4. (a) 8. Names of officers and employees to whom salaries of $3,000 or more were paid during the year and amount paid to each. (If the space below is not adequate, a list marked "Item 4 (a)" containing this information should be attached to this form.)

Total...

Name

Amount

(b) Payments in Lieu of Rent: This item should include all royalties, as well as interest paid in lieu of rent on mortgages secured by property which the corporation occupies but which it does not own and in which it has no equity. See Note 6 (a).

5. (a) LOSSES:

Losses deductible under this item must be distinguished from depreciation or allowances for wear and tear, exhaustion, or obsolescence of property. The losses must be absolute, complete, actually sustained during the year, and charged off on the books of the corporation, and if the loss results from the sale of assets acquired prior to January 1, 1909, such loss shall be prorated and the amount apportioned to the years subsequent to January 1, 1909, may be deducted under this item.

Losses compensated by insurance or otherwise are not deductible.

Kind of Asset

Total..

Original

Amount

Date Charged Off Amount Charged Off

When were the deducted losses ascertained to be such?.

How were they so ascertained?..

(b) Depreciation: The amount deductible on account of depreciation is an amount which fairly measures the deterioration during the year in the value of physical property by reason of use, wear and tear, and such amount should be determined upon the basis of the cost of the property and the probable number of years constituting its life. Stocks, bonds, and like securities are not subject to wear and tear within the meaning of the law, and any shrinkage in their value due to fluctuations in the market is not deductible either as depreciation or loss.

Depreciation computed on total invoice value of merchandise in stock is not an allowable deduction. However, the extent of shrinkage in value below invoice cost of certain articles of merchandise in stock, determined upon the individual articles affected, may be taken and should be reflected in the value of merchandise inventory shown in the supplementary statement 3 (a).

If buildings, state kind of construction.

(c) Depletion applies to the wasting of natural deposits and contemplates a deduction to return to the corporation the cost of or capital invested in such deposits, provided such deduction must not exceed 5 per cent of the gross value at the mine (or well) of the output of the year.

Coal, iron ore, copper, oil, or gas.

†Cost to include only initial purchase price plus all carrying charges not deducted from gross income for purpose of special excise and income tax.

6. (a) INTEREST DEDUCTIBLE:

The amount of interest which may be deducted under this item is the amount actually accrued (due and payable) and paid within the year on an amount of bonded or other indebtedness not in excess of the paid-up capital stock outstanding at the close of the year plus one-half of the interest-bearing indebtedness also then outstanding. Where there is no capital stock the amount of interest deductible is the amount actually paid on an amount of indebtedness not in excess, at any time during the year, of the capital employed in the business at the close of the year.

Interest paid on mortgage indebtedness, assumed or unassumed, on property to which the corporation has taken or is taking title, or in which it has an equity, or in the acquirement of which the mortgage was considered a part of the purchase price, should be reported under this item, as such indebtedness is held to be the debt of the corporation.

Interest paid in lieu of rent on mortgage indebtedness secured by property which the corporation occupies, but does not own, or have an equity in, should be reported under item 4 (a). Such debt is the debt of the property and not of the corporation.

Interest paid on indebtedness wholly secured by collateral the subject of sale in the ordinary business of the corporation should be reported under item 4 (a).

INTEREST PAYMENTS ACTUALLY MADE DURING YEAR.

All forms of indebtedness upon which interest was paid should be listed here.

proper deduction from gross income under this item in case of banks and banking institutions only.

7. (a) TAXES-Federal and State:

(b) TAXES-Foreign: Taxes deductible under these items are such taxes actually paid within the year as are imposed by either the United States or any State or Territory thereof, or by the Govern

ment of any foreign country, not including taxes for local benefits, nor taxes paid by corporations pursuant to covenants guaranteeing their bonds to be tax free.

A reserve for taxes, as such, is not deductible.

Banks paying taxes assessed on the value of their capital stock outstanding and in the hands of their stockholders cannot deduct the same. Such taxes are a liability of the stockholders, deductible from the dividends of such stockholders.

Where sufficient space is not provided for the entry of the information required in the "Supplementary statement," lists containing full information in the form indicated should be marked in accordance with the particular item and attached to this form.

INSTRUCTIONS TO CORPORATIONS WITH RESPECT TO MAKING RETURNS OF ANNUAL NET INCOME.

WASHINGTON, D. C., December 8, 1915.

The officers of corporations will please read carefully the following instructions, as well as those given on the return form (1031), before inserting the figures in either the return proper or the supplementary statement.

Returns must be filed by all corporations having existence during all or any part of the year, and, if made on the basis of a calendar year, must be filed on or before March 1; if on the basis of a fiscal, other than the calendar, year they must be filed on or before the last day of the 60-day period next following the close of the fiscal year.

Dissolved corporations, making return on the basis of a calendar year, will make final return covering the period from January 1 to date of dissolution. Dissolved corporations making return on the basis of a fiscal, other than the calendar, year will make a final return covering the period from the beginning of the fiscal year to the date of dissolution. Date of dissolution in either case must be noted on the face of the return in red ink.

New corporations organized during the year must make return covering the period from date of organization to December 31, unless the collector is given written notice, not less than 30 days prior to March 1, designating the last day of some month, other than December, as the closing date of the fiscal year. In this event a return will be made within 60 days after the close of the fiscal year designated, provided the period from date of organization to the closing date of the fiscal year does not exceed 12 months. Further instructions will be given by the collector.

Address in the heading must show where books are kept from which return is prepared, and the return will be filed in the district in which this address shows the books to be kept.

SUPPLEMENTARY STATEMENT MUST BE PREPARED FIRST AND THE TOTALS CARRIED TO THE PROPER SPACES BEARING SIMILAR NUMBER AND LETTER IN THE RETURN PROPER.

Paid-up capital stock, to be entered under item 1, should represent total par value of paid-up stock issued, both common and preferred, outstanding at the close of the period covered by the return. It is immaterial whether stock is paid for in cash, promissory notes, or other assets. When stock is assessable on account of deferred payments or is payable in installments, the amount actually paid on such shares will constitute the actual paid-up capital stock of the corporation, and the amount so actually paid in will be entered under this item.

Indebtedness, to be entered under item 2, should embrace all outstanding interest-bearing indebtedness for which the corporation has acknowledged liability, in the form of mortgage, note, bond, or other paper, said paper bearing interest, not including indebtedness wholly secured by collateral the subject of sale in the ordinary business of the corporation. Such latter indebtedness should be included under item 2 of the supplementary statement, at the lower margin of the return proper, and should be properly explained.

GROSS INCOME.

Banks and other financial institutions will include as Gross Income the total revenue, gains, or profits from all sources, as shown by the entries on the books of account.

Manufacturing corporations will ascertain Gross Income from Operations through the inventory computation (3a) on the back of the form. In this computation "Sales" should represent the entire sales during the year, whether for cash or otherwise. "Purchases" should include all purchases of raw material, supplies, etc., during the same period. "Purchases" will not, however, include any expenses or other items claimed as deductions under the headings 4a to 7b, inclusive. (Purchases of equipment, office furniture, fixtures, and so forth, are considered to be capital investments and are not subject to deduction as purchases or expenses.) Such items are to be charged to capital account and are susceptible to depreciation charge, which may be taken in the return if such account is set up on the books of the corporation and so entered on the books as to constitute a liability against the assets of the company. "Inven