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refusing or neglecting to make a return shall have added 50 per centum to the amount of tax, or for a false or fraudulent return, 100 per cent (St. I), besides being liable to a specific penalty not exceeding $10,000. (St. G d.) Any person or any officer of a corporation required to make a return, who shall therein make any false or fraudulent statement with intent to evade the tax, shall be guilty of a misdemeanor and be liable to a fine of $2,000 and to imprisonment for one year. (T. R. 164.) Any person divulging unlawfully any information whatever disclosed by a return shall be subject to a fine of $1,000 and to imprisonment for one year. (St. I.) For making a false statement for the purpose of obtaining any reduction or exemption, the person shall be liable to a penalty of $300. (St. E.) The statute of limitations in enforcing collection of income tax is three years. (T. R. 177.) Any person, corporation or association liable to make return and not making it in due time shall be liable to a penalty of not less than $20 and not more than $1,000. (T. R. 164.) As every return must be made under oath, any willful misstatement contained in it is a violation of law. A fine not exceeding $5,000 and imprisonment for a year may be imposed on any person or corporation undertaking for profit to collect interest from coupons, checks and bills of exchange from foreign countries, without first having obtained a license for such purpose from the Commissioner of Internal Reve

(Section 3 of the Statute.) Failure to make a return in due time by an individual who is required to make it (117) incurs a penalty of not less than $20 nor more than $1,000. (See Protests, 454, and Compromises, T. D. 2015.)

141. Inspection of Returns. It is unlawful for any official or other person to divulge any information from the re turns of income, except as specifically allowed as herein noted. (Statute I.) The returns shall be open to inspection only upon the order of the President, under rules and regulations to be prescribed by the Secretary of the Treasury and approved by the President. The proper officers of any State imposing a general income tax may, upon the request of the


Governor thereof, have access to the returns or an abstract of them. (T. R. 178.) (Section G, subsection d, of the Statute.) (T. D. 1962 and 2016.)

[42. Powers of the Collectors. Section 3172 of the Re vised Statutes provides that every Collector shall, from time to time, cause his deputies to proceed through every part of his district and inquire after and concerning all persons therein who are liable to pay any internal revenue tax. The latter part of section D of the Statute provides that if the Collector or Deputy Collector has reason to believe that the amount of any income is understated he shall give due notice to the lister to show cause why it should not be increased. If the return shall not be made as required by law, the Collector shall cause it to be made by summoning the person or others having charge of the books and accounts, and require them to produce the accounts and to answer any questions concerning said income. From any decision of the Collector the taxpayer may appeal to the Commissioner of Internal Revenue. See Treasury Regulations, Articles 20 and 21, and section I of the Statute. Corporation Bookkeeping, (57. On order of the Commissioner of Internal Revenue the books of a corporation are to be open to inspection. (T. R. 186.)

143. Insurance Companies. A different form of return is required for insurance companies, though, except in a few details, they are essentially the same in requirements as for other corporations. (St. G c.) Deductions allowable for insurance companies are expenses (621), losses (924), interest (22), taxes (123), and the two following. Fifth is "the net addition, if any, required by law to be made within the

year to reserve funds.” (T. R. 147.) Sixth is "sums other than dividends paid within the year on policy and annuity con

(See Article 100 of Treasury Regulations.) Mutual fire insurance companies shall not return as income any portion of premium deposits returned to policyholders, but shall return all income from other sources plus such portions of the premium deposits as are retained by the companies for purposes other than the payment of losses and expenses and reinsurance reserves. (T. R. 98-100.) Mutual marine insurance companies may deduct from gross income the amount repaid to policyholders on account of premiums previously paid. (T. R. 99.) Life Insurance, f30. Corporations, (15. Penalties, 140.

144. Assessment. Section E of the Statute says that "all assessments shall be made by the Commissioner of Internal Revenue, and all persons shall be notified of the amount for which they are respectively liable on or before the first day of June of each successive year.” In the case of corporations whose fiscal years end at other times than December 31, the assessment is made within three months from the time of making the return. (137.) It is the duty of the Collector of Internal Revenue for the district to have all returns made according to the requirements. When this is accomplished, the returns are forwarded to the Commissioner in Washington, and the assessments of tax are made by him. (T. R. 195.) The list of tax to be collected is then sent to the Collector, and it is then his duty to collect it. (T. R. 197.) (Protests, 154.)

145. Nonresident Aliens. Persons owning property in the United States, and who are neither citizens nor residents of the United States, are subject to the Income Tax in so far as it affects the income from such property in the United States. (T. R. 8.) Such nonresident alien is allowed all the deductions in section B of the act, 1 to 8, inclusive. (T. R. 6.) The exemption of $3,000, however, is not allowed, but the tax must be paid on all the income in the United States, and the tax includes the normal tax and the additional tax, as discussed in paragraph 16. (T. D. 2109.) The persons in charge of the property shall make the return and pay the tax. (T. R. 8.) “Residence” of aliens defined, T. D. 2242. As to exemption on dividends (f49), see T. D. 2012. U. S. banks as agents for aliens, T. D. 1988. Alien does not pay tax on income derived wholly in foreign country for services, etc. (T. D. 2152.)

146. "Accrued Income" Defined. The first sentence of the Statute says that the tax shall be levied and paid annually “upon the entire net income arising or accruing from all sources during the preceding calendar year.” Section G(a) of the Statute likewise imposes the normal tax for corporations on the income "arising or accruing." Section G(c) says that "the tax herein imposed shall be computed upon the entire net income accrued within each preceding calendar year.” (“Calendar year,” wherever used in this connection, is subject to the provision that any corporation may substitute its own fiscal year as stated in (37.) This word, “accruing” or “accrued,” has caused misunderstanding in view of the fact that the excise corporation tax of 1909 (s11) imposed the tax on "income received." This presents the question as to whether or not the tax under the present Statute is to be paid on the income that was actually received during the year, or that accrued and was therefore due to be received. The distinction and meaning can probably be made clear by the requirement as to partnerships. (136.) A partner must return the income which has “accrued” to him in the profits of the partnership, whether or not the "accrued” profits have been actually distributed to him and the others. It has been said that uncertain income which “may never be received” cannot be included as income. (Life Ins. Co. v. Herold, 198 Fed. 199.) Therefore it may be held as certain that taxable income does not include uncertainties, but only the "accrued” income, such as interest or dividends or profits due and unpaid, but collectible. Even if such should later not be collected, they would be deducted for that year and thus the balance made. See 125 and 147, and T. D. 2090, page 13.

947. Professional Fees. The first sentence of section B of the Statute prescribes that "net income of a taxable person shall include that derived from professions, vocations, businesses." Instructions on the form for individual returns provided by the Treasury Department prescribe: “Persons receiving fees or emoluments for professional or other services should include all actual receipts for the services rendered in the year for which return is made, together with all unpaid accounts, charges for services, or contingent income due for that year, if good and collectible.” This requirement concerning “unpaid accounts” has been misunderstood, but in connection with the last words of the instruction, "if good and collectible,” ought to be plain enough. It leaves the provision practically as "accrued income.” (146.) The taxpayer is left as the judge as to whether or not the “unpaid accounts” are “collectible.” If he should make a mistake about it either way, it will be corrected in subsequent years. If the amount should be returned as income and later charged off the books as uncollectible, it would be deductible for such latter year. (1125.) On the other hand, if certain unpaid accounts should be considered worthless and not be included as income, and later should be collected, they would have to be included as income for the year in which they were collected. It might be more simple to regulate it as in Wisconsin, where, under the State law, professional fees are included "when collected"; but as the taxpayer is the judge, the difference is slight. Fees that are irregular or uncertain are not subject to withholding, f32. Salaries (131) paid to professional men are subject to withholding.

148. Rents. Another of the specific sources of taxable income is rents. (St. B.) This includes the receipts from all property used by another and for which use a certain amount is paid. It makes no difference in what form the rent is paid, whether in services, produce, or otherwise. Where land was leased and the lessee erected a building which at the end of a term of years was to go to the owner of the land, the cost of the building was held as rent for the number of years. (T. R. 115.) Any agent entrusted with the collection of rents shall withhold the normal tax on the amount after it exceeds $3,000. (132.) (Interest paid by corporations as rent, T. R. 148.) See T. D. 2090, pages 16 and 23, and T. D. 2135, page 6.

49. Dividends. The income from dividends is a specifically named source of taxable income. (St. B.) The Statute

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