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fiduciaries otherwise than as here provided. Fiduciaries should set forth in connection with their returns the provision of the will or trust or decree requiring such depreciation deduction where any exists, or that actual depreciation occurs, the amount thereof, and that the same has been or will be preserved and applied as such.

The intent and purpose of this regulation is to deny to fiduciaries the right of claiming a deduction for depreciation in returns for the income tax of beneficiaries when, in fact, no depreciation reserve is established nor is authorized to be established, but the amount claimed as a deduction for depreciation is actually paid to the beneficiary as income.

All amounts paid by fiduciaries to beneficiaries of trust estates from the income of such trust estates are held to be distributions of income and will be treated for income-tax purposes in accordance with the provisions of the law and regulations applicable to the income of such beneficiaries.

Nothing in this regulation shall be construed to deny the right of trustees to make deductions from gross income for expenses actually incurred for repairs and such other necessary expenses other than betterments as may be required to preserve the corpus of the estate in accordance with the facts, actual application, or reservation of the necessary amounts or proper provisions of the trust, the requirements of law, or the order of a court of competent jurisdiction.

(T. D. 2274.)

Revision of T. D. 2163 of February 18, 1915, defining the taxable status of stock dividends paid on the capital stock from the current net earnings or established surplus created from the net earnings of corporations, joint-stock companies or associations, and insurance companies taxable upon their net income.

To collectors of internal revenue:

Cash dividends or their equivalent paid from the net earnings or the established surplus or undivided profits of corpo

rations, joint-stock companies or associations, and insurance companies, if declared and paid on or after March 1, 1913, constitute taxable income in the hands of shareholders or beneficiaries when received, and should be returned when the total net income of any individual is in excess of $20,000, inclusive of such dividends, and the additional tax should be paid thereon as on income for the year in which such dividends were received, without regard to the period in which the profits or surplus were earned or the period during which they were carried as surplus or undivided profits in the treasury or on the books of the corporations, etc.

Stock dividends paid from the net earnings or the established surplus or undivided profits of corporations, jointstock companies or associations, and insurance companies, are held to be the equivalent of cash, and to constitute taxable income under the same conditions as cash dividends.

T. D. 2163 of February 18, 1915, is hereby revised, and all rulings or parts of rulings heretofore made which are in conflict herewith are hereby revoked.

(T. D. 2289, Revising 2231, Jan. 28, 1916.)

T. D. 2231 is hereby amended to provide that fiduciaries having control of any portion of income accruing during the year to known beneficiaries, other than trust estates as provided in T. D. 2231, but not distributed or paid to the beneficiaries during the year, shall, in rendering their annual return (Form 1041), give the name and address of each of said beneficiaries having a distributive interest in said income, and shall furnish all the information called for in such returns.

In all such cases the fiduciary shall withhold and pay to the collector, as provided by law, the normal tax of 1 per cent upon the distributive interest of each of said beneficiaries when such interest is in excess of $3,000, the same as if said income were actually distributed and paid to the beneficiary.

Exemption under paragraph C, however, may be claimed by the beneficiary or his legal representative by filing his claim for exemption with the fiduciary agent.

When the normal tax on undivided annual net income has been so withheld, such tax shall not be again withheld when such portion of the income is actually distributed and paid to said beneficiary, but the beneficiary will account for such income in his return of income for the year in which the same is actually received by him, entering in column "A" the amount of income on which the normal tax has heretofore been paid.

PART V

United States Supreme Court opinion in Brushaber v. Union Pacific Railroad, January 24, 1916, construing the statute

and the Sixteenth Amendment.

See 13 for Synopsis, and the Index to this volume, for references to details, abbreviated as "Sup. Ct.," followed by the page number.

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