"64 ing. Nevertheless, in some cases the Treasury engineers have contended that estimated future profits from timber properties should be so discounted. Maps are called for by form T, both key and detail maps. These should show clearly all of the features essential to demonstrate the bearing that the topography, accessibility, transportation facilities, blocking up, sales, purchases and other factors have on the property involved. Regulations pertaining to forest industries are comprehensive and are reproduced hereafter in full except when the provisions are the same as for mines, etc. The form T questionnaire (36 pages) issued by the Treasury should be in the hands of all who are interested in the valuation or taxation of forest industries.65 REVALUATION AFFECTING LESSEE. RULING. A licensee of Crown Land Limits in the Province of Quebec, Canada, is to be regarded as a lessee for tax purposes and is not entitled to deduct depletion based upon the value of the timber as of March 1, 1913. . . . . (C. B. 3, 178; L. O. 1055.) The leases in question, however, were terminable in one year. For the distinction between a lease and a sale, see page 1116. Timber accounts. REGULATION. With a view to logical and reasonable valuation of timber, the taxpayer shall include his timber in one or more accounts. In general, each such account shall include all of the taxpayer's timber which is located in one "block," a block being an operation unit which includes all of the taxpayer's timber which would logically go to a single given point of manufacture. In those cases in which the point of manufacture is at a considerable distance, or in which the logs or other products will probably be sold in a log or other market, the block may be a logging unit which includes all of the taxpayer's timber which would logically be removed by a single logging development. In exceptional cases, provided there are good and substantial reasons, and subject to approval or revision by the Commissioner on audit, the taxpayer may divide the timber in a given block into two or more accounts, e. g., timber owned on February 28, 1913, and that purchased subsequently may be kept in separate accounts, or timber owned on February 28, 1913, and the timber purchased since that date in several distinct See "Some Public and Economic Aspects of the Lumber Industry," by William B. Greeley, Assistant Forester Report No. 114. Forest Service, pages 12-18, for discussion of interest rates and capitalization of stumpage values. 65 Form T (Timber), 7 pages, is a supplementary schedule which must be filed with the return for each year subsequent to 1919, the purpose being to keep the depletion data up to date. transactions may be kept in several distinct accounts, or individual tree species or groups of tree species may be carried in distinct accounts, or special timber products may be carried in distinct accounts, or blocks may be divided into two or more accounts based on the character of the timber and/or its accessibility, or scattered tracts may be included in separate accounts. When such a division is made, a proper portion of the total value or cost, as the case may be, shall be allocated to each account. The timber accounts mentioned in the preceding paragraph shall not include any part of the value or cost, as the case may be, of the land. In a manner similar to that prescribed in the foregoing part of this article the land in a given "block" may be carried in a single land account or may be divided into two or more accounts on the basis of its character and/or accessibility. When such a division is made, a proper portion of the total value or cost, as the case may be, shall be allocated to each account. The total value or total cost, as the case may be, of land and timber shall be equitably allocated to the timber and land accounts, respectively. Each of the several land and timber accounts carried on the books of the taxpayer shall be definitely described as to their location on the ground either by maps or by legal descriptions. For good and substantial reasons to be approved by the Commissioner, or as required by the Commissioner, the timber or the land accounts may be readjusted by dividing individual accounts, by combining two or more accounts, or by dividing and recombining accounts. (Art. 236.) Depletion and depreciation accounts on books. Book depletion and depreciation are based on estimates of value and life. If it is known that additional tracts of timber will be acquired, the depreciation of the book value of equipment should be adjusted to the extended life. Since the requirements with respect to the accounts to be kept are practically the same as for mineral property (Art. 217) Article 237 for timber is omitted. Individuals are permitted to deduct contributions made to certain classes of organizations up to 15 per cent of their net income. Partnerships may deduct from gross income such donations as are in the nature of business expenses, any others being prorated among the members and deducted in their individual returns. Corporations have never been permitted to include gifts, as such, among their deductible expenses. Estates and trusts (other than trusts which have the taxable status of associations) are permitted to deduct all contributions without limitation, paid or permanently set aside during the taxable year, if so provided in the will or trust deed, for the purposes and in the manner specified for individuals, with the additional exemption of contributions to a public cemetery not operated for profit. (See Chapter 42.) Gifts by individuals deductible within limitations.— LAW. Section 214. (a) In computing net income there shall be allowed as deductions: (10) Contributions or gifts made within the taxable year to or for the use of: (A) The United States, any State, Territory, or any political subdivision thereof, or the District of Columbia, for exclusively public purposes; (B) any corporation, or trust, or community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals, no part of the E net earnings of which inures to the benefit of any private shareholder or individual; (C) the special fund for vocational rehabilitation authorized by section 7 of the Vocational Rehabilitation Act; (D) posts or organizations of war veterans, or auxiliary units or societies of any such posts or organizations, if such posts, organizations, units, or societies are organized in the United States or any of its possessions, and if no part of their net earnings inures to the benefit of any private shareholder or individual; or (E) a fraternal society, order, or association, operating under the lodge system, but only if such contributions or gifts are to be used exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals; to an amount which in all the above cases combined does not exceed 15 per centum of the taxpayer's net income as computed without the benefit of this paragraph, except that if in the taxable year and in each of the ten preceding taxable years the amount in all the above cases combined exceeds 90 per centum of the taxpayer's net income for each such year, as computed without the benefit of this paragraph, then to the full amount of such contributions and gifts made within the taxable year. In case of a nonresident alien individual this deduction shall be allowed only as to contributions or gifts made to domestic corporations, or to community chests, funds, or foundations created in the United States, or to such vocational rehabilitation fund. Such contributions or gifts shall be allowable as deductions only if verified under rules and regulations prescribed by the Commissioner, with the approval of the Secretary.1 Application of 15 per cent limitation.-In computing the 15 per cent limitation care should be taken to include capital gains and to deduct capital losses from the net income. RULING. Capital losses can not be excluded in computing net income for the purpose of determining the amount of charitable contribution deductions. (C. B. III-2, 152; I. T. 2104.) The basis upon which the limitation is computed is the statutory net income as defined in section 212 (a). If a taxpayer has a net loss carried forward from a previous year or years the deduction for contributions should be based upon his net income after deduction of the net loss.2 DEDUCTIONS PERMITTED TO EXTENT OF TOTAL NET INCOME IN CERTAIN CASES.-The law contains a provision exempting from tax the total amount of contributions, if during the taxable year, and in each of the ten preceding taxable years, the amount of all contributions is in excess of 90 per cent of the taxpayer's net income for each year, computed before deduction for contributions. This provision was inserted to cover the case of members of [Former Procedure] See Income Tax Procedure, 1926, page 1588. religious orders who, having personal incomes, are forbidden by vows of poverty to spend any part of such incomes upon themselves. In such cases, by reducing the amount available for distribution, the tax fell directly upon the beneficiaries and not upon the donors. Gifts to United States, states, municipalities, etc., deductible. The provision of the law is restrictive in the sense that contributions of such nature must be for exclusively public purposes. A taxpayer who makes a donation to the United States or a political subdivision thereof, which meets the test of being for the general good of the public, may deduct in his tax return such expenditures if his total deduction, including this and other donations, is within the 15 per cent limit. The policy of permitting deductions for such gifts is sound. Ordinarily when public improvements are made under the direction of public officials, the cost thereof is assessed to taxpayers in the form of municipal taxes. Such taxes are deductible in an individual's return. If public improvements are the gift of an individual citizen they are similar in some respects to taxes, in that the public receives benefit therefrom, and it is only reasonable that a limited deduction should be permitted, as is now provided in the present law. Contributions to state university deductible. RULING. The university of the State of S is an arm or agency of the State created and operated for a public purpose, namely, providing proper educational facilities-a purely governmental function. Contributions to the State for the use of the university are deductible to the extent provided by section 214 (a) 11. [1926 law, section 214 (a-10)] (C. B. II-2, 156; I. T. 1880.) Gifts to be deductible must be made to public associations or trusts. The law is not designed to cover private charity, such as assistance afforded to a needy relative or dependent; but the wording of the law is broad enough to include all contributions to churches and other recognized agencies, which in turn dispense aid to the needy. RULING. Contributions which may be deducted in computing the net income of an individual taxpayer include not only donations to incorporated institutions, but those given to similar associations which are not incorporated. Contributions to war chest funds, war camp com |