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CREDITS. 126 Art. 9. (a) For the purpose of the normal tax only, the income

embraced in a personal return shall be credited with the amount received as dividends upon the stock or from the net earnings of any corporation, joint-stock company or association, trustee, or insurance

company, which is taxable upon its net income. 127 (b) A like credit shall be allowed as to the amount of income, the

normal tax upon which has been paid or withheld for payment at : the source of the income under the provisions of Title I of the act of September 8, 1916, as amended, or the act of October 3, 1917, for

the purposes of one normal tax only. 128 (c) The net incoñe embraced in the return shall also be credited

with the amount of any excess-profits tax imposed and assessed for the same calendar or fiscal year upon the taxpayer, and in the case of a member of a partnership with his proportionate share of such excess-profits tax,

NONRESIDENT ALIENS. 129

Art. 10. The deductions provided by section 6 for a nonresident

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alien are

130 First. Necessary expenses actually paid in carrying on any busi

ness or trade conducted by him within the United States, not in

cluding personal, living, or family expense. 131 Second. The proportion of interest paid by him within the year

applicable in ascertaining his net income from all sources within the United States, ascertained in accordance with rule prescribed in this paragraph (except interest on indebtedness incurred for purchase of obligations or securities, the interest on which is exempt from income tax), viz: Multiply interest paid on entire indebtedness from all sources by quotient arising from dividing gross income from sources within the United States by gross income from all sources within and without the United States, but this deduction shall be allowed only if such person shall include in his return all the in- 1

formation necessary for its calculation. 132 Third. Taxes.—State and Federal, but not foreign, paid within

the year (except income and excess-profits taxes paid to the United

States) and not including taxes assessed against local benefits. 133 Fourth. Losses.-Actually sustained during the year, incurred in

business or trade conducted by him in the United States, and losses or property in the United States from fires, storms, shipwreck, or other casualty, and from theft, when such losses are not compensated

by insurance or otherwise. 134 Fifth. Losses incurred in transactions entered into in the United

States for profit, but not connected with his business or trade in the United States, to an amount not exceeding the profits arising from such transactions.

Sixth. Debts arising in course of business or trade conducted in 135 the United States due to taxpayer actually ascertained to be worthi less and charged off within the year.

Seventh. Depreciation in an amount representing exhaustion from 136 wear and tear of property within the United States arising out of

its use or employment in business or trade, but no deduction shall - be allowed for any amount paid out for new buildings, permanent

improvements or betterments to increase the value of any property or estate, and no deduction shall be made for any amount of expense of restoring property or making good the exhaustion thereof for which an allowance is or has been made. The value to be cared for by depreciation is the actual amount invested in the property, and not the value which may be arbitrarily or otherwise fixed.

Eighth. (a) Depletion.-An amount representing the capital in- 137 (vested in product removed during the year through oil or gas wells

or mines within the United States. (6) Depletion can be claimed only by the owner in fee of the mineral interest. Mineral in place being real estate, in all cases where aliens are not permitted to own real estate in the United States without some enabling act making such ownership possible, except upon a showing of title satisfactory to the Commissioner of Internal Revenue, no depletion shall be allowed to a nonresident alien. Upon a satisfactory showing of fee title in a nonresident alien to mineral interest being operated by

means of wells or mines, depletion shall be calculated in the same th manner as provided in Articles 170, 171, and 172.

Art. 11. (a) For the purpose of the normal tax only, the income 138 embraced in a personal return of a nonresident alien individual shall be credited with the amount received as dividends upon the stock or

from the net earnings of any corporation, joint-stock company or 1

association, trustee, or insurance company, which is taxable upon its net income.

(6) A like credit shall be allowed as to the amount of income, the 139 normal tax upon which has been paid or withheld for payment at the

source of the income under the provisions of Title I of the act of September 8, 1916, as amended, or the act of October 3, 1917.

(c) The net income embraced in the return shall also be credited 140 with the amount of any excess-profits tax impossed and assessed for the same calendar or fiscal year upon the taxpayer, and in the case of a member of a partnership, with his proportionate share of such

excess-profits tax. i

Art. 12. A nonresident alien may have the benefit of the deduc- 141 tions and credits above provided only by filing or causing to be filed i with the collector of internal revenue a true and accurate return of

his total income received from all sources, corporate or otherwise, in the United States. In case of failure to file return the tax is to be collected on the gross income from all sources in the United States.

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142 Art. 13. When all income tax to which income of a nonresident

alien is subject is not withheld at the source, a return of income will be required to be filed by or on behalf of said nonresident alien, and penalty for failure to make return in time will attach. All property in the United States of a nonresident alien will be subject to distraint for collection of tax and penalty.

EXEMPTIONS.

4,000

143 Art. 14. The cxemptions below are given in respect of the normal

income tax only.—They are limited to individuals who are citizeng or resident aliens and are provided by (a) section 7, act of September 8, 1916, as amended by the act of October 3, 1917, and by (6) sec.

tion 3, act of October 3, 1917.
141 (a) Under the act of 1916 (sec. 7), for the purpose of the

normal income tax, there shall be allowed as an ex-
emption in the nature of a deduction from the amount
of net income of each citizen or resident of the United
Statesc

$3,000 145 (6) An additional $1,000 is allowed when the person making

the return is head of a family or is married and living
with husband or wife (as the case may be), in that
case making

(Provided, that only one deduction of $4,000 shall
be made from the aggregate income of both husband

and wife when living together.)
146 (c) When the person making the return is the head of a

family and there are children of the family under 18
years of age, dependent upon such person, or if 18 years
of age or over but incapable of self-support because
mentally or physically defective and dependent by rea-
son of that fact, there is an additional exemption for
each child to be claimed by person making return
and supporting child).

200 147 (d) Estates in process of administration, or in trust, the in

come of which is not distributed annually or regularly
(to be claimed by executor, administrator, or trustee) -- 3,000

SECTION 3, ACT OF OCTOBER 3, 1917.

148 Section 3, act of October 3, 1917, provides that in case of normal

tax imposed by section 1 of that act: 149 The exemption of $3,000 and $4,000 provided by section 7, act of

September 8, 1916, as amended by the act of 1917, shall be, respectively, $1,000 and $2,000.

In all cases where under section 7, act of September 8, 1916, as 150 amended, exemptions of $3,000 or $4,000 are given in the nature of a deduction for the purpose of the normal income tax, for the purpose of normal tax under the act of October 3, 1917, said exemptions of $3,000 and $4,000 are to be, respectively, $1,000 and $2,000.

Fiduciaries acting for minors or incompetent persons are permitted 151 to take the personal exemption as to income derived from property of which they have charge in favor of each ward or beneficiary.

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Where a person having a taxable income dies within the calendar 152 year his personal representative in making return for him will be entitled to claim the full exemption granted by the statutes for the calendar year.

HEAD OF A FAMILY.

A head of a family is a person who actually supports and main- 153 tains one or more individuals who are closely connected with him by blood relationship, relationship by marriage, or by adoption, and whose right to exercise family control and provide for these dependent individuals is based upon some moral or legal obligation.

EXCESS.

Personal exemptions from tax are granted in respect of the normal 154 income tax only. Where the total of allowable exemptions and credits exceeds the amount of net income, the excess of such exemptions may not be availed of as against the additional tax,

DEPENDENT CHILDREN.

The exemption of $200 for each dependent child provided by 155 section 7, act of September 8, 1916, as amended, is given in respect of the income tax and is, therefore applicable under both the act of September 8, 1916, as amended, and the act of October 3, 1917, under the same conditions of fact.

HUSBAND OR WIFE DYING DURING CALENDAR YEAR.

Where a husband or wife having a taxable income dies within a 156 calendar year, and the full exemption for the calendar year is used by the personal representative in making return for the deceased, if the survivor is also required to make a return at the close of the

calendar year for income received within that calendar year the full personal exemption, according to the marital status of the survivor at the close of the calendar year, may be claimed in a return of

income. 157 Art. 15. Section 1 (a), act of September 8, 1916, levies a normal

income tax of 2 per cent on the entire net income received in the preceding calendar year from all sources by every individual, a citizen or resident of the United States; and a like tax upon the entire net income received in the preceding calendar year from all sources

within the United States by every individual, a nonresident alien. 158 Art. 16. Section 1 (b), act of September 8, 1916, levies upon the

total net income from all sources of every individual, a citizen or resident of the United States, or, in the case of a nonresident alien the total net income received from all sources within the United States, an additional income tax, at the rates therein specified, upon

the amount by which such total net income exceeds $20,000. 159 Art. 17. Section 1 of the act of October 3, 1917, levies (in addition

to the normal tax under the act of 1916), a normal income tax of 2 per cent upon the net income of every individual, a citizen or resident of the United States, received in the calendar year 1917 and every calendar year thereafter. The normal income tax under this

section is not levied on the income of nonresident aliens. 160 Art. 18. Section 2, act of October 3, 1917, levies (in addition to

the additional tax imposed by section 1 (6), act of 1916) an additional tax upon the total net income in excess of $5,000 of every individual (citizen, resident, or nonresident alien) at the rates therein prescribed, received in the calendar year 1917 and every calendar

year thereafter. 161 Art. 19. Additional tax includes undistributed profits.

For the purpose of the additional tax, the taxable income of any individual shall include the share to which he would be entitled of the gains and profits, if divided or distributed, whether divided or distributed or not, of all corporations, joint-stock companies or associations, or insurance companies, however created or organized, formed or fraudulently availed of for the purpose of preventing the imposition of such tax through the medium of permitting such gains and profits to accumulate instead of being divided, or distributed; and the fact that any such corporation, joint-stock company or association, or insurance company, is a mere holding company, or that the gains and profits are permitted to accumulate beyond the reasonable needs of the business, shall be prima facie evidence of a fraudulent purpose to escape such tax; but the fact that the gains and profits are in any case permitted to accumulate and become surplus shall not be construed as evidence of a purpose to escape the said tax in such case unless the Secretary of the Treasury shall certify

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