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(d) Gains or profits and income derived from any source whatever, including the income from, but not the value of, property acquired by gift, bequest, devise or descent.

The foregoing is held to include all income, gains, and profits arising or accruing from all sources whatever in the calendar year for which the return is made, except as hereinafter specifically stated.

Income Exempt from Taxation. Art. 5. The following items should not be included as

gross income:

(a) Value of property acquired by gift, bequest, devise, or descent during the year.

(6) Proceeds of life insurance policies paid upon the death of the person insured to beneficiaries, or payments made by or credited to the insured, on life insurance, endowment, or annuity contracts, upon the return thereof to the insured at the maturity of the term mentioned in the contract, but this shall not be construed to mean that interest payments to beneficiaries from insurance companies shall not be included as income.

(c) Income derived from interest upon the obligations of a State or any political subdivision thereof and upon the obligations of the United States or its possessions.

(d) The compensation of the President of the United States in office at the time of the passage of the act of October 3, 1913, during the term for which he was elected, and the judges of the Supreme and inferior courts of the United States in office at the time of the passage of the act of October 3, 1913;

(e) The compensation of all officers and employees of a State or any political subdivision thereof, including publicschool teachers, etc. When such State officers or employees are compensated by the United States, they must include such income as taxable.

Art. 6. Deductions and exemptions allowed in computing taxable income for the purposes of the normal tax.

Deductions Allowed Under Paragraph B. Under paragraph B the following items are to be de ducted from the gross income:

1. The amount of necessary expenses actually paid for carrying on business, but not including business expenses of partnerships and not including personal, living, or family expenses.

2. All interest paid within the year on personal indebtedness of the taxpayer incurred in the conduct of business.

3. All National, State, county, school, and municipal taxes paid within the year (not including those assessed against local benefits).

4. Losses actually sustained during the year incurred in trade or arising from fires, storms, or shipwreck and not compensated for by insurance or otherwise.

5. Debts due to the taxpayer which have been actually ascertained to be worthless and charged off within the year.

6. Amount representing a reasonable allowance for the exhaustion, wear, and tear of property arising out of its use or employment in the business, not to exceed, in the case of mines, 5 per cent of the gross value at the mine of the output for the year for which the computation is made, but not including the expense of restoring property or making good the exhaustion thereof, for which an allowance is or has been made, nor for any amount paid for new buildings, permanent improvements, or betterments, made to increase the value of any property or estate.

Gross Value at the Mine" Defined. The term "gross value at the mine," as used in paragraphs B and G of section 2 of the act of October 3, 1913, prescribing a limit to the amount which may be deducted in the return of individuals and corporations as depreciation in the case of mines, is held to mean the bona fide market value of ore, coal, crude oil, and gas at the mine or well, where such value is established by actual sales at the mine or well; and in case the market value of the product of the mine or well is established at some other place than at the mine or well, or on the basis of the bullion or metallic value of the ore, then the gross value at the mine is held to be the value of the ore, coal, oil, or gas sold, or of the metal produced, less transportation, reduction, and smelting charges.

7. The amount included in gross income received as dividends upon the stock, or upon the net earnings, of any corporation, joint-stock company, association, or insurance company which is taxable upon its net income.

8. The amount of income, the normal tax upon which has been paid or withheld for payment at the source of in


Gifts or Donations Made During the Year Not to be

Deducted. None of the above items of deduction shall include money or other items of value disposed of by gift, donation, or endowment.

Exemptions Allowed Under Paragraph C. Under paragraph C the personal exemption of $3,000 or $4,000, as the case may be, is to be deducted from the net income except in the cases of nonresident aliens. (See Arts. 7, 9, and 10.)

Tax Computed on the Calendar Year Except for 1913.

Art. 7. The act provides that the said normal tax shall be computed on the remainder of said net income accruing during each preceding calendar year, and that for the year ended December 31, 1913, said tax shall be computed on the net income accruing from March 1 to December 31, both dates inclusive, after deducting five-sixths only of the specific exemptions and deductions authorized. A specific exemption, therefore, of $2,500 or $3,333.33, as the case may be, will be allowed for the year 1913. Income of Nonresident Aliens Subject to the Normal Tax.

Art. 8. The income of nonresident aliens subject to the normal tax of 1 per cent shall consist of the total gains, profits, and income derived from all property owned, and from every business, trade, or profession carried on and capital invested within the United States (to be designated as gross income), less deductions (1 to 8, inclusive) specifically enumerated in paragraph B of the act (see Art. 6), in so far as said deductions relate to said gains, profits, etc. Exemption Under Paragraph C Not Allowed in Computing

Taxable Incomes of Nonresident Aliens. The specific exemption in paragraph C of the act can not be allowed as a deduction in computing the normal tax of nonresident aliens.

Nonresident Aliens Subject to Additional or Surtax.

Nonresident aliens are subject to additional or surtax the same as prescribed in the case of citizens of the United States or persons residing in the United States.

The responsible heads, agents, or representatives of said nonresident aliens who are in charge of the property owned or business carried on or capital invested shall make full and complete return of said income and shall pay the tax as provided herein. (See T. D. 2109.) Specific Exemption Allowed to Single Person or Married

Persons Living A part. Art. 9. Under paragraph C, every single person and every married person not living with husband or wife in the sense below defined, who has a net income exceeding $3,000 per annum, is liable to pay the normal tax under this law, but in making return for such tax such person may claim an exemption of $3,000 from his or her total net income. Specific Exemption Allowed with Respect to Aggregate

Income of Husband and Wife. Art. 10. Husband and wife living together are entitled to an exemption of $4,000 only from the aggregate net income of both, which may be deducted in making the return of such income for taxation. However, when the husband and wife are separated and living permanently apart from each other each shall be entitled to an exemption of $3,000.

If Husband and Wife Have Separate Estates One Return

May be Made Showing Income of Each. If the husband and wife not living apart have separate es tates, the income from both may be made on one return, but the amount of income of each, and the full name and address of both, must be shown in such return.

The husband, as the head and legal representative of the household and general custodian of its income, should make and render the return of the aggregate income of himself and wife, and for the purpose of levying the income tax it is as sumed that he can ascertain the total amount of said in


Wife's Return of Separate Estate to be Attached to Hus

band's Return or Husband's Income May be Included in Wife's Return.

If a wife has a separate estate managed by herself as her own separate property and receives an income of $3,000 or over, she may make return of her own income, and if the husband has other net income, making the aggregate of both incomes more than $4,000, the wife's return should be attached to the return of her husband, or his income should be included in her return, in order that a deduction of $1,000 may be made from the aggregate of both incomes. The tax in such case, however, will be imposed only upon so much of the aggregate income of both as shall exceed $4,000.

Return Required if Either Husband or Wife Has an

Income of $3,000 or Over. If either husband or wife separately has an income equal to or in excess of $3,000, a return of annual net income is required under the law, and such return must include the income of both, and in such case the return must be made even though the combined income of both be less than $1,000.

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