SECTION 3. THE NORMAL INCOME TAX ON NON-RESIDENT ALIENS. The provisions of the statute, relevant to persons residing in foreign countries, but deriving incomes from property owned, or from business, trade or profession conducted in the United States are ambiguous provisions. The second paragraph of Section 1 of Chapter 1 of this pamphlet explains the ambiguity which attends the question, whether those provisions, such as they are, apply to citizens of the United States residing elsewhere. In that Section and paragraph, the opinion is expressed that those provisions apply only to aliens residing in foreign countries, and deriving incomes from sources in the United States; and it is certain that those are the only provisions in the statute which do apply to such aliens. But whether those provisions apply only to such aliens, or apply also to citizens of the United States residing in foreign countries, they are ambiguously expressed in the statute, as the following analysis of the subject will show. The fifth paragraph of the statute reads as follows: "The net income from property owned and business carried on in the United States, by persons residing elsewhere, shall be computed upon the basis prescribed in this paragraph, and in that part of paragraph G, of this Section relating to the computation of the net income of corporations, joint stock and insurance companies organized, created or existing under the laws of foreign countries, in so far as applicable." How far those provisions of paragraph G, which relate to foreign corporations, joint stock companies and insurance companies, are applicable to alien persons residing in foreign countries, is a question of construction of the statute. So also, in construing the statute, attention must be given to the phrase "this paragraph," where it occurs in the paragraph above quoted. In order to give that phrase any effect, it must be construed to refer to those four paragraphs, of which it is the third, and which appear to be segregated from the other paragraphs of the statute, by the letter B, which is prefixed to the first of them. The theory that Congress intended by the phrase "this paragraph" to include the group of four paragraphs which are printed between the letter B and the letter C, is supported by the fact that the third of those paragraphs speaks of "paragraph G” as being composed of parts, and by the fact that the "part" therein particularly referred to, comprises many elaborate provisions which are printed in the latter part of the third paragraph, of the group of paragraphs which are preceded by the letter G. These circumstances indicate that the word "paragraph" is used in the statute to designate one or another of the groups of paragraphs which are respectively preceded by the first fourteen letters of the alphabet. It is only on this assumption, that anybody can learn from the statute, by what method any income tax is to be assessed against alien persons residing in foreign countries, on account of incomes derived by them from sources in the United States. If this assumption is correct, that method appears to be as follows: All items of income accrued from business transacted or from capital invested in the United States are added together; except any interest received upon any obligation of the United States, or of any of its possessions, or of any State or of any political subdivision thereof; and except the value of property acquired by gift, bequest, devise or descent; and except proceeds of life insurance policies paid upon the death of the insured, and except repayments made to holders of life insurance, endowment or annuity contracts, upon the maturity or surrender of such contracts. In this pamphlet the sum of this addition is designated as "the personal gross income, from the United States, of nonresident aliens," and the much smaller amount upon which the normal income tax against such non-resident aliens, is calculated by percentage arithmetic, is designated in this pamphlet as the "personal taxable income of non-resident aliens." That personal taxable income is apparently to be ascertained, by deducting from that personal gross income, the following items. FIRST: All the ordinary and necessary expenses, actually paid out of earnings, in the maintenance and operation of the non-resident alien's business and property in the United States. SECOND: Such a proportion of the interest accrued and paid on the indebtedness of the non-resident alien, as the gross amount of his income from business transacted and capital invested in the United States, bears to the gross amount of his income, derived from all sources in the world. THIRD: All taxes collected upon the property or business of a non-resident alien in the United States, under the authority of the United States, or of any State or Territory thereof or the District of Columbia, not including assessments for local benefits. FOURTH: All losses actually sustained by the nonresident alien, in business conducted within the United States, and not compensated by insurance or otherwise. FIFTH: Worthless debts, charged off during the year, from books of account of business in the United States. SIXTH: Reasonable allowance for depreciation of property, arising from its employment in the United States; not exceeding, in the case of a mine, five per cent of the gross value at the mine, of its annual output. SEVENTH: All dividends received upon corporate stock, and all amounts received from the net earnings of any corporation, joint stock company, association or insurance company, which is taxable upon its net income, in the United States, under this statute. EIGHTH: Any income, exceeding $3,000, the income tax upon which has been paid or withheld for payment at its source in the United States, according to the statute. NINTH: In the case of a person not living with a wife or a husband $3,000. TENTH: In the case of a man and his wife living together, $4,000. COMMENTS ON THE FOREGOING PARTS OF SECTION 3. The comments which are inserted in this pamphlet as the latter part of Section 2, and which relate to the preceding part of that section are also substantially applicable to the corresponding parts of this section, with the following exception: The fourth deduction from the personal gross income which may be made by a citizen of the United States or by an alien residing in the United States, is expressly limited to losses incurred in trade or arising from fire, storm or shipwreck, and not compensated by insurance or otherwise; whereas the corresponding deduction which the statute permits to be made by a non-resident alien, appears to include all losses, which are not compensated by insurance or otherwise. SECTION 4. THE RATE OF THE NORMAL INCOME TAX. The "normal income tax" is one per cent of the "personal taxable income," in the case of a citizen of the United States, and in the case of an alien residing in the United States; as that personal taxable income is ascertained by the method which is explained in Section 2 of this chapter. And the normal income tax is one per cent of the "personal taxable income of nonresident aliens', in the case of an alien residing in some foreign country, but deriving an income from property owned, or from business, trade or profession conducted in the United States; as that taxable income is ascertained by the method explained in Section 3. SECTION 5. PERSONAL NORMAL INCOME TAXES COLLECTED AT THEIR SOURCES. The statute imposes certain vicarious duties upon every person or organization which accumulates, or otherwise receives, money for another person, during any taxable year; where the amount of that money is fixed or determinable in annual or other periodical parts. The persons and organizations upon which these vicarious duties are imposed by the statute, are therein designated as all persons, firms, copartnerships, companies, corporations, joint stock companies, associations, insurance companies, lessees, mortgagors, trustees, guardians, executors, administrators, agents, receivers, conservators, employers, and officers and employees of the United States. But those vicarious duties are im |