missioner to a United States attorney for use as evidence before a United States grand jury or in litigation in any court, where the United States is interested in the result, or for use in the preparation for such litigation, or to an attorney connected with the Department of Justice designated to handle such matters, upon written request of the Attorney General, the Assistant to the Attorney General, or an Assistant Attorney General. When an income return or copy thereof is thus furnished, it must be limited in use to the purpose for which it is furnished and is under no conditions to be made public except where publicity necessarily results from such use. If the income return is in the custody of a collector or of an internal revenue agent in charge, a copy thereof may be furnished by the collector or by the internal revenue agent in charge to a United States attorney for use as evidence before a United States grand jury or in litigation in any court where the United States is interested in the result, or for use in the preparation of such litigation. Where a photostat copy is requested and the collector or the internal revenue agent in charge has not the available facilities for making such copy, written request for the copy must be sent to the Commissioner at Washington.

In case the original return is necessary, it shall be placed in evidence by the Commissioner or by some other officer or employee of the Internal Revenue Bureau designated by the Commissioner for that purpose, and after it has been placed in evidence it shall be returned to the files from which it was withdrawn. An original return will be furnished only in exceptional cases, and then only when it is made to appear that the ends of justice may otherwise be defeated. Neither the original nor a copy of an income return desired for use in litigation in court will be furnished, where the United States Government is not interested in the result and where such use might result in making public the information contained therein, whether or not the request for the copy is contained in an order of the court. This provision is not a limitation on the use of copies of returns by the persons entitled to such copies under the provisions of the succeeding paragraph.

(2) A copy of an income return may be furnished by the Commissioner to the person who made the return or to his duly constituted attorney; or if the person is deceased, to his executor or administrator; or if the person is in the hands of a receiver, trustee in bankruptcy, guardian, or similar legal custodian, to the receiver, trustee, guardian, or other similar custodian upon written application for same, accompanied by satisfactory evidence that the applicant comes within this provision. "The person who made the return," as herein used, refers in the case of an individual return to the individual, a copy of whose return is desired, and in the case of a return of a corporation, association, joint-stock company, insurance company, or fiduciary, to the corporation, association, joint-stock company, insurance company, or fiduciary, a copy of whose return is desired. A corporation, association, joint-stock company, or insurance company, may designate by proper action of its board of directors or other similar governing body, the officer or individual to whom a copy of a return made by the corporation, association, joint-stock company, or insurance company may be furnished, and upon sufficient evidence of such action and of the identity of the officer or individual, a copy may be furnished to such person. A copy of a partnership income return may be furnished to any individual

(or his duly constituted attorney in fact or legal representative) who was a member of such partnership during any part of the time covered by the return, upon satisfactory evidence of such fact being furnished. A copy of a corporation income return may be furnished to a shareholder entitled to inspect the return upon submission of the evidence required by article 1093. The copy of the return will, however, be furnished only to the shareholder and he will not be permitted to delegate another to receive it in his behalf. A copy of an income return in the custody of a collector or of an internal revenue agent in charge may be furnished by the collector or by the internal revenue agent in charge to a person entitled to receive a copy of such return under this paragraph upon written application for same, accompanied by satisfactory evidence that the applicant comes within its provisions. Where a photostat copy is requested and the collector or the internal revenue agent in charge has not the available facilities for making such copy, the written request for the copy must be sent to the Commissioner at Washington.

(3) A copy of an income return may be furnished to any person who may be permitted to inspect the return as provided in article 1090.

(4) Certified copies of returns will be furnished to the persons entitled thereto only upon written request for same sent to the Commissioner at Washington.

(5) The Commissioner may prescribe a reasonable fee for furnishing copies of returns. (Art. 1091.)

In In re Epstein [4 F. (2d) 529], it was held that a copy of an income tax return furnished in accordance with the foregoing regulation to the trustee in bankruptcy of the person who made it, could be used by the trustee in examining the bankrupt under the Bankruptcy Act.

REGULATION. . . . . 14. In the case of returns or copies thereof furnished by the Department for use in legal proceedings, only such inspection as necessarily results from such use is permitted. 1090.)

(Art.

RULING. In a suit instituted by A against B, C was appointed receiver of all the "debts, property, equitable interests and things in action" of B. A copy of the income tax return of B may be furnished C for use as evidence in the suit referred to. (C. B. III-2, 328; I. T. 2087.)

A collector of internal revenue cannot be compelled to produce in court tax reports made to him and a regulation forbidding him to disclose such information is not unconstitutional. (Boske v. Comingore, 177 U. S. 459.) A statute which authorizes the district attorney to request a taxpayer to produce his private papers in court, failing which the government's contention shall be taken as confessed, is unconstitutional as an "unreasonable search and seizure." v. U. S., 116 U. S. 616.)

(Boyd

Ownership certificates are considered to be returns and copies may

be obtained under the conditions prescribed. (C. B. 1, 262; O. D. 879. C. B. II-2, 256; I. T. 1817. C. B. III-2, 329; S. M. 2575.)

Unofficial disclosure of information forbidden.

LAW. Section 1115. [Section 3167, Rev. Stat.] It shall be unlawful for any collector, deputy collector, agent, clerk, or other officer or employee of the United States to divulge or to make known in any manner whatever not provided by law to any person the operations, style of work, or apparatus of any manufacturer or producer visited by him in the discharge of his official duties or the amount or source of income, profits, losses, expenditures, or any particular thereof, set forth or disclosed in any income return, or to permit any income return or copy thereof or any book containing any abstract or particulars thereof to be seen or examined. by any person except as provided by law; and it shall be unlawful for any person to print or publish in any manner whatever not provided by law any income return, or any part thereof or source of income, profits, losses, or expenditures appearing in any income return; and any offense against the foregoing provision shall be a misdemeanor and be punished by a fine not exceeding $1,000 or by imprisonment not exceeding one year, or both, at the discretion of the court; and if the offender be an officer or employee of the United States he shall be dismissed from office or discharged from employment.

List of taxpapers and tax paid to be posted.—

LAW. Section 257. (e) The Commissioner shall as soon as practicable in each year cause to be prepared and made available to public inspection in such manner as he may determine, in the office of the collector in each internal-revenue district and in such other places as he may determine, lists containing the name and the post-office address of each person making an income-tax return in such district.

Section 258. The Commissioner, with the approval of the Secretary, shall prepare and publish annually statistics reasonably available with respect to the operation of the income, war-profits and excessprofits tax laws, including classifications of taxpayers and of income, the amounts allowed as deductions, exemptions, and credits, and any other facts deemed pertinent and valuable.

REGULATION. The Commissioner will publish annually a volume of statistics of income showing, among other things, the incomes reported by corporations and individuals distributed by States, by income classes, and by industrial groups; also sources of income and nature of deductions. (Art. 1101.)

Such statistics for the calendar years 1916 to 1924 have been issued under the title of "Statistics of Income."

The theory underlying consolidated returns is well stated in the following regulation:

REGULATION. Consolidated returns are based upon the principle of levying the tax according to the true net income of a single enterprise, even though the business is operated through more than one corporation. Where one corporation owns the capital stock of another corporation or other corporations, or where the stock of two or more corporations is owned by the same interests, a situation results which is closely analogous to that of a business maintaining one or more branch establishments. In the latter case, because of the direct ownership of the property, the net income of the branch forms a part of the net income of the entire organization. (Art. 631.)

The circumstances under which taxpayers may elect, or the Treasury require, the consolidation of returns or accounts is narrowly prescribed in the statute. In the first place, "affiliated corporations" may elect to submit consolidated returns under certain conditions and, in the second place, "related trades or businesses" may in some cases elect or be required by the Commissioner to con

solidate their accounts. In the regulations the Treasury seeks to preserve this distinction between the two classes: that, while the consolidated returns of affiliated corporations relate to the payment of taxes, the consolidation of the accounts of the "related trades or businesses" relates rather to the determination of the true income of the taxpayer and only indirectly to the amount of taxes due. In using this chapter it is important that the distinction between these two classes be kept in mind because some of the provisions of the law and the regulations refer to only one of the classes while others refer to both.

Affiliated Corporations-Consolidated Returns

The language of the section extending to affiliated corporations the privilege of filing consolidated returns is as follows:

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LAW. Section 240. (a) Corporations which are affiliated within the meaning of this section may, for any taxable year, make separate returns or, under regulations prescribed by the Commissioner with the approval of the Secretary, make a consolidated return of net income for the purpose of this title, in which case the taxes thereunder shall be computed and determined upon the basis of such return. If return is made on either of such bases, all returns thereafter made shall be upon the same basis unless permission to change the basis is granted by the Commissioner.

The election of consolidated or separate returns.-The regulations clarify to some extent the conditions surrounding the election extended in the foregoing section of the law.

REGULATION. Affiliated corporations as defined in section 240 (d), irrespective of the basis upon which returns were filed prior to 1926 under section 240 (a) of the Revenue Acts of 1924 and 1926, may for 1926 elect to make separate returns or file a consolidated return in which will be reported the consolidated net income of the affiliated group. If return is made upon either of these bases, all subsequent returns must be made upon the same basis except as permission to change may be granted by the Commissioner. In applying for permission to change from one basis to the other there should be submitted a statement in the form of an affidavit executed by a person or persons qualified to sign the returns (see section 239) setting forth completely the reasons for making the request. (Art. 632.)

In other words, the option was extended afresh in 1924, and

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[Former Procedure] See Income Tax Procedure, 1926, page 130. See further, Excess Profits Tax Procedure, 1926, page 321.