or sources of their respective incomes; but those of them who derive their incomes from dividends on stocks, ought not to be subjected to the "normal income tax,” because that tax has been practically paid by them, already, out of the net earnings of the corporations which issued those stocks. Third, wealthy persons should be compelled and indeed should be willing to bear income taxes which increase in their percentages, as their wealth increases at various stages of advance. Thus a man having a net income of $1,000,000, derived from the profits of a great department store, is properly required by the statute, to pay an aggregate income tax thereon of $60,020; while a merchant who derives a net income of $100,000, from the profits of a small department store, is required by the statute to pay an aggregate income tax of only $2,420; and a smaller merchant, who derives a net income of $30,000 from the profits of a still smaller mercantile establishment, is required by the statute to pay an aggregate income tax of only $370.

SECTION 9.

PARTNERSHIPS.

The provisions of the statute relevant to partnerships, are few and simple. The only duty which the statute imposes upon any partnership, consists in furnishing to the Commissioner of Internal Revenue, or to any collector of internal revenue, upon request, a correct statement of its profits, for the preceding calendar year, and a list of the names of the partners entitled to have those profits distributed among them. The statute makes each partner in any partnership, liable to all its provisions, relevant to his share of the partnership profits, in the same ways that he would be liable, if he had received those profits from a business conducted by himself alone.

CHAPTER II.

CORPORATIONS AND OTHER ORGANIZATIONS.

SECTION 1.

EXEMPT ORGANIZATIONS.

The income statute provides that no tax shall be levied under it, upon any income, derived from any public utility, or from the exercise of any essential governmental function, by any State or any political subdivision of a State.

The statute also provides that no tax shall be levied under it, upon the income derived from the operation of any public utility, so far as its payment would impose a loss or burden upon any State, or any political subdivision of a State; where that public utility shall have been contracted for, prior to October 3, 1913, with any person or corporation, by such State, or political subdivision. But this provision will not relieve any such person or corporation, from the tax upon the part of any such income, to which such person or corporation is entitled under such contract.

The word "State" signifies not only each of the fortyeight States, but also, the District of Columbia, Alaska, Hawaii, Porto Rico, and the Philippine Islands; whereever, in the statute, such signification is necessary to carry out its provisions.

The statute also provides that nothing therein shall apply to any organization, in any of the following classes: Agricultural organizations.

Business leagues or chambers of commerce or boards of trade, not organized for profit, or no part of the net

income of which inures to the benefit of any private stockholder or individual.

Cemetery companies, organized and operated exclusively for the mutual benefit of their members.

Civic leagues or organizations, not organized for profit, but operated exclusively for the promotion of social welfare.

Corporations or associations, organized and operated exclusively for religious, charitable, scientific or educational purposes, no part of the net income of which inures to the benefit of any private stockholder or individual.

Domestic building and loan associations.

Fraternal beneficiary societies, orders, or associations, operating under the lodge system and providing for the payment of life, sick, accident and other benefits to the members of such societies, orders or associations or dependents of such members.

Horticultural organizations.

Labor organizations.

Mutual Savings Banks, not having capital stock represented by shares.

SECTION 2.

NON-EXEMPT ORGANIZATIONS.

With the exceptions specified in Section 1, of this chapter; every corporation, joint stock company, insurance company and association, organized and existing in the United States; and every corporation, joint stock company, insurance company and association, organized and existing under the laws of any foreign country, and having capital invested or doing business in the United

States; is subject to the "normal income tax", but not to the "additional income tax", prescribed by the statute.

SECTION 3.

NON-EXEMPT AMERICAN ORGANIZATIONS.

The income tax levied upon each of such of the above mentioned non-exempt organizations as are organized in the United States, is ascertained by the following method:

All items of income, received from any and all sources, are added together; except any interest, received upon any obligation of the United States, or any of its possessions, or of any State, or any political subdivision thereof. In this pamphlet the sum of this addition is designated as the "corporate gross income"; and the much smaller amount upon which the corporate income tax is calculated, by percentage arithmetic, is designated in this pamphlet, as the "corporate taxable income".

The "corporate taxable income" is ascertained by deducting from the "corporate gross income", the following items:

FIRST: All the ordinary and necessary expenses, paid in the maintenance and operation of the corporate properties and business, including rentals or other payments required to be made, as a condition to the continued use or possession of property.

SECOND: All losses, actually sustained, and not compensated by insurance or otherwise, including a reasonable allowance for depreciation by use or wear and tear of property; and in the case of mines, a reasonable allowance for depletion of ores and other natural deposits, not to exceed five per cent of the gross value, at the respective mines, of their respective annual outputs.

THIRD: Interest, accrued and paid on the corporate indebtedness, to an amount not exceeding one-half of the sum of its interest-bearing debts and paid-up capital stock outstanding at the end of the year; or if there is no capital stock in a particular case, this deduction will not exceed interest upon the capital employed in the business at the end of the year. And in case a particular debt is wholly secured by some collateral, which is the subject of sale in the ordinary business of the organization owing that debt, the total interest secured and paid by that organization on that indebtedness, is deducted from the "corporate gross income" of that organization. Also in the case of a bank, banking association, loan company or trust company, which pays interest on deposits, or on money received for investment and secured by interest bearing certificates of indebtedness, issued by such bank, banking association, loan company or trust company, all such interest is likewise deducted. But the statute prohibits the inclusion in the deducted interest, of any interest paid by any corporation, joint stock company, or association, upon any bond, or other indebtedness, which was issued with a guaranty that the interest payable thereon, should be free from taxation, in the hands of the creditor holding it.

FOURTH: Taxes, imposed under the authority of the United States, or of any State or Territory thereof, or imposed by the Government of any foreign country.

FIFTH: In the case of any insurance company, the net addition, if any, required by law to be made within the year to its reserve fund or funds, and all payments made within the year, other than dividends, on insurance contracts or on annuity contracts.

SIXTH: In the case of any mutual fire insurance company, which requires its members to make premium deposits to provide for losses and expenses; whatever pre