excess profits taxes which may be assessed for the same calendar or fiscal year, such credit extending to both the normal tax and surtax.

Personal Exemption

Amount of Exemption

For the purpose of the assessment of the normal tax of two per centum under the Act of October 3, 1917, single persons are allowed a personal exemption of $1,000. If the person subject to tax is the head of a family or married person, living with husband or wife, an exemption of $2,000 may be claimed, but a husband and wife living together may claim only a total exemption of $2,000 between them.

For the purpose of the assessment of the two per centum normal tax under the Act of September 8, 1916, a single person is allowed an exemption of $3,000. A head of a family or married person living with husband or wife is entitled to an exemption of $4,000, but a husband and wife living together are allowed only one exemption of $4,000 between them.

Dependent Children

The head of a family is allowed an additional exemption of $200 for each dependent child, if the child is under eighteen years of age, or if

incapable of self-support because mentally or physically defective, but only one parent may claim the benefit of the exemption. This exemption is applicable to the normal tax both under the Act of September 8, 1916, and under the Act of October 3, 1917.

Exemption Prorated

The specific exemption of $2,000 for the assessment of the normal tax of two per centum under the Act of October 3, 1917, and $4,000 for the assessment of the normal tax under the Act of September 8, 1916, may be claimed in the separate return of either husband or wife, the other claiming no exemption, or may be prorated between the two.

Guardians and Trustees

Guardians or trustees shall be allowed to claim this personal exemption in favor of each ward or cestui que trust, but in no event shall a ward or cestui que trust be allowed a greater personal exemption than as above stated.

Estates and Trusts

An exemption of $1,000 under the Act of October 3, 1917, and of $3,000 under the Act of September 8, 1916, may be claimed by estates of

deceased persons, in the process of settlement, and by trust or other estates, the income of which is not distributed annually or regularly.

Status of Person Claiming Exemption

The status of the person claiming the specific exemption shall be determined as of the time of claiming such exemption, if such claim be made within the year for which return is made; otherwise the status at the close of the year shall govern.

Head of Family Defined

For the purpose of the income tax law, the head of a family is held to be a person who actually supports and maintains one or more individuals who are closely connected with him by blood relationship, relationship by marriage, or by adoption, and whose right to exercise family control, and provide for these dependent individuals, is based upon some moral or legal obligation.

Non-Resident Alien

A non-resident alien is not entitled to a personal exemption.

Withholding at the Source

Citizens and Residents

Withholding of the normal tax at the source on income of individuals, who are residents or citizens of the United States, is abolished, except in the case of interest on bonds containing "tax free" covenants, in which case the withholding is at the rate of two per centum.

In practice, the tax is not actually withheld, for if an ownership certificate is filed on Form 1000-tax to be paid at the source the company will pay the tax and the owner of the bond may take credit in his return for the amount so paid.

When coupons from bonds containing tax free covenants are presented for payment, if exemption is not claimed, ownership certificate Form 1000, Revised January, 1918, will be used. If exemption is claimed, Form 1001, Revised January, 1918, will be used.

Refund of Tax Withheld

Any amount of tax withheld during the year 1917 on acount of tax imposed upon income of any individual, a citizen or resident of the United States, except in the case of interest on "tax free" covenant bonds, shall be returned to the individual by the withholding agent. The tax so returned shall be assessed on the return of the individual and paid directly by him.

Non-Resident Aliens

The normal tax of two per centum shall be withheld at the source on all fixed and determinable annual income, payable to non-resident alien individuals, except that derived from dividends on the stock of a domestic corporation, subject to the income tax, or from interest on obligations of the United States.

Corporations

Withholding in the case of a foreign corporation, not engaged in business or trade within the United States and not having any office or place of business therein, applies only to interest on bonds and similar obligations of domestic corporations and to dividends on the stock of domestic corporations.

The Commissioner of Internal Revenue has ruled that interest on bank deposits of foreign corporations not having offices or places of business in the United States is subject to withholding at the rate of six per centum.

Foreign corporations, having offices or places of business in the United States, should establish such fact by filing certificate Form 1001, Revised January, 1918, with the issuing corporation in order to be relieved from withholding of the tax.