corporation), the character of the income and the amount collected for each. Every person, partnership or corporation undertaking as a matter of business or for profit the collection of the above described foreign items must first obtain a license from the Government. Application for this license should be made to the local Collector of Internal RevThe undertaking of such collections without having first obtained a license is a serious offense, punishable by a fine not exceeding $5,000, or by imprisonment for not more than a year, or both. -5.— General Information On Other Payments. Provision having been made, according to the preceding paragraphs, for reports relative to (1) Dividend payments, (2) Transactions through brokers. (4) Foreign collections, there remain other payments to be taken care of. The law provides that any such other payment of income of a fixed or determinable character, of $800 or more in any taxable year, must be reported. And in this case the obligation to make such report is imposed by the statute and not left to the pleasure of the Commissioner of Internal Revenue. Every individual, partnership, corporation or association making such payments to another individual, partnership, corporation or association, must make a report, or return, under oath, to the local Collector of Internal Revenue, provided the total paid to any one recipient within the year is $800 or more. (It must be understood, in this connection, that the four kinds of payments described under preceding headings and enumerated immediately under this heading are not to be included in this report.) The report must show the name and address of each recipient, the character of the income and the amount paid each. It must be made on an official form to be obtained from the Collector of Internal Revenue. The liability to make this report attaches to lessees or mortgagors of real or personal property, trustees acting in any trust capacity, executors, administrators, receivers, conservators, and employers also all persons, firms or corporations paying interest other than bond interest. 159.-CERTAIN REPORTS REQUIRED BY LAW, OTHERS AS DEPARTMENT DEMANDS. The provisions of the law with respect to information at the source having been discussed above under five separate headings, attention is called to the fact that certain reports are required by law and others as the Commissioner of Internal Revenue may ask for them. All, when made, must conform to the regulations made by the Department. These regulations had not been made when this book. went to press but the official forms obtained from the Collector of Internal Revenue will show what must be reported and when the report must be filed. The reports discussed under headings No. 1 and No. 2, above, are to be made when required by the Commissioner; those discussed under headings No. 3, No. 4 and No. 5 are required by law. -HOW TO OBTAIN OFFICIAL FORMS FOR REPORTS. All official forms for reports are to be obtained from the local Collector of Internal Revenue. The forms not having been provided when this book went to press, the numbers of them are not known. However, they may be obtained, when provided by the Department, by personal or written application, making reference to report to be made under one or more of the following headings: (a) Corporation dividend payments. (b) Brokerage business. (c) Bond interest payments. (d) Foreign Collections. (e) Payments aggregating $800 or more to one recipient and not including dividends, business transacted through brokers, bond interest payments or foreign collections. 161. PENALTIES FOR FAILURE TO REPORT OR MAKING FALSE REPORT. The penalty for failure or refusal to make a report of information as required by law and as outlined above is a fine of not less than $20 nor more than $1,000. The penalty for making a false report is a fine of not more than $2,000, or imprisonment for not more than one year, or both. 162.-INDEFINITE INCOME NEED NOT BE REPORTED. The law requires that in the case of payments aggregating $800 or more a year to one recipient reports be made only with respect to income which is of a fixed or determinable character. Income in the form of rent and salaries, and of interest other than bond interest, is of such fixed and periodical character; but the royalties paid on a mine or oil well, or from the use of a patent or sale of a copyrighted book, and the commissions paid salesmen are of a different character. Dependent for amount upon the extent of operations or the business done, they are indefinite and need not be included in a report of information from the source. CHAPTER XII THE INCOME TAX ESTATES AND FIDUCIARIES UNDER THE LAW 163.-CERTAIN ESTATES TAXABLE. The income tax law provides that a return shall be made and tax paid by estates in certain circumstances and, when the circumstances of administration make an estate amenable to the requirements of the statute, such estate virtually has the status of a taxable individual. The executors, administrators, trustees or other person or persons acting in the fiduciary capacity, are made responsible for filing the return and paying the tax, under all the penalties that apply in the case of individuals. 164.-ESTATE DURING SETTLEMENT. The law provides that the "income received by estates of deceased persons during the period of administration or settlement shall be subject to the normal and additional tax and taxed to the estates." In such a case the estate is treated as an entity. A return must be made, although such return need not be signed by more than one of the persons in charge of the estate as executors, administrators, or in other fiduciary capacity. The estate reports its income just as an individual would do, and makes its deductions as far as such deductions are properly chargable against the income of the estate for the year in which the return is made. It must not be understood, however, that those expenses which should be charged against the principal of an estate are allowable as deductions. By the latter are meant such expenses as costs in court, counsel fees, the fees or commissions of executors, and similar ex penses the Treasury Department has repeatedly held that such expenses are to be charged against the principal of the estate and can not be deducted in a return filed by the estate. 165.-TRUST ESTATES. The law also provides that "income of estates or any kind of property held in trust, including such income accumulated in trust for the benefit of unborn or unascertained persons, or persons with contingent interests, and income held for future distribution under the terms of the will or trust shall be likewise taxed." Any estate coming within the above provision must make a return just as an individual would do, and must pay the tax shown to be due, both normal and additional. 166.-INCOME DISTRIBUTED IN PART. If any part of the income of an estate is not distributed annually or regularly-that is, if any part of the income is not distributed or distributable to known beneficiaries-then the estate becomes a taxable entity with respect to that part of the income and must make return, subject to full assessment of tax. 167.-ESTATES OF NON-RESIDENT ALIENS. If the estate, which is required to make return and pay tax, under the law as above explained, is that of a non-resident alien, it follows that only the income of such estate from sources within the United States need be accounted for, also that only deductions related to such income are allowable. 168.-EXEMPTION ALLOWED ESTATE. An estate of a deceased citizen or resident of the United States, when required to file return, is allowed to claim the benefit of a specific exemption of $3,000. An estate of a deceased non-resident alien is not allowed any specific exemption. 169.-AMOUNT OF INCOME REQUIRING RETURN TO BE FILED. The amount of net income that determines the question of an estate's liability to file a return as a taxable entity is $3,000, and this applies to estates both of citizens or residents of the United States |