such as the improvement of streets and public highways, the provision for sewerage, gas and light, and the reclamation, drainage or irrigation of bodies of land within such special assessment districts when such districts are for public use, are political subdivisions of the State.

It is also held that the term political subdivision includes special assessment districts or divisions of a state created by the proper authority of the state acting within its constitutional powers and under its general laws, for the purpose of carrying out a portion of those functions of the State which by long usage and inherent necessities of government have always been regarded as public.

Levee and school districts, when lawfully created under the authority of the State and authorized by the laws of the State to levy a tax to meet the obligations of such districts, are also held to be political subdivisions of a state within the meaning of the income tax law.

Salaries of Officials

The compensation of all officers and employees of a state or any political subdivision thereof, except when such compensation is paid by the United States Government, is exempt.

Payments Under Contract with State

An individual who enters into a contract with a State, or any political subdivision thereof, for

the construction of a public highway, is held not

to be an officer or employee of the State or political subdivision thereof. The amounts received by him, therefore, under the terms of the contract, are not exempt from tax under the provisions of the income tax law.

Deductions

Citizens or Residents of the United States

For the purpose of determining the net income in the case of a citizen or resident of the United States, there shall be allowed as deductions from gross income the following:

Expenses in Business or Trade

Necessary expenses actually paid in carrying on any business or trade, not including personal, living or family expenses, are allowable deductions.

Insurance Premiums

Premiums paid on life insurance by the insured do not constitute allowable deductions under the income tax law.

Premiums paid for insurance on property which is not occupied by the owner as a dwelling, but is rented or leased to secure an income, or used for business purposes are allowable deductions in computing net income.

Premium on Fidelity Bond

Where an employee is required to furnish bond and pay the premium on such bond, as a necessary incident of his employment, the premium on the bond will constitute an allowable deduction.

Expenses of Rented Property

A commission paid to a real estate agent for collecting rents and management of property is a legitimate business expense and an allowable deduction.

Deductions may be claimed on account of any expense incurred in the maintenance of the property, or its use, for rental purposes, including amounts paid for repairs, insurance, fuel, light and water, and janitor and elevator service, if any. In addition to the foregoing, an amount representing a reasonable allowance for the wear and tear of the property arising from its use for rental purposes may be claimed, but no claim for such depreciation may be made on account of any expense of restoring property or making

good the exhaustion thereof for which a deduction is claimed for repairs.

Lease

Where payment is made in advance for a lease running for a term of years, the amount paid divided by the number of years the lease is to run will give the amount to be deducted each year.

Investments of Capital

Expenditures such as payments for(a) plans for a new building;

(b) copyrights and plates which remain in possession of person making payment;

(c) defending title to real estate;

(d) assessments made, under a mutual agreement of bondholders or stockholders of a corporation, to be used in the reorganization of a corporation; and

(e) assessments on its capital stock by a corporation:

are held to be investments of capital and not allowable deductions for expenses.

Expenses of Administration of Estates

Expenses of administration of an estate, such as court costs, attorneys' fees and executors' commissions, are chargeable against the corpus

of the estate and are not allowable deductions in the return of a fiduciary.

It will be proper, however, for the fiduciary to enter all legitimate expenses incurred in managing the estate or trust. If the fiduciary holds and rents real estate and pays insurance, water rents, commissions for the collection of rents, or any other necessary expense in managing the estate or trust, it will be proper to enter same as an allowable deduction.

Salaries Paid to Employees in
United States Service

In case an employer continues to pay an employee his salary, or part thereof, during his service in the United States Army or Navy, it is held that the same will be considered a necessary expense of the operation of the business of the employer and as such will be an allowable deduction.

Interest on Personal Indebtedness

All interest paid within the year on the personal indebtedness of the taxpayer, may be deducted except interest incurred in the purchase of securities the income from which is exempt from taxation.

Under this provision it is held that interest paid on indebtedness incurred in the purchase of