s n hs possesson.
The permt may reman n the possesson of the propretor of the ndustra
acoho pant unt t s canceed or s recaed by the department or governmenta
agency to whch t was ssued. When the same wthdrawa permt, Form 1 ,
covers wthdrawas from an ndustra acoho pant and a bonded warehouse on
the same premses, the permt may be retaned at the warehouse pursuant to
secton 1 2. 1. (Sees. 310 , 3106, 310 (b), 311 (a), 312 (a) (6), 3176, I. R. C.)
Sec. 1S2. 0SS. Forms 1 0 and 1 3. Te propretor w gauge each package
of acoho wthdrawn ta -free and prepare Form 1 0, n trpcate, gvng the
detas of such gauge. The form w bear the notaton Wthdrawa and the
purpose shown as Use of Unted States. The packages w be marked n ac-
cordance wth sectons 1S2. 1S-1 2. 26. t the tme of shpment, the propretor
w prepare one copy of Form 1 3. e w ndcate on the form, n the space
provded, the address of the supervsor of the dstrct n whch the ndustra
acoho pant s ocated. The propretor w dever a copes of Forms 1 0
and 1 3 to the storekeeper-gauger who sha, upon remova of the acoho, retan
one copy of Form 1 0, forward one copy of Form 1 0 to the supervsor of the
dstrct n whch the acoho pant s ocated, and forward one copy each of
Forms 1 0 and 1 3 to the Government offcer to whom the acoho s to be
devered at destnaton. The remanng Form 1 0 w be returned to the pro-
pretor for fng n accordance wth secton 1 2. b. Upon recept of the a-
coho by the consgnee, Forms 1 0 and 1 3 w be dsposed of n accordance
wth secton 1 2. 9 . (Sees. 3103, 310 , 3106, 310 (b), 312 (a) (6), 3176, I. R. C.)
Sec. S2. 0 t. of Ladng. Where the acoho s transported from an n-
dustra acoho pant by a common carrer, the person to whom the acoho was
devered for shpment sha furnsh a copy of the b of adng coverng trans-
portaton of the acoho from the pont of shpment to fna destnaton to the
storekeeper-gauger, who w forward the same to the dstrct supervsor wth
Form 1 0. (Sees. 310 , 3106, 312 (a) (6), 3176, I. R. C.)
e portaton of acoho free of ta
Sec. 1S2. 0SU. Procedure. coho w be wthdrawn from an ndustra a-
coho pant, for e portaton free of ta , n approved contaners (other than
cases contanng one-haf pnt to 1-gaon bottes) n accordance wth sectons
1 2. S -1 2.619. (Sees. 2 , 2 6, 3101, 3103, 310 , 3106, 3112(b), 3113, 312
(a) (6), 3170, 3171, 3176, 33 1(b), 3361(b), 36 0, 39 3(b), I. R. C.)
transfer of acoho to customs manufacturng bonded warehouses
Sec. 1S2. 0 v. Procedure. coho w he wthdrawn from an ndustra a-
coho pant, for transfer to customs manufacturng bonded warehouses, n ap-
proved contaners (other than eases contanng one-haf pnt to 1-gaon bottes)
n accordance wth sectons 1 2.620-1 2.630. (Sees. 2 91, 3103, 310 , 310 ,
312 (a) (0), 3176, 3177, 317 , I. R. C.; sec. 6, 32 Stat. (19 U. S. C. 1 2(a)).)
suppes for certan vesses and arcraft
Sec. 1 2. 0Sw. Procedure coho w be wthdrawn from an ndustra
acoho pant, free of ta for use on certan vesses and arcraft, n approved
contaners (other than cases contanng one-haf pnt to 1-gaon bottes) n
accordance wth sectons 1 2.630a-1 2.630n. (Sees. 3103, 310 , 310 , 311 (a),
312 (a) (6), 3176, I. R. C.; sec. 309(a), Tarff ct of 1930 (19 U. S. C. 1309).)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 3, 1 2.6(6), etc 166
LOSS S OF LCO OL
Sec. 1 2. 12. Records. Where acoho Is ost or destroyed on the ndustra
acoho pant premses, approprate entry and report of such oss or destructon
w be made by the storekeeper-gauger on Form 16 6, and by the propretor on
Form 1 2. (Sees. 310 , 312 (a) (6), 3176, I. R. C.)
LCO OL PRODUC D ND NOT CCOUNT D FO
Sec. 1 2. 1 . Storekeeper-G auger To Report Defcences. The storekeeper-
gauger upon competon of hs monthy record, Form 16 6, w compare the
cacuated yer . for that month wth the actua producton and w gve a com-
pete statement on such form n respect to any matera defcency n the cacu-
ated producton n accordance wth secton 1 2.361 and of any oss of beer or
acoho by casuaty or otherwse. e w kewse report any unusua or pe-
cuar condtons at the pant. Where the facts warrant, he w make a report
by etter to the dstrct supervsor and w submt t wth Form 1 2 forwarded
to the dstrct supervsor. (Sees. 310 , 312 (a) (0), 3176, I. R. C.)
Sec. 1 2. 1 . Dstrct Supervsor s amnaton of Returns. Upon recept
of the propretor s monthy return, Form 1 2, the dstrct supervsor w e -
amne t to determne whether the propretor has accounted for a the acoho
produced by hm durng the month. If he fnds that the propretor apparenty
has not accounted for a the acoho produced by hm, he sha make such n-
vestgaton as he may deem necessary and determne from a the evdence he
can obtan the quantty of acoho actuay produced by the propretor. (Sees.
3103, 310 , 312 (a) (6), 3176, 36 0,1. R. C.)
SUSP NSION OF OP R TIONS
Sec. 1 2. 23. Notce, Form 12 . ny propretor desrng to suspend operatons
for an ndefnte perod or for a defnte perod of 7 days or more at hs n-
dustra acoho pant sha gve notce on Form 12 , Notce of Suspenson, n
trpcate, statng when he w suspend operatons. The notce w be devered
to the storekeeper-gauger n charge at the pant.
(a) Competon of operatons requred. cept as provded n secton 1 2. 2 ,
before the ndustra acoho pant may be suspended, a dstng matern and
a unfnshed acoho must be dsted and a acoho produced must be run nto
the recevng tanks: Provded, That where acoho s hed n the wne room for
redstaton, and the ndustra acoho pant Is to be suspended for a temporary
perod of not more than 7 days and s not to be operated by another propretor
or as a regstered dstery or frut dstery durng such perod, the dstrct su-
pervsor may, where n hs opnon suc may be done wthout |eopardy to the
revenue, permt such acoho to be retaned n tanks n the wne room of the n-
dustra acoho pant durng the perod of temporary suspenson, f both the tanks
and the wne room are kept ocked wth Government ocks: Provded further,
That where the ndustra acoho pant s to be operated temporary as a regs-
tered dstery or frut dstery, unfnshed acoho may be hed under Govern-
ment ock n unfnshed acoho tanks n the wne room, as provded n secton
1 2. 39(a). The dstrct supervsor may aso n hs dscreton authorze the re-
tenton of unwashed fuse o n ocked tanks durng the perod of such tem-
porary suspenson: nd provded further, That n any case where the suspenson
s due to emergency condtons over whch the propretor has no contro, and
whch woud prevent the competon of operatons, the dstrct supervsor may,
n hs dscreton, gve wrtten authorzaton to the propretor to retan a un-
fnshed acoho, cr fnshed acoho, n Government sea-ocked tanks or n Gov-
ernment ocked tanks n the wne room for such perod n e cess of 7 days as he
mav deem necessnrv to meet the partcuar stuaton. (Sees. 3103, 310 ,
312 (a) (6), 3176, I. R. C.)
OP R TIONS Y PROPRI TOR UND R DIFF R NT TR D N M S OR STYL S
Sec. 1 2. 36. Fnshed coho. fnshed acoho remanng n the recev-
ng room at the tme the change n trade name or stye becomes effectve must be
marked and removed n the trade name or stye under whch t was fnshed.
fnshed acoho produced from mash, beer, or other dstng matera, and un-
fnshed acoho remanng on hand at the tme the change n trade name or stye
becomes effectve must be marked and removed n the trade name or stye under
whch t s fnshed. The propretor w report the remova of such fnshed
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
167 Regs. 3, 1 2.0(6), etc.
acoho on Form 1 2 on the same ne coverng ts manufacture. smar
entrv w be made by the storekeeper-ganger on Form 16 6. (Sees. 310 ,
312 (a)(6), 3176, I. R. C.)
Sec. 1 2. 37. ecokds. Separate record on Form 1 2 w not be requred for
operatons under each trade name but the propretor must note on such record
the trade names or styes under whch he operated durng the month and the
dates of operatons under each. The storekeeper-gauger w make a smar
notaton on hs record. Form 16 6. Where acoho s produced under a trade
name, the propretor and the storekeeper-gauger must show on ther records both
the rea name of the actua producer and the trade name under whch the acoho
was produced. (Sees. 310 , 312 (a) (6), 3170, I. R. C.)
LT RN T OP R TION S I CIST D DISTILL RY OR FRUIT DISTILL RY
Sec. 1 2. 3. Competon of Records. The outgong propretor w compete
hs record. Form 1 2, and the storekeeper-ganger hs record, Form 16S6, as to
the remova of basc materas from the premses, or the transfer of basc mate-
ras and mash and beer or other dstng matera n process to the successor,
as the case may be, and as to a acoho produced by hm. If unfnshed acoho
s retaned on the premses n ocked tanks, as provded n secton 1 2. 39(a), the
propretor w enter the quantty thereof on Form 1 2, wth e panatory nota-
ton that the same s unfnshed acoho temporary retaned on the premses
pendng resumpton of operatons as an ndustra acoho pant. The store-
keeper-gauger w make smar entry on hs Form 16 6, wth an e panatory
notaton n the statement of speca operatons or condtons. The propretor w
contnue to fe monthy reports on Form 1 2 and the storekeeper-gauger to man-
tan a record on Form 10 0, accountng for such unfnshed acoho durng the
perod t s retaned on the premses. Where the pant s operated as an n-
dustra acoho pant n two or more perods durng the same month by the same
propretor, the operatons of such propretor w be recorded on the same Forms
1 2 and Sf, respectvey, but approprate notatons w be made on the sep-
aratng nes to show the dates the ndustra acoho pant was operated as a
regstered dstery or frut dstery and the names under whch t was operated.
(Sees. 3103, 310 . 312 (a) (G), 3176, I. R. C.)
Sec. 1 2. . Records of Successor. The succeedng propretor w enter a
materas, ncudng those n process receved from hs predecessor on Form 1 0
f the pant s to be operated as a regstered dstery, or on Form 1 f the pant
s to be operated as a frut dstery. The materas w aso be entered on
Form 16S0 f the ndustra acoho pant s to be operated as a regstered ds-
tery. If the materas are transferred when the pant s agan operated as an
ndustra acoho pant, approprate entry thereof w be made on the records of
the transferor and the transferee and the storekeeper-gauger. (Sees. 2 1(a),
310 , 312 (a) (G), 3176, I. R. C.)
C NG IN PROPRI TORS IP
Sec. 1 2. 0. Records.- The outgong propretor w enter on hs record, Form
1 2, a materas and a unfnshed acoho outsde the recevng room trans-
ferred to hs successor, who sha n turn enter such tems on hs records as
receved from hs predecessor. Where the change n propretorshp s of a per-
manent nature, the outgong propretor sha compete Form 1 2 and submt a
fna report on such form to the dstrct supervsor. pproprate notatons w
be made on such fna report showng the change n propretorshp and the date
thereof. Where the pant s operated under aternatng propretorshps, each
propretor sha keep a separate record on Form 1 2. When operatons are con-
ducted by the same propretor n two or more perods durng (he same month, the
operatons by such propretor w bo entered on the same Form 1 2, approprate
notatons beng made on the separatng nes to show the names of the aternatng
propretors and the dates the ndustra acoho pant was operated by them.
The storekeeper-gauger w make smar entres on Form 10 G. The propretor
wn dspose of Form 1 2 n accordance wth secton 1S2. 6. (Sees. 3103, 310 ,
312 (a) (6), 3176, I. R. C.)
Sec. 1 2. 1. Successon by Fducary. Where a change n propretorshp Is
brought about by operaton of aw, the admnstrator, e ecutor, recever, trustee,
assgnee, or other fducary may not contnue the busness unt the requred
quafyng documents have been fed and approved and a basc permt ssued.
In the case of such change, the fducary sha make approprate notaton on
Form 1 2 of hs successon and the date thereof, and the storekenper-gau-|er w
make a smar notaton on Form 16 6. (Sees. 310 , 312 (a) (G), 317G, I. R. C.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 3, 1 2.6(6), etc.
16
storekeeper-gauger s record
Sec. 1 2. 2. Fork 16 6. The storekeeper-gauger sha keep a day record of
the Industra acoho pant operatons on Form 16 6, U. S. Storekeeper-Ganger s
Report of Operatons at Regstered Dstery and Industra coho Pant.
ntres sha be made as ndcated by the headngs of the varous coumns and
nes and n accordance wth the nstructons on the form or ssued n respect
thereto and as requred by the reguatons n ths part. Where an ndustra
acoho pant, n connecton wth the producton of ethy acoho by any manner,
produces other chemcas as byproducts, or where an Industra acoho pant,- n
connecton wth the producton of substances other than ethy acoho, such as
buty acoho, produces ethy acoho as a byproduct, a separate record on Form
16 6 w be mantaned for each process. The storekeeper-gauger w note on
the record any speca operatons or condtons that may occur and any unusua
or pecuar condtons at the pant. Where the facts warrant, the offcers w
make a report by etter to the dstrct supervsor and w submt t wth Form 1 2
forwarded to the dstrct supervsor. (Sees. 3103,310 ,312 (a)(6), 3176,1. R. C.)
Sec. 1 2. . System of Fng. The storekeeper-gauger s monthy records on
Form 16S6 w be fed together n chronoogca order by months and n bound
form as a permanent record In the storekeeper-gauger s offce, and kept avaabe
for nspecton by Interna revenue offcers. (Sees. 310 , 312 (a)(6), 3176,
I. R. C.)
propretor s records and reports
Sec. 1 2. . Genera. The propretor of every ndustra acoho pant sha
keep monthy records and render day reports as provded In sectons 1 2. b
and 1 2. 6a. of the nformaton caed for n each form, as ndcated by
the headngs of the varous coumns and nes of the form and the nstructons
prnted thereon or Issued n respect thereto, and as requred by the reguatons In
ths part, w be gven. ntres sha be made on the forms before the cose of
the busness day ne t succeedng the day on whch the transactons occur, e cept
that summary entres w be made at the cose of the month. Where the makng
of entres Is deferred to the ne t busness day, as authorzed heren, approprate
memoranda sha be mantaned for the purpose of makng the entres correcty.
(Sees. 3103, 310 , 3121(c), 312 (a) (6), 3171, 3176, I. R. O.)
Sec. 1 2. a. Faure To eep Records or ow Inspecton. Faure to
keep the records and fes or to make and fe reports as and when requred, or to
furnsh verfed copes of fes and records when requested, or to prompty aow
nspecton to be made upon proper request therefor w be suffcent grounds for
ctaton and revocaton of the propretor s basc permt. (Sees. 3103, 310 ,
3121(c), 312 (a) (6), 3171, 3176, I. R. C.)
Sec 1 2. b. Form 1 0. Detas of a acoho gauged sha be reported by
the propretor of the ndustra acoho pant on Form 1 0 as ndcated by the
headngs of the varous coumns and nes and the nstructons prnted thereon
or ssued n respect thereto and as requred by the reguatons n ths part.
Notaton sha be made on the Form 1 0 coverng a acoho wthdrawn from
Industra acoho pants ta -pad for beverage use showng the matera from
whch produced or an abbrevaton thereof, such as coho Gran, coho
Cane, coho Frut, coho Dsted from gran, coho Dsted
from cane, or coho Dsted from frut When the propretor desres
to wthdraw acoho from the ndustra acoho pant for any awfu purpose and
has comped wth a the requrements of the aw and reguatons n ths part
respectng the partcuar wthdrawa, he w make appcaton on the back of
each copy of Form 1 0 coverng the wthdrawa to the storekeeper-gauger n
charge for permsson to wthdraw the acoho. If wthdrawa s to be made
upon ta -payment, the propretor sha present to the storekeeper-gauger the
prescrbed ta -pad stamps or certfcate of ta -payment coverng the acoho to
be wthdrawn. If the acoho s to be transferred n bond to an ndustra acoho
bonded warehouse or shpped to a denaturng pant or wthdrawn for e port or
other awfu ta -free purpose, the propretor w present to the storekeeper-
gauger the necessary permt authorzng such wthdrawa. The storekeeper-
gauger w e amne the ta -pad stamps or certfcate of ta -payment, or the
permt authorzng transfer n bond or ta -free wthdrawa, and f he fnds that
the ta has been pad, or, n the case of transfer n bond or ta -free wthdrawa
that proper wthdrawa permt s hed by the propretor, the storekeeper-gauger
w sgn the authorzaton on Form 1 0 for the wthdrawa of the acoho. The
number of copes of Form 1 0 to be e ecuted and the dsposton thereof w be
made n accordance wth the reguatons n ths part One copy of each Form
1 0 coverng the depost of acoho n the ndustra acoho bonded warehouse on
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
169 Regs. 3, 1 2.6(6), etc.
the premses sha be fed by the propretor of the warehouse In accordance wth
secton 1 2.6 3g. One copy of each Form 1 0 coverng a other wthdrawas of
acoho from the Industra acoho pant sha be fed by the propretor of such
pant n bound form as a separate permanent record. The Forms 1 0 w be
arranged n the fe n chronoogca order accordng to the date of wthdrawa.
(Sees. 3103, 310 , 3121(c), 312 (a) (C), 3171, 3176, L R. C.)
Sec. 1S2. 6. Form 1 2. The propretor of every ndustra acoho pant
sha keep a day record of ndustra acoho pant operatons on Form 1 2,
Propretor s Report of Operatons at Industra coho Pant. ntres sha
be made as ndcated by the headngs of the varous coumns and nes on the form
and the nstructons prnted thereon or ssued n respect thereto, and as requred
by the reguatons n ths part. ntres sha be made on the form before the
cose of the busness day ne t succeedng the day on whch the transactons
occur, e cept that summary entres w be made at the cose of the month.
Where the makng of entres s deferred to the ne t busness day, as authorzed
heren, approprate memoranda sha be mantaned for the purpose of makng the
entres correcty. Where an ndustra acoho pant, n connecton wth the
producton of ethy acoho by any method, produces other chemcas as by-
products, or where an ndustra acoho pant, n connecton wth the producton
of substances other than ethy acoho, such as buty acoho, produces ethy
acoho as a byproduct, a separate record on Form 1 2 w be mantaned for
each process. The quantty of materas used n the producton of ethy acoho
w be determned separatey from the quantty used n the producton of other
substances. Such determnaton may be made at the cose of the month for
reportng on Form 1 2. Form 1 2 must be verfed under oath (or affrmaton)
by the propretor or hs authorzed agent at the pant; Provded, That f the
form offcay prescrbed for such report contans theren a provson for ver-
fcaton by a wrtten decaraton that such report Is made under penates of
per|ury, such report sha be verfed by the e ecuton of such decaraton, and
such decaraton so e ecuted sha be n eu of the oath requred heren for
verfcaton. The propretor w dever Form 1 2 n trpcate, to the store-
keeper-ganger on or before the th day of the month succeedng that for whch
the report s rendered. The storekeeper-gauger w e amne the report, e ecute
the certfcate of the Government offcer on a three copes of the form, return
one copy to the propretor, and forward two copes to the dstrct supervsor.
The dstrct supervsor w, after audt of the report, and not ater than the
ast day of. the month succeedng that for whch the report s rendered, forward
one copy to the Commssoner. e w retan the remanng copy. (Sees.
3103, 310 , 312 (a) (6), 3171, 3176, 3 09, L R. C.)
Sec. 1 2. 6a. Record at Ta -Pad Premses, Form 2- . very propretor
of an ndustra acoho pant who mantans a ta -pad storeroom n connec-
ton wth such pant, as provded In secton 1 2.31a, sha keep Form 2- ,
Monthy Record and Report of Importer or Propretor of Ta -Pad Premses,
of a acoho receved and dsposed of at such ta -pad premses. The records
sha be kept and reports rendered to the dstrct su ervsor n accordance wth
the appcabe provsons of secton 1 2.6 . (Sees. 310 , 3106, 312 (a) (6), 3171,
3176, I. R. C.)
Sec. 1 2. 9. Sgnng of Reports. Forms 1 2 and 2- must be sgned n
the same manner as the appcaton, Form 1 31, e cept that n the case of a
corporaton, the aff ng of the corporate sea w not be requred. Where the
reports are sgned by an agent, proper power of attorney authorzng the agent
to e ecute the reports for the propretor must be fed on Form 1 3 , In trpcate,
In accordance wth the provsons of secton 1 2.129. (Sees. 310 , 312 (a) (0),
3176, 3S09, I. R. C.)
Sec. 1 2. 61. Fh|no.of Forms. The propretor sha fe Forms 1 2 n
chronoogca order by months and n bound form, as a pprmanent record ava-
abe for nspecton by Government offcers at any reasonabe tme. (Sees. 310 ,
312 (a) (6), 3176, I. R. C.)
PURC S OF DISTILL D SPIRITS NDON D TO T UNIT D ST T S
Sec. 1 2. 6 . Recept at Industra coho Pant. When sprts so pur-
chased are to be redsted pror to denaturaton, they shoud be receved at the
ndustra acoho pant, where they w be redsted and transferred to the
denaturng pant prompty. The sprts w be kept separate from other sprts
n the Industra acoho pant not Intended for denaturaton. The recept of
the sprts at the ndustra acoho pant and ther redstaton and transfer
to the denaturng pant w be reported by the propretor on the ndustra
03 S0 0 12
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 3, 1 2.G(fc), etc.
170
acoho pant, bonded warehouse, and denaturng pant records, Forms 1 2,
1 3- , and 1 0 - , and by the storekeeper-gauger on Form 16 0, wth proper
e panatory note. (Sees. 310 , 312 (a) (6), 3170, I. R. C.)
Opebaton of Industra coho onded Warehouses
saes of acoho
Sec. 1 2. . empton From Speca Ta Labty. In vew of the e emp-
ton provded by aw, the propretor of an ndustra acoho pant or of a bonded
warehouse may se or offer for sae ta -pad acoho In the ta -pad storeroom
provded In connecton wth such pant or bonded warehouse wthout beng re-
qured to pay such speca ta as whoesae or reta quor deaer, provded
the saes are made from the pant or bonded warehouse. If ta -pad acoho
s sod esewhere, the propretor engagng n the traffc w not be entted to the
e empton but w be sub|ect to the speca ta mposed by aw.
(a) Lmtaton of e empton. The ta -pad storeroom provded n connec-
ton wth the ndustra acoho pant or bonded warehouse s covered by the
basc permt requred to be hed by the propretor of an ndustra acoho
pant or of a bonded warehouse, respectvey, and, accordngy, the above e emp-
ton s hed appcabe to acoho ta -pad n such pant or bonded warehouse and
stored In the ta -pad storeroom provded n connecton therewth. Such ta -
pad acoho so stored may not be transferred to another smar ta -pad store-
room estabshed n connecton wth another pant or bonded warehouse nor
w the above e empton appy to any premses to whch such ta -pad acoho
may be transferred. (Sees. 3103, 310 , 312 (a) (0), 317G, 32 0 (a) (1), (b) (1),
I.R. C.)
R C IPT OF LCO OL FROM INDUSTRI L LCO OL PL NT ON W R OUS PR MIS S
Sec. 1S2. 9. y Ppe Lne. If the bonded warehouse s ocated on the premses
of an ndustra acoho pant, the acoho produced at such pant may be trans-
ferred from the recevng tanks to storage tanks n the bonded warehouse by
means of ppe nes. The transfer w be made n accordance wth sectons
1S2.S2, 1S2. 07, and 1S2. 0S. The transfer of acoho by ppe ne from the recev-
ng room to storage tanks n the bonded warehouse w be under the mmednte
supervson of the storekeeper-gauger n charge of the recevng room and the
storekeeper-gauger n charge of the warehouse. The storekeeper-gauger super-
vsng the depost of the acoho n the warehouse storage tanks w see that the
cutet and a other openngs of the tanks, e cept the net, affordng access to
the acoho are cosed and ocked and that the vaves n the ppe ne are so ad-
|usted by the propretor as to contro the fow of acoho nto the tank. When
the acoho has been deposted n the tank, the net w be mmedatey cosed
by the propretor and ocked by the storekeeper-gauger. The vaves n the ppe
nes and the openngs of tanks contanng acoho sha be kept cosed and ocked
at a tmes, e cept when necessary to be open for the transfer of acoho. When-
ever acoho s transferred Into or out of storage tanks or weghng tanks, the
storekeeper-ganger w open and cose the ocks but t sha be the duty of the
propretor to manpuate the stopcocks or vaves controng the fow of the
acoho. Form 1 0 w be dsposed of n accordance wth secton 1 2. 00a.
(Sees. 310.3, 310 , 312 (a) (0), 3170, I. . C.)
Sec. 1 2. 00. In Packages. Where acoho s receved n casks, drums, or sm-
ar contaners for depost from an ndustra acoho pant on the same premses,
the packages w be transferred from the recevng room to the bonded ware-
house under the supervson of the storekeeper-gauger n charge of the recevng
room and the storekeeper-gauger n charge of the bonded warehouse. The pack-
ages w bo e amned n accordance wth secton 1S2. 92. Form 1 0 w be
dsposed of n accordance wth secton S2. )0a. (Sees. 3101, 310 , 312 (a) (6),
3170, I. R. C.)
Skc. 1 2. 90a. Depost n Warehouse From Industra coho Pant on
the Same Premses. Upon the depost n storage tanks of acoho transferred
by ppe ne pursuant to secton 1 2. 9, and upon competon of the e amnaton
of packages receved pursuant to secton 1 2. 90, from the ndustra acoho
pant on the premses of the bonded warehouse, the propretor w determne
accuratey the quantty receved and w check n the recept of the acoho
aganst Form 1 0 n the presence of the storekeeper-gauger. The propretor
w e ecute the certfcate of recept on bot copes of Form 1 0 and w note
thereon and on Form 1 3- or Form 1 3-I any oss or defcency n the shp-
ment. Where a oss n transt s sustaned, the propretor w report on such
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
171
Regs. 3, 1 2.f ), etc.
forms the tota oss for transfer by ppe ne and. In the case of packages, the
oss from each package. The storekeeper-gauger w make a fu report of such
oss to the dstrct supervsor In accordance wth secton 1S2. 92. The pro-
pretor w fe one copy of Form 1 0 as a permanent record as provded In
secton 1 2.6 3g and w dever the remanng copy to the storekeeper-gauger who
w forward It to the dstrct supervsor. (Sees. 3101, 310 , 3113, 312 (a) (0),
3176, I. R. C.)
R C IPT OF LCO OL FROM INDUSTRI L LCO OL PL NT NOT ON W R OUS PR MIS S
ND FROM NOT R OND D W R OUS IN S M SUP R ISORY DISTRICT
Sec. 1 2. 91. Packages, Tank Cars, and Tank Trucks. Upon recevng Form
1 0 n dupcate coverng acoho transferred n bond from an ndustra aco-
ho pant n the same supervsory dstrct pursuant to secton 1S2. 0SC, or from
another bonded warehouse n the same supervsory dstrct pursuant to st c
ton 1 2. 6, the storekeeper-gauger n charge at the recevng warehouse w
dever both copes to the propretor of the warehouse. When the acoho s re-
ceved at the warehouse n packages, the shpment w be e amned by the pro-
pretor and the storekeeper-gauger n accordance wth secton 1R2. 92. When
receved In a tank car, the shpment w be e amned In accordance wth secton
1S2. 93. When receved In a tank truck, the seas w be broken and the shp-
ment e amned n accordance wth sectons 1 2. 91a and 1 2. 93a, respectvey.
Form 1 0 w be dsposed of In accordance wth secton 1 2. 9 . (Sees. 310 ,
3113. 312 (a) (6), 3176, I. R. C.)
Sec. 1 2. 9 . Depost n Recevng Warehouse. Upon competon of the e -
amnaton of the contaners from an ndustra acoho pant ocated on other
premses, or from another bonded warehouse, n the same supervsory dstrct,
the propretor w determne accuratey the quantty receved and w check n
the recept of the acoho aganst Form 1 0 n the presence of the storekeeper-
gauger. The propretor w e ecute the certfcate of recept on bot copes of
Form 1 0 and w note thereon and on Form 1 3- or Form 1 3- any oss or
defcency n the shpment Where a oss n transt s sustaned, the propretor
w report on such forms the tota oss from tank cars and tank trucks and.
In the case of packages, the oss from each packape. The storekeeper-gauger w
make a fu report of such oss to the dstrct supervsor n accordance wth
secton 1 2. 92, 1 2. 93, or 1 2. 93a as the case may be. The propretor w fe
one copy of Form 1 0 as a permanent record as provded n secton 1 2.6 3g and
w dever the remanng copy to the storekeeper-gauger who w forward t to
the dstrct supervsor. The dstrct supervsor w check day, on recept, each
Form 1 0 coverng a tank truck shpment, and make any nqury whch he
deems necessary wth respect to any dscrepancy. In the event of faure to
receve a form from the storekeeper-gauger at the consgnees premses wthn the
tme normay requred for the truck to make the shpment and the form to be
receved by ma, the dstrct supervsor w make approprate fnqury. (Sees.
3101, 310 , 3113, 312 (a) (6). 3176, I. R. C.)
R C IPT OF LCO OL FROM INDUSTRI L I.COnOL PL NT OR NOT R OND D
W R OUS IN DIFF R NT SUP R ISORY DISTRICT
Sec. 1 2. 9 a. Packages, Tank Cars, and Tank Trucks. Upon recevng
Form 1 0 coverng acoho transferred n bond from an ndustra acoho pant
n a dfferent supervsory dstrct pursuant to secton 1 2. 0Sd, or from another
bonded warehouse n a dfferent supervsory dstrct pursuant to secton S2. 6a,
the storekeeper-gauger In charge at the recevng warehouse w dever a
copes to the propretor of the warehouse. When the acoho s receved at the
warehouse n packages, the shpment w be e amned by the propretor and
the storekeeper-gauger n accordance wth secton 1 2. 92. When receved n a
tank car t w be e amned n accordance wth secton 1 2. 93. When re-
ceved n a tank truck, the seas w be broken and the shpment e amned n
accordance wth sectons 1 2. 91a and S2. 93a, respectvey. The acoho sha
be deposted n accordance wth secton 1 2. 9 . Form 1 0 w be dsposed
of n accordance wth secton 1 2. 9 b. (Sees. 3101, 310 , 3113, 312 (a)(6).
3176,1. RC.)
Sec. 1 2. 9 b. Depost n Recevng Warehouse. Upon competon of the
e amnaton of the contaners from an ndustra acoho pant or another bonded
warehouse ocated n a dfferent supervsory dstrct, the propretor w deter-
mne accuratey the quantty receved and w cheek n the recept of the acoho
aganst Form 1 0 n the presence of the storekeeper-gauger. The propretor
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 3, 1 2.0(6), etc. 172
w e eeuta the certfcate of recept on a copes of Form 1 0 and w note
thereon and on Form 1 3- or Form 1 3- any oss or defcency n the
shpment. Where a oss n transt s sustaned, the propretor w report on
such forms the tota oss from tank cars and tank trucks and, n the case of
packages, the oss from each package. The storekeeper-gauger w make a fu
report of such oss to the dstrct supervsor n accordance wth secton 1S2. 92,
1 2. 93, or 1 2. 93a as the case may be. The propretor w fe one copy of
Form 1 0 as a permanent record as provded n secton 1 2.6 3g and w
dever the remanng copy of Form 1 0 to the storekeeper-gauger. The store-
keeper-gauger w forward the copy of Form 1 0 to the supervsor of the
dstrct n whch the warehouse s ocated. The supervsor-consgnee w forward
the copy receved at tme of shpment to the supervsor-consgnor and fe the
remanng copy. e w check day, on recept, each Form 1 0 coverng a
tank truck shpment, and make any nqury whch he deems necessary wth
respect to any dscrepancy. In the event of faure to receve a form from
the storekeeper-gauger at the consgnees premses wthn the tme normay
requred for the truck to make the shpment and the form to be receved by
ma, the supervsor-consgnee w make approprate nvestgaton. The super-
vsor-consgnor w aso check day on recept each Form 1 0 coverng a tank
truck shpment receved from the supervsor-consgnee. In the event of faure
to receve a form wthn a reasonabe tme, he w make approprate nqury.
If recepted Forms 1 0 coverng other shpments are not receved wthn a
reasonabe tme, dstrct supervsors w make approprate nqury. (Sees. 3101,
310 ,3113,312 (a) (6), 3170,1. . C.)
TUItN TO INDUSTRI L LCO OL PL NT OR OND D W R OUS OF UNUS D LCO OL
WIT DR WN FR OF T
Sec. 1 2. 96. Procedure. s provded n secton 1 2.6G , where ta -free aco-
ho awfuy n possesson of a permttee authorzed to use the same s found to be
unsutabe for use, or where such permttee dscontnues the use thereof, or where
for any other egtmate reason such permttee desres so to do, such acoho
may be returned to the respectve ndustra acoho pant or bonded warehouse
for awfu dsposton: Provded, That the propretor of such pant or bonded
warehouse consents to such return and permsson therefor s, n each nstance,
frst obtaned from the supervsor of the dstrct from whc| the ta -free acoho
s to be returned. If the ndustra acoho pant or bonded warehouse s
stuated n another dstrct, the dstrct supervsor authorzng the return w
forward a copy of hs etter of authorty to the supervsor of such other dstrct.
Notaton of such return w be made by the propretor of the ndustra acoho
pant on hs monthy report, Form 1 2, and by the warehouseman on hs
monthy report, Form 1 3- , as provded n secton 1 2.0 0. (Sees. 3101, C10 ,
312 (a) (6), 3170, I. R. C.)
R MO L OF LCO OL FROM R C I ING ND STOR G T N S
Sec. 1 2. 02. Fng of Tank Car. The tank car must be fed n the
mmedate presence of the storekeeper-gauger. The ppe ne from the weghng
tank to the tank car must be n fu vew of the offcer, and must not bo con-
nected or used e cept n hs presence. The offcer w sea-ock the car as soon
as It s fed. The propretor w enter on Form 1 0, coverng the gauge of
the acoho, the symbo and sera number of the car, the number of nches
above or beow the fu mark, and the temperature of the acoho at fng, the
sera number of the ock sea or seas, the destnaton, and the date of shpment; .
for e ampe: Wthdrawn n U. P. tank car No. 10 . , ted 2 nches above fu
mark at 0 F., ock sea No. 0 7, for transfer to Ind. e. onded Whse.
No. 0, New York, N. T. ed out : 30 p. n., May 1, 19 1. (Sees. 3101, 310 ,
3107, 310 , 312 (a) (0), 3170, I. R. C.)
M R S, R NDS, ND ST MPS
Sec. 1 2. 1 . Numberng of Packages. Where packages of acoho are fed
from recevng tanks n an ndustra acoho pant, they sha be numbered n
sera order begnnng wth number 1 for the frst package fed and contnung
n reguar sequence. Lkewse, where packages of acoho are fed from storage
tanks n an ndustra acoho bonded warehouse, they sha be numbered n sera
order begnnng wth number 1 for the frst package fed and contnung n regu-
ar sequence. Where an e stng ndustra acoho pant s ocated on the
premses of the bonded warehouse and one seres of numbers has been used for
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
173
Regs. 3, 1 2.6(6), etc.
packages fed from both the recevng and storage tanks, such seres w be
contnued for packages fed from the storage tanks n the bonded warehouse.
ereafter, a dfferent seres of numbers w be used for packages fed from the
recevng tanks of such ndustra acoho pant, begnnng wth number 1 for
the frst package fed and contnung In reguar sequence. Where there Is a
change n the trade name or stye or n the propretorshp of the busness, the
seres n use at the tme of such change w be contnued. new seres w be
used where there s a change n the type of pant; but use of the pror seres
w be resumed when the pant Is agan operated as an Industra acoho
pant. When the sera numbers of packages fed have reached the number
1.000,000, the propretor may, f he so desres, begn a new seres, com-
mencng wth number 1, preceded or foowed by a etter to dstngush It
from the pror seres as 1 , 2 , etc., and when the number 1,000,000 so dstn-
gushed s agan reached, the propretor may begn another seres dstngushed
by the second etter of the aphabet, as I , 2 , etc., and subsequent seres, ds-
tngushed by other etters of the aphabet n order, may kewse be commenced.
(Sees. 2 0 , 3100, 312 (a) (6), 3176, L R. C.)
Sec. 1 2. 19. Masks and rands. (a) Drums, barres, etc. coho wth-
drawn nto drums, barres, or other approved contaners sha be weghed and
proofed by the propretor. Such propretor sha have marked upon the head
of each package, n the order named, the gross weght, tare, net weght n pounds
and haf pounds, wne gaons, proof, and proof gaons, retanng fractons of
gaons n a nstances. The name of the propretor of the ndustra acoho
pant or bonded warehouse at whch the package s fed, the number of the
pant or warehouse, the cty or town and State n whch the pant or warehouse
s ocated, and the date the package was fed sha aso be marked on the pack-
age. In addton to the foregong, the word coho must aso appear on the
heads of a packages of more than 30 wne gaons capacty, n etters of not
ess than 1 Inch n heght. On packages of 30 wne gaons or ess such etters
sha not be ess than three-fourths of an nch n heght On sma contaners,
the requred markngs sha be paced on the sde of the contaner. In addton
to the foregong, each package sha be seray numbered n accordance wth
secton 1 2. 1 . There sha aso be paced upon the Government head or sde
of each contaner, by prntng, stencng, or abeng, a statement to the effect
that a marks and stamps must be destroyed mmedatey after the contaner Is
empted.
(6) Cases of botted acoo. ach package contanng acoho In bottes sha
bear a the marks requred by sectons 1 2. 17 and 1 2. 1 , e cept the gross
weght, tare, and net weght. The number and capacty of the bottes sha, how-
ever, be shown on each package. The marks sha be paced on one sde of the case.
(Sees. 2 0 , 3103, 310 , 312 (a) (6), 3176, I. R. C.)
Sec. 1 2. 26. Wthdrawn for Ta -Free Use or for port. (a) Ta -free
use. When acoho s wthdrawn free of ta from an ndustra acoho pant or
a bonded warehouse for scentfc purposes, use of hosptas, etc., or for use of
the Unted States, there sha be stenced on the Government head of each pack-
age or sde of each case In etters and fgures not ess than one-haf Inch n heght
the date and purpose of wthdrawa, such as ospta use, Scentfc purposes,
Use of U. S., etc., and number of the permt authorzng the wthdrawa, n
addton to the other marks and brands requred by the reguatons n ths part.
(1) Tank cars. When acoho s wthdrawn n tank cars for use of the Unted
States or a governmenta agency thereof, there sha be attached to the route
board of the tank car, a abe showng the name, regstry number, and ocaton
(cty or town and State) of the ndustra acoho pant or bonded warehouse,
and the name and address of the Government estabshment to whch the acoho
s consgned, foowed by the permt number under whch the acoho s wth-
drawn, the words For use of U. S. and the date of wthdrawa. The abe,
whch sha be furnshed and attached by the propretor, sha be n substantay
the foowng form:
Shpped by
Standard coho Co.
. W. 271, atmore, Md.
To
U. S. Navy Yard.
Washngton. D. C.
U. S.-TF-71
For use of U. S.
ug. 1 , 10-11
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 3, 1 2.6(6), etc. 17
(6) For e port. When acoho s wthdrawn for e portaton, the words For
e port and the names of the ports from and to whch the acoho s to be e -
ported, and the number of the e port permt, as for e ampe For port, New
York to Lsbon, Permt -NY-1 , sha aso be marked on each package or
case n etters not ess than one-haf Inch n heght. (Sees. 2 0 , 310 ,
312 (a) (6), 3176,1. . C.)
TR NSF OF LCO OL IN OND TW N OND D W R OUS S
Sec. 1 2. 0. Genera. coho may be transferred n bond from any ndus-
tra acoho pant or bonded warehouse n orgna packages or other approved
contaners, or n tank trucks, after the acoho has been correcty weghed and
proofed to determne the e act contents of each package, uness wthdrawn on
the orgna gauge, to another bonded warehouse as herenafter provded. (Sees.
310 , 3107, 312 (a) (6), 3176, L R. C.)
Sec 1 2. 1. ppcaton and Wthdrawa Permt, Form 1 36. (a) ppca-
ton. Where the propretor of the bonded warehouse desres to procure acoho
from an ndustra acoho pant not ocated on the premses of the bonded ware-
house or from another bonded warehouse, he w fe appcaton on Part I of
Form 1 30, ppcaton and Wthdrawa Permt to Transfer coho etween
Industra coho onded Premses, n dupcate, wth the dstrct supervsor
for wthdrawa permt to procure acoho. The names, regstry numbers, and
addresses of the pants and warehouses from whch acoho w be procured
w be stated n the appcaton. Where the bond. Form 1 32- , fed by the
propretor coverng the recevng warehouse s n ess than the ma mum pena
sum, the appcaton shoud be for a f ed number of proof gaons to be wthdrawn
durng a caendar month, whch amount sha not e ceed the quantty authorzed
n the appcant s basc permt. Form 1 33, to be on hand, n transt, and
unaccounted for at any one tme.
(6) Wthdratca permt. If the appcaton s approved by the dstrct super-
vsor, e w ssue a wthdrawa permt on Form 1 36. If the appcant s basc
permt on Form 1 33 for hs bonded warehouse mts the quantty of acoho
that may be on hand, n transt, and unaccounted for at any one tme, the
quantty authorzed by the wthdrawa permt on Form 1 36 to be wthdrawn
durng any caendar month, sha not e ceed such quantty specfed n the
appcant s basc permt. The dstrct supervsor w forward the orgna copy
of the wthdrawa permt to the appcant and w retan the dupcate copy for
hs fes. When the propretor of the recevng warehouse desres to procure
acoho, he w forward the orgna of thq, wthdrawa permt to the propretor
of the ndustra acoho pant or bonded warehouse named theren from whom
he desres to procure acoho. Upon shpment, the propretor of the shppng
pant or warehouse w enter the shpment on the permt and return t to the
consgnee, uness he has been authorzed by the consgnee to retan the permt
for the purpose of makng future shpments. No acoho may be shpped by a
consgnor named n the wthdrawa permt unt such permt s n hs possesson.
cept as provded n paragraph (d) of ths secton, further ke transfers may
be made under such permt durng the term for whch t s ssued.
(c) Carrer to he furnshed copy of Form 1 36. Where the acoho s to be
devered by a person other than the vendor, the consgnee sha procure from
the dstrct supervsor a certfed copy (or copes, f devery s to be made by
more than one carrer), on the prescrbed form, of the wthdrawa permt. Form
1136. and sha fe the same wth the deverng carrer s agent at destnaton.
ppcaton for such certfed copy or copes sha be made by the permttee to
the dstrct supervsor by etter, specfyng the name of the deverng carrer.
Where such deverng carrer s known at the tme Form 1 36 s fed, the
appcaton shoud accompany such form.
(( ) praton or termnaton of permt. Upon e praton of a wthdrawa
permt t sha be returned to the dstrct supervsor for canceaton. Where
the permt s n the possesson of a consgnor on the date of e praton, such
consgnor sha return t to the permttee for surrender to the dstrct supervsor.
Shoud a basc permt. Form 1 33, hed by a person to whom wthdrawa permt.
Form 1 3 , was ssued, be termnated, surrendered, or revoked, the propretor
of each ndustra acoho pant and bonded warehouse named as vendor n
such wthdrawa permt sha, upon notce from the dstrct supervsor, make no
further shpments thereunder, and f such wthdrawa permt s n hs possesson,
he sha return t to the dstrct supervsor for canceaton. (Sees. 3101, 310 ,
3107, 3121(a) (0), 3176, I. R. C.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
17
Regs. 3, 192.6(6), etc.
Sec. 1 2. . uanttt Pkocdrabb Under Wthdrawa Permts. Where the
permttee s basc permt Form 1 33, mts the quantty of acoho that may be
on hand, n transt, and unaccounted for at any one tme at the bonded ware-
house, he sha n procurng acoho from an ndustra acoho pant or from
another bonded warehouse deduct the quantty on hand, n transt, and unac-
counted for from the quantty so mted n hs basc permt, and f the avaabe
baance Is ess than the quantty procurabe under the wthdrawa permt durng
the caendar month, gve hs order for an amount not e ceedng the avaabe
baance. For ths purpose, acoho sha be deemed to be unaccounted for when
dsposed of or ost otherwse than as provded by the reguatons n ths part.
Faure on the part of permttees to observe the foregong requrements concern-
ng wthdrawas w be regarded as suffcent grounds for ctaton for revocaton
of ther basc permts. (Sees. 3101, 310 , 3107, 312 (a) (C), 3176, I. R. C.)
Sec. 1 2. 6. Transfer to onded Warehouse Located n Same Supervsory
Dstrct. coho w be transferred n bond from an ndustra acoho bonded
warehouse to another bonded warehouse ocated n the same supervsory dstrct
pursuant to wthdrawa permt. Form 1 36, In accordance wth sectons 1 2. 1-
1 2. . The propretor w prepare Form 1 0 n quadrupcate, gvng the
detas of the regauge, or orgna gauge f wthdrawn on such gauge of the
acoho. The form w bear the notaton Wthdrawa. e w gve a
copes to the storekeeper-gauger n charge who sha upon shpment of the acoho
forward one copy to the dstrct supervsor and gve one copy to the propretor
of the shppng warehouse for fng n accordance wth secton 1 2.6 3h. In
the case of transfers In contaners other than tank trucks the storekeeper-gauger
n charge sha ma the remanng two copes to the storekeeper-gauger n
charge of the recevng warehouse. In the case of transfers n tank trucks he
sha ma one copy to the storekeeper-gauger n charge of the recevng ware-
house and encose the other copy of Form 1 0 n a seaed enveope addressed to
the storekeeper-gauger n charge and gve the same to the drver of the tank
truck for devery to the storekeeper-gauger In charge. fter depost of the
acoho n the warehouse, Form 1 0 w be dsposed of n accordance wth
secton 1 2. 9 . (Sees. 3101, 310 , 3107, 312 (a) (6), 3176, I. . C.)
Sec. 1 2. 6a. Transfer to onded Warehouse Located n Dfferent Super-
vsory Dstrct. coho w be transferred n bond from an ndustra acoho
bonded warehouse to another bonded warehouse ocated n a dfferent supervsory
dstrct pursuant to wthdrawa permt, Form 1 36, n accordance wth sectons
1 2. 1-1 2. . The propretor w prepare an orgna and four copes of Form
1 0. Form 1 0 w gve the detas of the regauge, or orgna gauge f wth-
drawn on such gauge, of the acoho. The form w bear the notaton Wth-
drawa. e w dever a copes to the storekeeper-gauger n charge who sha
upon shpment of the acoho forward one copy to the supervsor of the dstrct
n whch the shppng warehouse s ocated, one copy to the supervsor of the
dstrct In whch the recevng warehouse s ocated, and gve one copy to the
propretor of the warehouse for fng n accordance wth secton 1 2.6 3h. In
the case of transfers n contaners other than tank trucks the storekeeper-gauger
n charge sha ma the remanng two copes to the storekeeper-gauger n charge
of the recevng warehouse. In the case of transfers n tank trucks he sha ma
one copy to the storekeeper-gauger n charge of the recevng warehouse and
encose the other copy of Form 1 0 n a seaed enveope addressed to the store-
keeper-gauger n charge and gve the same to the drver of the tank truck for
devery to the storekeeper-gauger n charge. fter depost of the acoho n
the warehouse Form 1 0 w be dsposed of n accordance wth secton 1 2. 90b.
(Sees. 3101,310 ,3107.312 (a) (6), 3176,1. R. C.)
WIT DR W L FOR D N TUR TION
Sec. 1 2. 9. Transfer to Denaturng Pant on Same Premses. coho
may be wthdrawn from a bonded warehouse and transferred to a denaturng
pant ocated on the same premses, wthout the necessty of procurng wthdrawa
permt. Form 1 63. coho may be so transferred by ppe ne to storage or
m ng tanks n the denaturng pant n accordance wth secton 1 2.69 , or n
approved contaners n accordance wth secton 1 2.69 . Where the bond for
the denaturng pant Is n an amount ess than the ma mum pena sum prescrbed
by the reguatons n ths part, and the basc permt, Form 1 33, for the denatur-
ng pant mts the quantty of acoho, specay denatured acoho and recovered
or restored denatured acoho that may be on hand, n transt, and unaccounted
for at any one tme, the quantty of acoho so transferred to the denaturng
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 3, 1 2.6(6), etc.
176
pant durng a caendar month, sha not e ceed the quantty so mted n the
basc permt, and the storekeeper-gauger w see that such mtatons are ob-
served. When the acoho s gauged for transfer to the denaturng pant, the
propretor w prepare Form 1 0 n dupcate. The form w bear the notaton
Wthdrawa and the purpose shown as For denaturaton. Upon recept of
the acoho at the denaturng pant Form 1 0 w be dsposed of n accordance
wth secton 1 2.69 a. (Sees. 3070(a), 3101, 310 , 310 (a), 312 (a)(6), 3176,
I. R. C.)
Sec. 1 2. 60. Transfer to Denaturng Pant Located on Other Premses n
Same Supervsory Dstrct.- coho may be wthdrawn from a bonded ware-
house for shpment to a denaturng pant ocated on other premses ony pursuant
to wthdrawa permt, Form 1 63, authorzng such shpment n accordance wth
sectons 1 2.0 6-1 2.690. coho may be so shpped n tank cars, drums, or
other approved contaners, or n tank trucks. Such shpments may not be made
unt the propretor of the bonded warehouse has receved from the denaturer
the wthdrawa permt, Form 1 63, namng hm as vendor, and then ony n
the quantty specfed n the wthdrawa permt. Upon shpment, the propretor
of the bonded warehouse w enter the shpment on the permt and return t
to the denaturer, uness he has been authorzed by the denaturer to retan the
permt for the purpose of makng future shpments. The propretor w prepare
Form 1 0, n quadrupcate, gvng the detas of the regauge, or orgna gauge f
wthdrawn on such gauge of the acoho. The form w bear the notaton Wth-
drawa and the purpose shown as For denaturaton. e w gve a copes
to the storekeeper-gauger n charge who sha upon shpment of the acoho for-
ward one copy to the dstrct supervsor and gve one copy to the propretor of the
shppng warehouse for fng n accordance wth secton 1 2.6 3h. In the case
of transfers n contaners other than tank trucks the storekeeper-gauger n
charge sha ma the remanng two copes to the storekeeper-gauger n charge
of the recevng denaturng pant. In the case of transfers n tank trucks he
sha ma one copy to the storekeeper-gauger n charge of the recevng denatur-
ng pant and encose the other copy of Form 1 0 n a seaed enveope addressed
to the storekeeper-gauger n charge and gve the same to the drver of the tank
truck for devery to the storekeeper-gauger n charge. Upon recept of the
acoho at the denaturng pant, Form 1 0 w be dsposed of n accordance wth
secton 1 2.696a. (Sees. 3070(a), 3101, 310 , 3106, 310 (a), 311 (a), 312 (a) (6),
3176, I. R. C.)
Sec.1 2. 00a. Transfer to Denaturng Pant Located n Dfferent Super-
vsory Dstrct. coho may be wthdrawn from a bonded warehouse for shp-
ment to a denaturng pant ocated n a dfferent supervsory dstrct ony pursuant
to wthdrawa permt, Form 1 63, authorzng such shpment n accordance wth
sectons 1 2.6S6-1 2.690. Such shpments may not be made unt the propretor
of the bonded warehouse has receved from the denaturer the wthdrawa permt,
Form 1 63, namng hm as vendor, and then ony n the quantty specfed n the
wthdrawa permt. Upon shpment the propretor of the bonded warehouse w
enter the shpment on the permt and return t to the denaturer, uness he has been
authorzed by the denaturer to retan the permt for the purpose of makng future
shpments. The propretor w prepare an orgna and four copes of Form 1 0.
Form 1 0 w gve the detas of the regauge, or orgna gauge f wthdrawn on
such gauge of the acoho. The form w bear the notaton Wthdrawa and the
purpose shown as For denaturaton. e w dever a copes to the store-
keeper-gauger n charge who sha upon shpment of the acoho forward one copy
to the supervsor of the dstrct n whch the shppng warehouse s ocated, one
copy to the supervsor of the dstrct n whch the recevng pant s ocated, and
gve one copy to the propretor of the shppng warehouse for fng n accordance
wth secton 1 2.6 3h. In the case of transfers n contaners other than tank
trucks the storekeeper-gauger n charge sha ma the remanng two copes to the
storekeeper-gauger n charge of the recevng denaturng pant. In the case of
transfers n tank trucks he sha ma one copy to the storekeeper-gauger n charge
of the recevng denaturng pant and encose the other copy of Form 1 0 n a
seaed enveope addressed to the storekeeper-gauger n charge and gve the same
to the drver of the tank truck for devery to the storekeeper-gauger n charge.
Upon recept of the acoho at the denaturng pant Form 1 0 w be dsposed of
n accordance wth secton 1S2.69 C. (Sees. 3070(a), 3101, 310 , 3106, 310S(a),
311 (a), 312 (a) (6), 3176, I. R. C.)
Sec. 1 2. 61. Gaugng, Markng, and Stampng Upon Wthdrawa. When
acoho s transferred by ppe ne, or shpped n tank cars or tank trucks, to a
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
177
Regs. 3, 1 2.6(6), etc.
denaturng pant, It w be run nto a weghng tank and weghed and proofed by
the propretor, n accordance wth sectons 1 2. 0 -1 2. 0 . When acoho s
transferred or shpped to a denaturng pant n other approved contaners, the
propretor w regauge the packages, uness wthdrawn on the orgna gauge, and
w mark each package n accordance wth sectons 1 2. 1 -1 2. 2 : Provded,
That where packages are transferred to a denaturng pant on the same premses
the regauge markngs prescrbed by secton 1 2. 22 need not be paced upon the
packages: nd provded further. That where packages are fed from the recev-
ng tanks of the ndustra acoho pant or from storage tanks n the bonded
warehouse for transfer to the denaturng pant ocated on the same premses, and
the acoho s to be denatured mmedatey n such packages and the ocaton of
the recevng room of the ndustra acoho pant, and the bonded warehouse and
denaturng pant s such that the packages are transferred from the recevng
room or bonded warehouse to the denaturng pant n the mmedate persona
presence of the storekeeper-ganger and under hs constant observaton, the dstrct
supervsor may authorze the data, whch the reguatons n ths part requre to
be marked upon the Government head or sde of the package, to be paced upon a
abe attached to the head or sde of the contaner, In eu of beng prnted,
stenced, or cut thereon. Such abe sha be destroyed when the contents of the
package are denatured. (Sees. 3070(a), 3101, 310 , 310 (a), 312 (a) (6), 3176,
L R. C.)
Sec. 1 2. 62. praton or Termnaton of Pkrmt. Where a wthdrawa
permt, Form 1 63, s n the possesson of the propretor of an ndustra acoho
pant or a bonded warehouse on the date of e praton, such propretor sha
return t to the denaturer for surrender to the dstrct supervsor. Shoud a basc
permt. Form 1 33, hed by a denaturer to whom wthdrawa permt, Form 1 63,
was ssued, be termnated, surrendered, or revoked, the propretor of each ndus-
tra acoho pant and of each bonded warehouse namsd as vendor n such wth-
drawa permt sha, upon notce from the dstrct supervsor, make no further
shpments thereon, and f such wthdrawa permt s n hs possesson, he sha
return t to the dstrct supervsor for canceaton. (Sees. 310 , 311 (a),
312 (a) (6), 3176, I. R. C.)
ta -payment of acoho n packages or cases
Sec. 1 2. 6 . Remova of coho. The propretor sha dever a copes of
Form 1 0 wth the ta -pad stamps to the storekeeper-ganger, who w verfy the
data thereon and, f no dscrepances are found, he w note the sera numbers of
the stamps on the retaned copy of Form 1 0, and aff hs sgnature to each stamp.
Facsmes of sgnatures of storekeeper-gaugers may be aff ed by the use of hand
stamps, care beng taken to use ony such nk as w nether fade nor bur. The
storekeeper-ganger w then return the stamps to the propretor, who w stamp
and mark the packages or cases, as provded n sectons 1 2. 2 , 1 2. 27, and
1 2. 2 and In the Gaugng Manua (26 CFR, Part 1 6). after whch the propretor
w mmedatey remove the acoho from the premses or to hs ta -pad store-
room, f one has been provded. When the acoho has been removed, the store-
keeper-gauger w forward one copy of Form 1 0 to the dstrct supervsor, and
return two copes to the .ropretor, who w retan one copy as a permanent
record, as provded n secton 1 2.6 3h and f he so desres, furnsh the remanng
copy to the vendee. (Sees. 3103, 310 , 3121(a) (6), 3176, I. R. C.)
ta -pad wthdrawas IN T N C S
Sec. 1 2. 70. erfcaton and ff ng of Certfcate. The propretor sha
gve the certfcate of ta -payment (Form 1 9 ), the b of adng, and a copes
of Form 1 0 to the storekeeper-ganger. The storekeeper-gaufcer w verfy the
contents of the tank cars and descrpton of Form 1 9 n the b of adng,
determne the securty of the route board, and, f no dscrepances are found,
he w note the sera number of the certfcate on Form 1 -10, and date and sen
the certfcate n the space provded therefor. Tho propretor sha then aff
the certfcate to the route board n the presence of the storekeeper-ganger. The
certfcate must be securey aff ed to the route board wth a good adhesve
and wth a tack n each corner, after whch t w be canceed n the same
manner as a ta -pad stamp after attachment to a package and covered wth
a coatng of transparent sheac, varnsh, or acquer to prevent ts easy remova
or ateraton. (Sees. 3101,310 ,312 (a) (6), 3176,1. R. C.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 3, 1 2.6(6), etc. 17
T -P ID WIT DR W LS Y PIP LIN TO R CTIFYING PL NT
Sec. 1 2. 7 (1. erfcaton and ff ng of Certfcate. The propretor
sha dever the certfcate of ta -payment, Form 1 9 , and a copes of Form
1 0 to the storekeeper-gauger, who w verfy the contents of the weghng
ank and, f no dscrepances are found, he w note the sera number of the
certfcate on Form 1 0 and date and sgn the certfcate, Form 1 9 , n the
space provded therefor. The certfcate must be attached to the board on the
weghng tank by means of a tack n each corner, after whch t w be can-
ceed n the same manner as a ta -pad stamp attached to a package and covered
wth a coatng of transparent varnsh, sheac, or acquer to prevent any ater-
aton thereof. (Sees. 3101,310 ,312 (a) (6), 3176,1. R. C.)
ta -free wthdrawas for scentfc purposes, use of hosptas, states, etc.
Sec. 1S2. 7G. Intradstrct Wthdrawas. Where the ndustra acoho
bonded warehouse and the consgnee are ocated n the same supervsory dstrct,
the propretor w gauge each package of acoho wthdrawn ta -free, uness
wthdrawn on the orgna gauge, and w prepare Form 1 0 n trpcate.
The packages sha be marked n accordance wth sectons 1S2. 1S-1 2. 26. The
propretor w dever a copes of Form 1 0 to the storekeeper-gauger n
charge who sha upon remova of the acoho forward one copy of Form 1 0
to the dstrct supervsor and one copy to the consgnee. e w gve the re-
manng copy to the propretor for fng n accordance wth secton S2.6 3h.
The dstrct supervsor, upon recept of Form 1 1 from the permttee, sha
check the same aganst Forms 1 0 coverng acoho shpped to the permttee,
to determne that a acoho wthdrawn by the permttee has been duy receved
and accounted for. (Sees. 3101, 3103, 310 , 310 (b), (c), 312 (a)(6), 3176,
I. It. C.)
Sec S2. 76a. Interdstrct Wthdrawas. Where the ndustra acoho
bonded warehouse and the consgnee are ocated n dfferent supervsory dstrcts,
the propretor w gauge each package of acoho wthdrawn ta -free, uness
wthdrawn on the orgna gauge, and w prepare Form 1 0 n quadrupcate.
The packages sha be marked n accordance wth sectons 1S2. 1S-1 2. 26. The
propretor w dever a copes of Form 1 0 to the storekeeper-gauger n charge
who sha upon remova of the acoho forward one copy of Form 1 0 to the
supervsor of the dstrct n whch the ndustra acoho bonded warehouse
s ocated, one copy to the supervsor of the dstrct n whch the consgnee s
ocated, and one copy to the consgnee. e w gve the remanng copy to the
propretor for fng n accordance wth secton 1 2.6 .3h. The supervsor-con-
sgnee upon recept of Form 1 1 from the permttee, sha check t aganst
a Forms 1 0 coverng acoho shpped to the permttee, to determne that a
acoho wthdrawn by the permttee has been duy receved and accounted for.
e sha take approprate acton concernng any osses n transt. e sha note
on each copy of Form 1 0 coverng recepts shown on Form 1 1 for the month,
that the shpment was reported receved. e w then send a such copes
of Form 1 0 to the supervsor-consgnor. (Sees. 3101, 3103, 310 , 310 (b), (c),
312 (a) (6), 3176,1. It. C.)
Sec. 1S2. S2. Gauge of coo. The propretor w gauge each package of
acoho wthdrawn ta -free, uness wthdrawn on the orgna gauge, and prepare
Form 1 0, n trpcate, gvng the detas of such gauge. e sha prepare one
copy of Form 1 3. e w ndcate on the form, n the space provded, the
address of the supervsor of the dstrct n whch the bonded warehouse s o-
cated. The packages sha be marked n accordance wth sectons 1S2. 1 -1S2. 26.
The propretor w dever the forms to the storekeeper-gauger who w check
them wt the records and the permt and f found to agree therewth he w
nta them. Upon shpment of the acoho, he w send one copy of Form 1 0
to the supervsor of the dstrct n whch the warehouse s ocated, one copy
each of Forms 1 0 and 1 3 to the consgnee and gve the remanng copy of
Form 1 0 to the propretor for fng n accordance wth secton 1 2.6 3h. Upon
recept of the acoho by the Unted States or governmenta agency thereof,
Forms 1 0 and 1 3 w be dsposed of n accordance wth secton 1S2. 9 .
(Sees. 3101, 3103, 310 , 310 (b), 312 (a) (0),3176,1. R. C.)
Sec. 1 2. . Notce and Recept of Shpment, Form 1 3. t the tme of
shppng acoho ta -free to the Unted States or governmenta agency thereof,
Form 1 3 w be prepared and dsposed of n accordance wth secton 1 2. 2.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
179
Regs. 3, 1 2.6(6), eta
Upon recept of the acoho by the Unted States or governmenta agency thereof,
Form 1 3 w be dsposed of n accordance wth secton 1S2. 9 . (Sees. 3101,
310 , 310 (b), 312 (a) (6), 3170, I. R. C.)
PORT TION OF LCO OL FR OF T
Sec, 1 2. 7. ppcaton and ntry. Whenever an owner desres to remove
acoho from an ndustra acoho pant or bonded warehouse ether for drect
e portaton or for transportaton for e port n approved contaners, he sha
e ecute the appcaton for a wthdrawa permt on Form 1 6, n quadrupcate.
of the nformaton caed for by the headngs of the varous coumns and
nes on the form and the nstructons prnted thereon or ssued n respect
thereto, and as requred by the reguatons n ths part, sha be furnshed. The
appcaton must be subscrbed and sworn to before a notary pubc or other
offcer authorzed to admnster oaths: Provded, That f the form offcay
prescrbed for such appcaton contans theren a provson for verfcaton by a
wrtten decaraton that such appcaton s made under penates of per|ury,
such appcaton sha be verfed by the e ecuton of such decaraton, and such
decaraton so e ecuted sha be n eu of the oath requred heren for verfca-
ton. Secs. 2 , 310 , 312 (a) (6), 3176, 3 00, I. R. C.)
Sec. 1 2.602. Records. Upon the remova of the packages from the bonded
warehouse, the propretor sha record the quantty removed on Form 1 3- .
(Sees. 310 , 312 (a) (6), 3171, 3176, I. R. C.)
Sec. 1 2.610. Records. The dstrct supervsor w take credt n hs bond
account for acoho wthdrawn for e port under a transportaton for e port
bond, Form 1 96 or Form 1 9 , upon recept of advce from the coector of cus-
toms that the acoho covered by the appcaton was ceared from the port of
e portaton. coho wthdrawn under an e port bond, Form 1 9 or Form 1 97,
w be credted upon recept of evdence of foregn andng. In case of a
shortage, credt may not be taken for the shpment unt the abty thereon
has been termnated. (Sees. 310 , 312 (a)(6), 3170, 3176, 39 3(b), I. R. C.)
TR NSF R OF LCO OL TO CUSTOMS M NUF CTURING OND D W R OUS S
Sec. 1 2.620. Genera. ny manufacturer who manufactures medcnes, prep-
aratons, compostons, perfumeres, cosmetcs, cordas, and other quors for
e port at a duy consttuted customs manufacturng bonded warehouse estab-
shed under secton 3177, Interna Revenue Code, may, under proper permt and
bond, wthdraw acoho n approved contaners from any ndustra acoho pant
or from any ndustra acoho bonded warehouse free of ta for use n the
manufacture of such products. Under secton 311, Tarff ct of 1930, as amended
(19 U. S. C. 1311), acoho may be removed from an ndustra acoho pant
or bonded warehou e under proper permt and bond wthout payment of ta
and transported to customs manufacturng bonded warehouses, cass 6, to be
rectfed, or reduced n proof and botted, and e ported or shpped to Puerto Rco.
(Sees. 2 91, 310 , 312 (a) (6), 3176, 3177, 317 , I. R. C.; sec. 311, Tarff ct 1930
(19 U. S. C. 1311).)
Sec. 1 2.621. ppcaton and ntry, Form 1603. When any manufacturer,
who s the propretor of a customs manufacturng bonded warehouse, desres to
remove acoho to such warehouse from an ndustra acoho pant or from
an ndustra acoho bonded warehouse free of ta for use n the manufac-
ture of medcnes, preparatons, compostons, perfumeres, cosmetcs, cordas,
and other quors for e port, or, n the case of acoho rectfed, or reduced n
proof and botted, for e port or for shpment to Puerto Rco, he sha e ecute
the appcaton on Form 1603, n quadrupcate, for permsson so to do, and sub-
mt a copes thereof to the dstrct supervsor. The provsons of sectons
1 2. -1 2.619, concernng the wthdrawa of acoho for e port, so far as
appcabe sha appy to packages to be removed to customs manufacturng
bonded warehouses. (Sees. 2 91 (a), 310 , 312 (a) (6), 3176, 3177, 317 , I. R. C.)
Sec. 1 2.622. ond. The manufacturer sha e ecute bond to cover the trans-
portaton of the acoho from the ndustra acoho pant or from the ndustra
acoho bonded warehouse from whch wthdrawn to the customs manufactur-
ng bonded warehouse. If the bond s to cover a specfc ot of acoho, t
sha be e ecuted on Form 1 9, n trpcate, and n a pena sum suffcent to
cover the ta at the rate prescrbed by aw on the acoho to be so transported.
If t s desred to furnsh bond under whch acoho may be wthdrawn from
tme to tme, It sha be e ecuted on Form 1 00, n a pena sum suffcent to cover
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 3, 1 2.6(6), etc.
ISO
the ta at the rate prescrbed by aw on the ma mum quantty of acoho whch
may be outstandng aganst the bond at any tme. The bond w be forwarded
wth the appcaton, Form 1603, to the dstrct supervsor. (Sees. 2 91(a), 310 ,
312 (a) (6), 3170, I. R. C.)
SUPPLI S FO C RT IN SS LS ND IRC FT
Sec. 1 2.030c. ppcaton, Fobm 16 9. Whenever t s desred to wthdraw
acoho from an ndustra acoho pant or bonded warehouse for use on vesses
or arcraft n accordance wth secton 1 2.630a, appcaton w be made on Form
16 9, n quadrupcate. the nformaton caed for by the headngs of the
varous coumns and nes on the form and the nstructons prnted thereon or
ssued n respect thereto, and as requred by the reguatons n ths part sha be
furnshed. The appcaton must be subscrbed and sworn to before a notary
pubc or other offcer authorzed to admnster oaths: Provded, That f the form
offcay prescrbed for such appcaton contans theren a provson for verfca-
ton by a wrtten decaraton that such appcaton s made under penates of
per|ury, such appcaton sha be verfed by the e ecuton of such decaraton,
and such decaraton so e ecuted sha be n eu of the oath requred heren for
verfcaton. (Sees. 310 , 311 (a), 312 (a) (6), 3176, 3 09, L R. C.; sec. 300(a),
Tarff ct of 1930 (19 U. S. C. 1309).)
CO DS and bepobts of peopeetob
Sec. 1 2.6 2. Genera. The propretor of every ndustra acoho bonded
warehouse sha keep monthy records and render day reports as herenafter
provded. ntres sha be made as ndcated by the headngs of the varous co-
umns and nes of the form and the nstructons prnted thereon or ssued n
respect thereto and as requred by the reguatons n ths part. The provsons
of secton 1S2. concernng the tme of makng entres, of secton 1 2. a con-
cernng the faure to keep records or aow nspecton, and of secton 1 2. 61
concernng the fng of reports by propretors of ndustra acoho pants are
hereby made appcabe to records and reports rendered by propretors of ndus-
tra acoho bonded warehouses. The reports must be sgned n the same manner
as the appcaton, Form 1 31, e cept that n the case of a corporaton the aff ng
of the corporate sea w not be requred. Where the reports are sgned by an
agent, proper power of attorney authorzng the agent to e ecute the reports for
the propretor must be fed on Form 1 3 n trpcate n accordance wth the
provsons of secton 1 2.129. (Sees. 3101, 310 , 312 (a) (6), 3171, 3176, I. R. C.)
FO M 1 0
Sec 1S2.G 3. Preparaton and Dsposton. Detas of a acoho gauged
sha be reported by the propretor on Form 1 0 as ndcated by the headngs of
the varous coumns and nes and the nstructons prnted thereon, or ssued n
respect thereto, and ns requred by the reguatons n ths part. The number of
copes to be e ecuted and the dsposton thereof w be made n accordance wth
the reguatons n ths part. When packages are wthdrawn from the warehouse,
the date of wthdrawa sha be entered on the Form 1 0 coverng the depost of
the packages n the warehouse, n order that the packages n warehouse may be
ready ascertaned from the record and the physca nventory of packages n
the warehouse may be checked therewth. Notaton sha be made on Form 1 0
coverng n acoho wthdrawn from bonded warehouses ta -pad for beverage
use showng the matera from whch produced or an abbrevaton thereof, such as
coho Gran, coho Cane. coho Frut, coho Dsted from
gran, coho Dsted from cane, or coho Dsted from frut. The
purpose of wthdrawa sha be shown on each Form 1 0 as, for e ampe when
acoho s wthdrawn for scentfc purposes, etc., or for the use of the Unted
States or governmenta agency thereof the purpose w be entered as ospta
use, Laboratory use, or Use of Unted States, etc., as the case may be.
Where packages are fed from a storage tank In a warehouse for mmedate
shpment the words Fed from storage tank n warehouse sha be wrtten n
the headng of Form 1 0. When packages are fed from storage tanks and are
not to be mmedatey wthdrawn the foowng notaton w be made: Fed
from storage tank n warehouse for storage. (Sees. 3101, 310 , 312 (a)(0),
3171, 3176, I. R..C.)
Sec 1 2.6 3a. ppcaton for Wthdrawa. When the propretor desres to
wthdraw acoho from the bonded warehouse for any awfu purpose and has
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
1 1 Regs. 3, 1 2.6(6), etc.
comped wth a the requrements of the aw and the reguatons n ths part
respectng the partcuar wthdrawa, he w make appcaton on the back of
each copy of Form 1 0, coverng the wthdrawa, to the storekeeper-gauger n
charge for permsson to wthdraw the acoho. If wthdrawa s to be made upon
ta -payment, the propretor sha present to the storekeeper-gauger the prescrbed
ta -pad stamps or certfcate of ta -payment coverng the acoho to be wth-
drawn. If the acoho s to be transferred In bond to another bonded warehouse
or shpped to a denaturng pant or wthdrawn for e port or other awfu ta -free
purpose, the propretor w present to the storekeeper-gauger the necessary per-
mt authorzng such wthdrawa. The storekeeper-gauger w e amne the
ta -pad stamps or certfcate of ta -payment, or the permt authorzng transfer
n bond or ta -free wthdrawa, and f he fnds that the ta has been pad or, In
the case of transfer n bond or ta -free wthdrawa, that proper wthdrawa
permt s hed by the propretor, the storekeeper-gauger w sgn the authorza-
ton on Form 1 0 for the wthdrawa of the acoho. (Sees. 3101, 310 ,
312 (a) (6). 3171, 3176, I. It. C.)
Sec. 1 2.6 3b. Wthdrawas on Orgna Gauge. When acoho s to be wth-
drawn wthout regauge, a transcrpton of the orgna gauge sha be made on
Form 1 0 appropratey headed to show the purpose for whch wthdrawn or
transferred. Notaton w be made to the effect that wthdrawa s made on
entry gauge. The number of copes to be e ecuted and the dsposton thereof for
such wthdrawa or transfer w be made n accordance wth the reguatons n
ths part. (Sees. 3101, 310 , 312 (a) (6), 3171, 3176, I. R. C.)
Sec. 1 2.6 3c. Wthdrawas Upon Reoauoe. If a regauge of acoho s made,
the sera number, tare, and proof gaons shown on entry Form 1 0 sha be
carred to the respectve coumns of the wthdrawa Form 1 0, whch w aso
show the detas of the regauge: Provded, That f wooden packages are regauged
and actua tare s taken, the actua tare, nstead of the orgna tare, w be
stated on Form 1 0. The dfference, f any, between the proof gaons shown
n the entry gauge and on wthdrawa sha be set out as the proof gaons ost
(Sees. 3101, 310 , 312 (a) (6), 3171, 3176, I. R. C.)
Sec. 1 2.6 3d. Repackagng. Where packages on depost n a bonded ware-
house are repackaged, notaton sha be made on Form 1 0, coverng the entry
gauge of the orgna packages, that ther contents have been recasked Into other
packages, gvng the sera numbers of the recasked packages and the date of
recaskng. The recasked packages sha be gauged and notaton made on the
Form 1 0, In dupcate, coverng such gauge that they were fed from other
packages, gvng the sera numbers of the orgna packages. Where It Is desred
to recask ony a porton of the contents of the package, the package shoud be
dumped Into a storage tank and a notaton thereof made on Form 1 0. (Sees.
3101, 310 , 312 (a) (6), 3171, 3176, I. R. C.)
Sec. 1 2.6 3e. Re-Markng Packages. Where packages receved from another
warehouse are re-marked, as provded n secton 1 2. 23(6), notatons sha be
made on Form 1 0, coverng the recept and depost of the packages n the ware-
house, that the packages have been re-marked, gvng the sera numbers of the
re-marked packages and the date of re-markng. new set of Forms 1 0 sha
be prepared, coverng the re-marked packages, and notaton made thereon that
the packages were re-marked, gvng the sera numbers and warehouse of the
orgna packages. (Sees. 3101, 310 , 312 (a) (6), 3171, 3176, I. It. C.)
Sec. 1 2.6 3f. Notaton of Dfferences by Consgnee. When acoho Is re-
ceved In bond from an Industra acoho pant or from another bonded ware-
house, the propretor sha note on Form 1 0, coverng the transfer, any oss
or defcency n the shpment, as provded In secton 1 2. 9 or secton 1 2. 9 b,
as the case may be. (Sees. 3101. 310 , 312 (a) (6), 3171, 3176, I. R. C.)
Sec. 1 2.6 3g. Fng of Depost Forms. One copy of each Form 1 0, cover-
ng the depost of acoho n the warehouse, sha be kept by the propretor
u bound form as a permanent record, and fed as foows:
(1) Forms 1 0 coverng the depost n the warehouse of packages fed
from recevng tanks n the ndustra acoho pant on the same premses
w be fed together In sequence accordng to the sera number of the
packages.
(2) Packages fed from storage tanks In the warehouse, or from other
packages (where acoho s repackaged as provded n secton 1 2.6 3d or
packages are re-marked as provded n secton 1 2.6 3e) w be fed together
In sequence accordng to the sera number of the packages.
(3) Forms 1 0, coverng packages receved n bond from an Industra
acoho pant or from another bonded warehouse, w be fed n a separate
fe, accordng to the date of depost of the packages n the warehouse.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 3, 1 2.6( ), etc. 1 2
( ) Forms 1 0, coverng acoho deposted n warehouse storage tanks,
whether receved by ppe ne from the recevng tanks n the ndustra
acoho pant on the same premses or n tank cars or tank trucks from
an ndustra acoho pant or from another bonded warehouse, or dumped
from packages (as provded n secton 1 2. 9 ), w be fed together n a
separate fe In chronoogca order accordng to the date of depost of the
acoho n storage tanks.
(Sees. 3101, 310 , 312 (a) (0), 3171, 3170, I. R. C.)
Sec. S2.C 3h. Fng of Wthdrawa Forms. The propretor sha keep n
bound form as a separate permanent record a copy of each Form 1 0 coverng the
wthdrawa of acoho from the warehouse, ncudng Forms 1 0 coverng acoho
gauged for drect shpment or transfer from the warehouse storage tanks,
whether by ppe ne or n tank cars, packages, or tank trucks. The Forms
1 0 w be arranged n the fe n chronoogca order accordng to the date
of wthdrawa. (Sees. 3101, 310 , 312 (a) (G), 3171, 3176,1. It. C.)
FORM 1 3- ND FORM 1 3-
Sec. 1S2.6 . Form 1 3- . The propretor of every bonded warehouse sha
keep a monthy record, Form 1 3- , Report of Uncoopered coho, and render
monthy reports thereon, n trpcate, of a uncoopered acoho receved and
dsposed of. efore the cose of the busness day ne t succeedng the day on
whch the transactons occur entres sha be made In the respectve coumns
of the quantty of acoho deposted n the warehouse, or receved n bond at the
bonded warehouse, or packages fed, and the quanttes wthdrawn for shpment
uncoopered. Where the makng of the entres Is deferred to the ne t busness
day, as authorzed heren, approprate memoranda sha be mantaned for the
purpose of makng the entres correcty.
(a) Receved. acoho drawn from recevng tanks n the ndustra
acoho pant ocated on the same premses for storage n the warehouse w be
entered on the form. When acoho s receved from ndustra acoho pants
and from other bonded warehouses n tank ears, the symbo and sera number
of the tank car and the quantty of acoho receved w be reported. When
acoho Is receved from ndustra acoho pants and from other bonded ware-
houses n tank trucks, the State cense number of the truck and the quantty of
acoho receved w be reported. The amount of acoho ost from each tank
car or tank truck n transt to the warehouse w be entered on the same ne
wth the quantty stated as receved n such tank car or tank truck. Losses n
transt w not be ncuded wth the osses reported n the summary.
(6) Packages fed. Under the headng Packages red w be entered the
detas of a packages fed from storage tanks n the warehouse. Tank cars
and tank trucks are not consdered packages and w not be reported under ths
headng. (

(Sees. 3101, 310 , 3107.312 (a) (6), 3171, 3176,1. It. O.)
Sec. 1 2.0-16. Form 1 3- . The propretor sha keep a monthy record on
Form 1 3- , eport of coho n Packages, n trpcate. There sha be en-
tered day the quantty of acoho transferred at the warehouse to packages or
receved n packages from Industra acoho pants and from other bonded ware-
houses and the quanttes wthdrawn for shpment n packages from the ware-
house. ntres of wthdrawas of acoho for ta -payment and depost n the
ta -pad storeroom (f any) shoud show the dsposton of such acoho to the
propretor of the warehouse for such purpose. .The requred entres sha be
made n the form before the cose of the busness day ne t succeedng the day on
whch the transactons occur. Where the makng of the entres s deferred to
the ne t busness day, as authorzed heren, approprate memoranda sha be
mantaned for the purpose of makng the entres correcty. (Sees. 3101, 310 ,
312 (a) (6), 3176,1. . C.)
Sec. 1 2.6 7. Dsposton of Forms 1 3- and 1 3- . On or before the th
day of the month succeedng that for whch Forms 1 3- and 1 3- cover, the
propretor sha dever three copes of each form to the storekeeper-ganger In
charge. ach form sha be duy subscrbed and sworn to: Provded, That f the
form offcay prescrbed for such report contans theren a provson for verfca-
ton by a wrtten decaraton that such report s made under penates 6f per|ury,
such report sha be verfed by the e ecuton of such decaraton, and such decara-
ton so e ecuted sha be n eu of the oath requred heren for verfcaton.
The storekeepcr-gauger sha e amne the forms carefuy, and, f they are com-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
1S3 Regs. 3, 1 2.6(b), etc.
pete n a respects, and the quanttes shown on hand nt the end of the month
are correct, he w nta a copes of the forms, forward two copes of each
form to the dstrct supervsor, and return one copy of each form to the propretor
who sha fe the same n bound form as a permanent record avaabe for n-
specton by Government offcers. (Sees. 310 , 312 (a) (6), 3176, 3 09. I. R. C.)
UDIT OP R PORTS
Sec. 1 2.6 9. udt by Dstrct Supervsor. fter audt, and not ater than
the ast day of the month succeedng that for whch the Forms 1 3- and 1 3-
are rendered, the dstrct supervsor w forward to the Commssoner one copy
each of each such report. (Sees. 310 ,312 (a) (0), 3176,1. R. C.)
Operatons bt Users of Ta -Free coho
recept of ta -free acoho
Sec. 1 2.G 7. Depost n Stoeroom. Ta -free acoho receved pursuant to
wthdrawa permt. Form 1 0, sha be paced n the ocked storeroom or com-
partment requred to be provded n accordance wth secton 1 2.61. Such acoho
sha reman n the orgna packages n the storeroom or compartment unt
wthdrawn for use. The room or compartment for the storage of ta -free acoho
must be used for the purpose of storng such acoho n the orgna contaners.
The copy of Form 1 0 receved by the consgnee from the storekeeper-gauger at
the shppng ndustra acoho pant or bonded warehouse, as the case may be,
sha be fed avaabe for nspecton by Government offcers. The recept of the
acoho w e recorded on Form 1 1 n accordance wth secton 1 2.609. (Sees.
310 ,310 ,311 (a),312 (a) (6),3170,1. R. C.)
use of ta -free acoho
Sec. 1 2.06 . Return of Ta -Free coho to Industra coho Pant ob
onded Warehouse. Where ta -free acoho, awfuy n the possesson of a ta -
free permttee, s found to be unsutabe for use, or where such permttee ds-
contnues the use thereof, or where for any other egtmate reason suc permttee
desres so to do, such acoho may be returned to the ndustra acoho pant
or bonded warehouse from whch receved, for awfu dsposton : Provded, That
(1) consent of surety s fed on the bond (f any) of the ta -free permttee e tend-
ng the terms thereof to cover the transportaton of the acoho to the pant or
bonded warehouse, (2) the propretor of such pant or bonded warehouse assents
to such return, and (3) permsson for such return s n each nstance frst ob-
taned from the dstrct supervsor of the dstrct n whch the permttee s o-
cated. If the ndustra acoho pant or bonded warehouse s stuated n another
dstrct, the dstrct supervsor authorzng the return w forward a copy of hs
etter of authorty to the dstrct supervsor of such other dstrct. Shoud the
acoho not be reported receved by the propretor of the pant or bonded ware-
house n due tme, the dstrct supervsor w make approprate nvestgaton n
respect thereto. Report of the return of the acoho to the pant or bonded ware-
house w be made by the ta -free permttee on hs monthy report, Form 1 1,
by the propretor of the Industra acoho pant on hs pant report, Form 1 2,
and by the ware onseman on hs warehouse report, Form 1 3- . (Sees. 310 ,
312 (a)(6), 3176,1. R. C.)
records and reports of permttee
Sec. 1 2.60 . Genera. very person hodng basc permt, Form 1 7, sha
keep records and render reports as herenafter provded. ntres sha be
made as ndcated by the headngs of the varous coumns and nes of the form
and the nstructons prnted thereon or ssued n respect thereto and as requred
by the reguatons n ths part. The provsons of secton 1 2. concernng
the tme of makng entres, of secton 1 2. a concernng the faure to keep
records or aow nspecton, and of secton 1 2. 01 concernng the fng of forms
by propretors of ndustra acoho pants are hereby made appcabe to reports
by persons hodng basc permt, Form 1 7. The reports must be sgned n the
same manner as the appcaton, Form 1 7, e cept that n the case of a cor-
poraton the aff ng of the corporate sea w not be requred. Where the re-
ports are sgned by an agent, proper power of attorney authorzng the agent to
e ecute the reports for the propretor must be fed on Form 1 3 , n trpcate,
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 3, 1 2.6(6), etc. 1
In accordance wth the provsons of secton 1 2.129. (Sees. 3101, 310 , 310S,
312 (a) (6), 3171, 3176, I. R. C.)
Sec. 1 2.669. Report, Form 1 1. very person hodng permt to use ta -free
acoho must keep Form 1 1, Report of Ta -Free coho, n dupcate, cover-
ng transactons for each month. There sha be entered on the form n the
approprate spaces provded therefor, the date of recept of acoho from the
Industra acoho pant or bonded warehouse, name of the propretor of the pant
or warehouse from whch the acoho s wthdrawn, the ndustra acoho pant or
warehouse number, State n whch ocated, the seru numbers of the packages,
and the wne gaons, proof, and proof gaons receved. The tota quantty
receved durng the month and the tota quantty used durng the month sha
be reported n the summary and there sha aso be reported any shortage In
packages receved and any oss of acoho after recept. ny dscrepancy be-
tween the amount of acoho actuay on hand at the end of the month and the
amount whch shoud be on hand sha be reported n the summary. The per-
mttee w forward the orgna copy of the form to the dstrct supervsor not
ater than the 10th day of the month succeedng that for whch rendered, and
w retan the dupcate copy at hs premses avaabe for nspecton by Gov-
ernment offcers. (Sees. 310 , 310 , 312 (a) (6), 3176, I. R. C.)
Sec. 1S2.671. udt of Reports. Upon recept of Form 1 1 from the per-
mttee, the dstrct supervsor sha have the same audted and checked aganst
Forms 1 0, coverng acoho shpped to the permttee, to determne that a a-
coho wthdrawn by the permttee has been duy receved and accounted for.
(Sees. 310 , 312 (a) (6), 3176, I. R. C.)
C NG IN PROPRI TORS IP, N M , TC. ; DISCONTINU NC OF US
Sec. 1 2.672. Procedure. (a) Change n propretorshp, name, etc. Where
there s a change n propretorshp, or n the persons nterested n the busness,
or n the ndvdua, frm, or corporate name, trade name or stye, or n the
ocaton of the premses, etc., procedure smar to that prescrbed n sectons
1 2.6 0-1 2.6 2 w be foowed nsofar as appcabe.
(6) Dscontnuance of use. When the use of ta -free acoho s dscontnued,
the permttee sha gve notce thereof n wrtng, n trpcate, to the dstrct
supervsor and sha surrender to the dstrct supervsor hs basc and wth-
drawa permts. ny ta -free acoho remanng on hand at the tme of such
dscontnuance may be returned to the ndustra acoho pant or bonded ware-
house n accordance wth secton 1 2.66 , or when authorzed by the dstrct
supervsor, the acoho may be dsposed of to another person hodng permt to
use ta -free acoho, upon the fng of a consent of surety, Form 1 33, on the
bond (f any), of the purchaser e tendng the terms of hs bond to cover the
transportaton to, and use by, hm of the acoho. (Sees. 310 , 312 (a)(6),
3176, I. R. C.)
OP R TION OF INDUSTRI L LCO OL D N TURING PL NTS
R C IPT OF LCO OL FROM INDUSTRI L LCO OL PL NT OR OND D W RF. OUS ON
D N TURING PL NT PR MIS S
Sec. 1 2.69 . t Ppe Lne. If the denaturng pant s ocated on the premses
of an ndustra acoho pant or bonded warehouse, acoho may be transferred
from the recevng tanks n the ndustra acoho pant or from storage tanks
n the bonded warehouse to acoho storage tanks n the denaturng pant, or
to m ng tanks theren for mmedate denaturaton. coho transferred to
denaturng pants by means of ppe nes sha be carefuy weghed and proofed
upon recept n the denaturng pant, uness weghed n weghng tanks n the
bonded warehouse or recevng room mmedatey before transfer. Whe a-
coho thus transferred must be weghed at the tme of transfer n a weghng
tank n the recevng room or bonded warehouse or n a weghng tank ocated
n the denaturng pant, t s not requred to be weghed at such tme both n
the recevng room or warehouse and the denaturng pant. transfers of
acoho from an ndustra acoho pant or bonded warehouse by ppe ne w
be made under the mmedate supervson of the storekeeper-gauger. The
storekeeper-ganger supervsng the depost of the acoho n the storage tank
or m ng tank n the denaturng pant w see that the outet and a other
openngs of such tank e cept the net are cosed and ocked and that the vaves
of the pne ne are so ad|usted by the propretor as to contro the fow of a-
coho nto the tank before the outet of the recevng tank or storage tank from
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
1 Regs. 3, 1 2.0(6), etc.
whch the acoho s to be transferred s unocked. When the acoho has been
deposted n the tank n the denaturng pant the net of such tank and the
outet of the recevng tank or storage tank w be mmedatey cosed by the
propretor and ocked by the storekeeper-gauger. The storekeeper-ganger w
not permt the transfer of acoho from recevng tanks or storage tanks to the
denaturng pant by ppe ne uness the use of such ppe ne has been approved
n accordance wth the reguatons n ths part. Form 1 0 w be dsposed of
n accordance wth secton S2.G93a. (Sees. 3070, 3103, 310 (a), 312 (a)(6),
3176, I. R. C.)
Sec. 1 2.60 . In Packages. When acoho Is receved n packages from the
ndustra acoho pant or bonded warehouse on the same premses, the packages
w be transferred to the denaturng pant under the mmedate supervson
of the storekeeper-gauger n charge of the ndustra acoho pant or bonded
warehonse from whch the acoho s transferred and the storekeeper-gauger
n charge of the denaturng pant. The packages w he e amned n accord-
ance wth secton 1 2. 92. Form 1 0 w be dsposed of n accordance wth
secton 1 2,69 a. (Sees. 3070, 310 , 310 (a), 312 (a) (6), 3176, I. R. C.)
Sec. 1 2.09 a. Depost n Denaturng Pant. Upon the depost n stornge
or m ng tanks of acoho transferred by ppe ne from the ndustra acoho
pant on the premses pursuant to secton 1 2. 0 f or from the warehouse on the
premses pursuant to secton 1 2. 9, and upon competon of the e amnaton
of packages receved from such ndustra acoho pant pursuant to secton
2. 0 f and from such bonded warehouse pursuant to secton 1 2. 9, the
propretor w determne accuratey the quantty receved and w check n
the recept of acoho aganst Form 1 0 n the presence of the storekeeper-
gauger. The propretor w e ecute the certfcate of recept on both copes
of Form 1 0 and w note thereon and on Form 1 6 - any oss or defcency
n the shpment. Where a oss n transt s sustaned, the propretor w report
on such forms the tota oss for transfer by ppe ne and, n the case of packages
the oss from each package. The storekeeper-gauger w make a fu report of
such oss to the dstrct supervsor n accordance wth secton 1 2. 92. The
propretor w fe one copy of Form 1 0 as a permanent record as provded
n secton 1 2.7S and w dever the remanng copy to the storekeeper-gauger
who w forward t to the dstrct supervsor. (Sees. 3070, 310 , 3107, 310 (a),
312 (a) (6), 3176, I. R. C.)
R C IPT OF LCO OL FROM INDUSTRI L LCO OL PL NTS ND OND D W R OUS S
NOT ON D N TURING PL NT PR MIS S, IN S M SUP R ISORY DISTRICT
Sec. 1 2.696. Packages, Tank Cars, and Tank Trucks. Upon recevng Form
1 0 n dupcate coverng acoho transferred n bond from an ndustra acoho
pant n the same supervsory dstrct pursuant to secton 1 2. 0 g, or from an
ndustra acoho bonded warehouse n the same supervsory dstrct pursuant
to secton 1 2. 60, the storekeeper-gauger n charge at the recevng denaturng
pant w dever both copes to the propretor of the pant. When the acoho
s receved at the denaturng pant n packages the shpment w be e amned
by the propretor and the storekeeper-gauger n accordance wth secton 1 2. 92.
When receved n a tank car, the shpment w be e amned n accordance wth
secton 1 2. 93. When receved n a tank truck the seas w be broken n
accordance wth secton 1 2.69 a and the shpment e amned n accordance wth
secton 1 2. 93a. coho receved In packages sha be deposted n accordance
wta secton 1 2.697, n tank cars n accordance wth secton 1 2.69 , and n
tank trucks n accordance wth secton 1 2.09 a. Form 1 0 w be dsposed
of n accordance wth secton 1 2.696a. (Sees. 3070, 310 , 3107, 310S(a), 311 (a),
312 (a) (6), 3176. I. R. C.)
Sec. 1 2.696a. Depost n Denaturng Pant. Upon competon of the e am-
naton of the contaners from an ndustra acoho pant or bonded warehouse
ocated on other premses n the same supervsory dstrct, the propretor of
the denaturng pant w determne accuratey the quantty receved and w
check n the recept of the acoho aganst Form 1 0 n the presence of the
storekeeper-gauger. The propretor w e ecute the certfcate of recept
on both copes of Form 1 0 and w note thereon and on Form 1 6 - any
oss or defcency n the shpment. Where a oss n transt s sustaned, the
propretor w report on such forms the tota oss from tank cars and tank
trucks and n the case of packages the oss from each package. The store-
keeper-gauger w make a fu report of such oss to the dstrct supervsor n
accordance wth secton 1 2. 92, 1 2. 93, or 1 2. 93a, as the case may be. The
93 30 0 13
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 3, 1 2.6(b), etc.
1 6
propretor w fe one copy of Form 1 0 ns a permanent record as provded
In secton 1 2.7 and w dever the remanng copy to the storekeeper-gauger
who w forward t to the dstrct supervsor. The dstrct supervsor w
check day on recept each Form 1 0 coverng a tank truck shpment and
make any nqury whch he deems necessary wth respect to any dscrepancy.
In the event of faure to receve a form from the storekeeper-gauger at the
consgnee s premses wthn the tme normay requred for the truck to make
the shpment and the form to be receved by ma the dstrct supervsor w
make approprate nqury. If recepted Forms 1 0 coverng other shpments
are not receved wthn a reasonabe tme, the dstrct supervsor w make
approprate nvestgaton. (Sees. 3070, 310 , 3107, 310 (a), 311 (a), 312
(a) (6), 3176,1. R. C.)
R C IPT OF LCO OL FROM INDUSTRI L LCO OL PL NTS ND OND D W R OUS S
IN DIFF R NT SUP R ISORY DISTRICTS
Sec. 1 2.69 b. Packages, Tank Cars, and Tank Trucks. Upon recevng Form
1 0 coverng acoho transferred n bond from an ndustra acoho pant n a
dfferent supervsory dstrct pursuant to secton 1 2. 0 h or from a bonded ware-
house n a dfferent supervsory dstrct pursuant to secton 1 2. 60a, the store-
keeper-gauger n charge at the recevng denaturng pant w dever a copes
to the propretor of the denaturng pant When the acoho s receved at the
denaturng pant n packages the shpment w be e amned by the propretor
and the storekeeper-gauger n accordance wth secton 1 2. 92. When receved
n a tank car, t w be e amned n accordance wth secton 1 2. 93. When
receved n a tank truck, the seas w be broken n accordance wth secton
1 2.69 a, and the shpment e amned n accordance wth secton 1 2. 93a. The
acoho receved n packages sha be deposted n accordance wth secton 1 2.697,
n tank cars n accordance wth secton 1 2.69 , and n tank trucks n accordance
wth secton 1 2.69 a. Form 1 0 w be dsposed of n accordance wth secton
1 2.69 c. (Sees. 3070, 310 , 310 (a), 311 (a), 312 (a) (6), 3176, L R, C.)
Sec, 1 2.69 c Depost n Denaturng Pant. Upon competon of the e -
amnaton of the contaners from an ndustra acoho pant or bonded ware-
house ocated In a dfferent supervsory dstrct, the propretor of the denaturng
pant w determne accuratey the quantty receved and w check n the recept
of the acoho aganst Form 1 0 n the presence of the storekeeper-gauger. The
propretor w e ecute the certfcate of recept on a copes of Form 1 0 and
w note thereon and on Form 1 6 - any oss or defcency n the shpment.
Where a oss n transt s sustaned the propretor w report on such forms the
tota oss for transfers n tank cars and n tank trucks and, n the case of pack-
ages the oss from each package. The storekeeper-gauger w make a fu report
of such oss to the dstrct supervsor n accordance wth secton 1 2. 92, 1 2. 93,
or 1 2. 93a, as the case may be. The propretor w fe one copy of Form 1 0
as a permanent record as provded n secton 1 2.7 and w dever the re-
manng copy of Form 1 0 to the storekeeper-gauger. The storekeeper-gauger
w forward the copy of Form 1 0 to the supervsor of the dstrct n whch the
denaturng pant s ocated. The supervsor-consgnee w forward the copy
receved at the tme of shpment to the supervsor-consgnor and fe the reman-
ng copy. e w check day, on recept, each Form 1 0 coverng a tank truck
shpment and make any nqury whch he deems necessary wth respect to any ds-
crepancy. In the event of faure to receve a form from the storekeeper-gauger
at the consgnee s premses wthn the tme normay requred for the truck to
make the shpment and the form to be receved by ma the supervsor-consgnee
w make approprate Investgaton. The supervsor-consgnor w aso check
day, on recept, each Form 1 0 coverng a tank truck shpment receved from
the supervsor-consgnee. In the event of faure to receve a form wthn a
reasonabe tme, he w make approprate nqury. If recepted Forms 1 0
coverng other shpments are not receved wthn a reasonabe tme, dstrct
supervsors w make approprate Inqury. (Sees. 3101, 310 , 3113, 312 (a) (6),
3176, I. R. a)
transfer n packages and tank cars of denatured acoho between
denaturng pants
Sec. 1 2.7 9. Intradstrct Transfers. When denntured acoho s shpped
to another denaturng pant n the same supervsory dstrct. In packages and
tank cars, the propretor w prepare two copes of Form 1 67 (n addton to
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
1

2
1
:

2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/
u
c
1
.
b
3
2
9
6
9
1
9
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
1 7
Regs. 3, 1 2.6(6), etc.
the copes prepared at the tme the packages were fed pursuant to secton
1S .7S3) and four copes of Form 1 73 reportng the shpment. When competey
denatured acoho Is so shpped, the Forms 1 73 w be modfed to read Com-
petey, nstead of Specay, denatured acoho. The propretor w dever
a copes of the forms to the storekeeper-gauger n charge who sha at the tme
of shpment forward one copy each of Forms 1 67 and 1 73 to the supervsor of
the dstrct and two copes of Form 1 73 and one copy of Form 1 67 to the store-
keeper-ganger n charge of the recevng denaturng pant, and return the reman-
ng copy of Form 1 73 to the propretor for fng n accordance wth secton
1 2.7SS. fter recept of the denatured acoho at the denaturng pant, forms
w be dsposed of n accordance wth secton 1 2.7 9a. (Sees. 3100, 312 (a) (6),
3170, I. R. C.)
Sec. 1 2.7 9a. I tradstrct Deposts. Forms 1 G7 and 1 73, coverng shp-
ments n packages or n a tank car receved by the storekeeper-gauger n charge
of the recevng denaturng pant w be devered to the propretor. When
such forms are receved pror to the recept of the acoho, the storekeeper-
gauger w make an approprate memorandum entry of the shpment before
deverng such forms to the propretor. When the denatured acoho s receved
at the denaturng pant, the propretor and the storekeeper-gauger w e amne
the shpment. The propretor w determne accuratey the quantty receved
and w check n the recept of the denatured acoho aganst Form 1 67 n the
presence of the storekeeper-gauger. Where packages bear evdence of havng
sustaned osses n transt, or raroad tank cars bear evdence of havng sus-
taned a oss, the oss w be determned. The propretor w recept for the
shpment n Part III of both copes of Form 1 73 notng any oss or defcency.
The storekeeper-gauger w make a report of such osses and of the e amnaton
of the shpment to the dstrct supervsor. The propretor w fe one copy
each of Forms 1 07 and Forms 1 73 n accordance wth secton 1 2.7 and w
dever the remanng copy of Form 1 73 to the storekeeper-gauger who w for-
ward t to the dstrct supervsor. The dstrct supervsor w check Form 1 73
wth the monthy reports of the consgnor and consgnee, and, f recept of the
shpment s duy reported by the consgnee and the form agrees wth the con-
sgnor s monthy report, the dstrct supervsor w nta Part II of the form.
(Sees. 310 , 312 (a) (0), 3170, I. It. C.)
Sec. 1 2.7 0. I tehdstrct Transfers. When denatured acoho s shpped
to another denaturng pant n a dfferent supervsory dstrct, n packages
and tank cars, the propretor w prepare three copes of Form 1 07 (n addton
to the copes prepared at the tme the packages were fed pursuant to secton
1 2.7 3) and fve copes of Form 1 73 reportng the shpment. When competey
denatured acoho s so shpped, the Form 1 73 w be modfed to read Com-
petey, nstead of Specay, denatured acoho. The propretor w gve a
copes to the storekeeper-gauger n charge who sha at the tme of shpment
forward one copy each of Forms 1 67 and 1 73 to the supervsor-consgnor, one
copy ea ch of Forms 1 67 and 1 73 to the supervsor-consgnee, one copy of Form
1 07 and two copes of Form 1 73 to the storekeeper-gauger n charge of the
recevng denaturng pant, and return the remanng copy of Form 1 73 to the
propretor for fng n accordance wth secton 1 2.7 . Upon recept of the
denatured acoho at the denaturng pant, the forms w be dsposed of n ac-
cordance wth secton 1S2.7 1. (Sees. 310 . 312 (a) (6), 3170, I. R. C.)
Sec. 1 2.7 1. I tehdstrct Deposts. Forms 1 07 and 1 73 coverng shp-
ments n packages or n a tank car receved by the storekeeper-gauger n charge
of the recevng denaturng pant w be devered to the propretor. Where snch
forms are receved pror to the recept