Sec. 25. (a) (1) Interest on Sec. 25. (a) (1) Interest on Sec. 25. (a) (1) Interest on United States obligations.-The United States obligations.—The United States obligations.-The amount received as interest upon amount received as interest upon amount received as interest upon obligations of the United States, if such interest is included in gross income under section 22, and if, under the Act authorizing the issue of such obligations, as amended and supplemented, such interest is exempt from normal tax. obligations of the United States Sec. 25 (a) (1), I. R. C., obligations of the United States which is included in gross income under section 22, if such interest is included in gross income under section 22, and if, under the Act authorizing the issue of such obligations, as amended and supplemented, such interest is exempt from normal tax. Sec. 25 (a) (1), I. R. C., 112 supra, amended by Sec. (b), R. A. of 1942, by omitting language in stricken through type and adding language in italics. Sec. 112 (c) of said Act makes amendment effective as of March 1, 1941. Sec. 25. (a) (2) Interest on ob- Sec. 25. (a) (2) Interest on obSec. 25. (a) (2) Interest on obligations of instrumentalities of ligations of instrumentalities of ligations of instrumentalities of the United States.-The amount the United States. The amount the United States.-The amount received as interest on obligations received as interest on obligations received as interest on obligations of a corporation organized under of a corporation organized under of a corporation organized under Act of Congress, if (A) such cor- Act of Congress, if (A) such cor- Act of Congress, if (A) such corporation is an instrumentality of poration is an instrumentality of poration is an instrumentality of the United States; and (B) such the United States; and (B) such the United States; and (B) such interest is included in gross in- interest is included in gross in- interest is included in gross income under section 22; and (C) come under section 22; and (C) come under section 22; and (C) under the Act authorizing the under the Act authorizing the under the Act authorizing the issue thereof, as amended and sup- issue thereof, as amended and sup- issue thereof, as amended and supplemented, such interest is exempt plemented, such interest is exempt plemented, such interest is exempt from normal tax. (For reduction from normal tax. (For reduction from normal tax. of credit under paragraph (1) or of credit under paragraph (1) or (2) on account of amortizable bond (2) on account of amortizable bond premium, see section 125). premium, see section 125). Sec. 25 (a) (2), I. R. C., supra, amended by Sec. 126 (i) (1), R. A. of 1942, to read as above. Sec. 101 of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1941. For Sec. 25 (a) (2), I. R. C., before amendment, see 1942 column. Sec. 25. (a) (3) Earned income Sec. 25 (a) (2), I. R. C.. supra, amended by Sec. 126 (i) (1), R. A. of 1942, by adding language in italics. Sec. 101 of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1941. Sec. 25. (a) (3) Earned income Sec. 25. (a) (3) Earned income credit.-10 per centum of the credit.-10 per centum of the credit.-10 per centum of the amount of the earned net income, amount of the earned net income, amount of the earned net income, but not in excess of 10 per centum but not in excess of 10 per centum but not in excess of 10 per centum of the amount of the net income. of the amount of the net income. of the amount of the net income. Sec. 25. (a) (4) Earned income Sec. 25. (a) (4) Earned income Sec. 25. (a) (4) Earned income definitions. For the purposes of definitions. For the purposes of definitions.-For the purposes of this sectionthis section this section (A) “Earned income" means (A) "Earned income" means (A) "Earned income" means wages, salaries, professional fees, wages, salaries, professional fees, wages, salaries, professional fees, Sec. 25. Credits of individual Sec. 25. Credits of individual against net income. against net income. Sec. 25. (a) Credits for normal tax only. There shall be allowed for the purpose of the normal tax, but not for the surtax, the following credits against the net income: Sec. 25. (a) Credits for normal tax only.-There shall be allowed for the purpose of the normal tax, but not for the surtax, the following credits against the net income: Sec. 25. (a) (1) Interest on Sec. 25. (a) (1) Interest on United States obligations.-The United Taxable Years Sec. 25. Credits of individual against net income. Sec. 25. (a) Credits for normal tax only. See p. 64, Eighth Edition. Sec. 25. (a) (1) Interest on States obligations.-The United States obligations. amount received as interest upon amount received as interest upon See p. 64, Eighth Edition. See p. 64, Eighth Edition. Sec. 25. (a) (2) Interest on ob- Sec. 25. (a) (2) Interest on ob- Sec. 25. (a) (2) Interest on obligations of instrumentalities of ligations of instrumentalities of ligations of instrumentalities of the United States.-The amount the United States.-The amount the United States. received as interest on obligations received as interest on obligations of a corporation organized under of a corporation organized under Act of Congress, if (A) such cor- Act of Congress, if (A) such corporation is an instrumentality of poration is an instrumentality of the United States; and (B) such the United States; and (B) such interest is included in gross in- interest is included in gross income under section 22; and (C) come under section 22; and (C) under the Act authorizing the issue thereof, as amended and supplemented, such interest is exempt from normal tax. under the Act authorizing the Sec. 25. (a) (3) Earned income Sec. 25. (a) (3) Earned income credit.-10 per centum of the credit.-10 per centum of the amount of the earned net income, amount of the earned net income, but not in excess of 10 per centum but not in excess of 10 per centum of the amount of the net income. of the amount of the net income. Sec. 25. (a) (4) Earned income definitions. For the purposes of definitions. For the purposes of this section (A) "Earned income" means Sec. 25. (a) (4) Earned income this section Sec. 25. (a) (3) Earned income credit. See p. 64, Eighth Edition. Sec. 25. (a) (4) Earned income definitions. p. 66, Eighth Edition. See (A) "Earned income" means wages, salaries, professional fees, wages, salaries, professional fees, and Taxable Years Taxable Years Taxable Years as as and other amounts received other amounts received as and other amounts received compensation for personal services compensation for personal services compensation for personal services actually rendered, but does not in- actually rendered, but does not in- actually rendered, but does not include any amount not included in clude any amount not included in clude any amount not included in gross income, nor that part of the gross income, nor that part of the gross income, nor that part of the compensation derived by the tax- compensation derived by the tax-compensation derived by the taxpayer for personal services ren- payer for personal services ren- payer for personal services rendered by him to a corporation dered by him to a corporation dered by him to a corporation which represents a distribution of which represents a distribution of which represents a distribution of earnings or profits rather than a earnings or profits rather than a earnings or profits rather than a reasonable allowance as compensa- reasonable allowance as compensa- reasonable allowance as compensation for the personal services ac- tion for the personal services ac- tion for the personal services actually rendered. In the case of a tually rendered. In the case of a tually rendered. In the case of a taxpayer engaged in a trade or taxpayer engaged in a trade or taxpayer engaged in a trade or business in which both personal business in which both personal business in which both personal services and capital are material services and capital are material services and capital are material income producing factors, a rea- income producing factors, a rea-income producing factors, a sonable allowance as compensation sonable allowance as compensation sonable allowance as compensation for the personal services actually for the personal services actually for the personal services actually rendered by the taxpayer, not in rendered by the taxpayer, not in rendered by the taxpayer, not in excess of 20 per centum of his excess of 20 per centum of his excess of 20 per centum of his share of the net profits of such share of the net profits of such share of the net profits of such trade or business, shall be con- trade or business, shall be con- trade or business, shall be considered as earned income. sidered as earned income. sidered as earned income. deduc(B) "Earned income "Earned income (B) deductions' means such deductions as tions" means such deductions as are allowed by section 23 for the are allowed by section 23 for the purpose of computing net income, purpose of computing net income, and are properly allocable to or and are properly allocable to or chargeable against earned income. chargeable against earned income. income deduc(B) "Earned tions" means such deductions as are allowed by section 23 for the purpose of computing net income, and are properly allocable to or chargeable against earned income. rea (C) "Earned net income" means (C) "Earned net income" means (C) "Earned net income" means the excess of the amount of the the excess of the amount of the the excess of the amount of the earned income over the sum of the earned income over the sum of the earned income over the sum of the earned income deductions. If the earned income deductions. If the earned income deductions. If the taxpayer's net income is not more taxpayer's net income is not more taxpayer's net income is not more than $3,000, his entire net income than $3,000, his entire net income than $3,000, his entire net income shall be considered to be earned shall be considered to be earned shall be considered to be earned net income, and if his net income net income, and if his net income net income, and if his net income is more than $3,000, his earned net is more than $3,000, his earned net is more than $3,000, his earned net income shall not be considered to income shall not be considered to income shall not be considered to be less than $3,000. In no case be less than $3,000. In no case be less than $3,000. In no case shall the earned net income be shall the earned net income be shall the earned net income be than considered considered. $14,000. $14,000. to be more to be more than considered to be more than Sec. 25. (b) Credits for both Sec. 25. (b) Credits for both Sec. 25. (b) Credits for both normal tax and surtax.-There normal tax and surtax.-There normal tax and surtax.—There shall be allowed for the purposes shall be allowed for the purposes of the normal tax and the surtax of the normal tax and the surtax the following credits against net the following credits against net income: income: shall be allowed for the purposes of the normal tax and the surtax the following credits against net income: Sec. 25. (b) (1) Personal ex- Sec. 25. (b) (1) Personal ex- Sec. 25. (b) (1) Personal exemption. In the case of a single emption. In the case of a single emption.-In the case of a single person or a married person not liv-person or a married person not liv-person or a married person not living with husband or wife, a per- ing with husband or wife, a per- ing with husband or wife, a personal exemption of $500, or in the sonal exemption of $500 $750; or sonal exemption of $750 $800, case of the head of a family or a in the case of the head of a fam- or in the case of the head of a fammarried person living with husband ily or a married person living with ily or a married person living with or wife, a personal exemption of husband or wife, a personal ex-husband or wife, a personal ex$1200. A husband and wife living emption of $1200 $1,500. A hus-emption of $1,500 $2,000. A hustogether shall receive but one per- band and wife living together shall band and wife living together shall sonal exemption. The amount of receive but one personal exemp-receive but one personal exempsuch personal exemption shall be tion. The amount of such per- tion. The amount of such per$1200. If such husband and wife sonal exemption shall be $1200 sonal exemption shall be $1,500 as and other amounts received as and other amounts received (B) "Earned income deduc- (B) "Earned income deduc- more Sec. 25. (b) Credits for both Sec. 25. (b) Credits for both normal tax and surtax. There normal tax and surtax.-There shall be allowed for the purposes shall be allowed for the purposes of the normal tax and the surtax of the normal tax and the surtax the following credits against net the following credits against net income: income: Sec. 25. (b) (1) Personal exSec. 25. (b) (1) Personal exempemption. In the case of a single tion.-In the case of a single perperson or a married person not liv-son or a married person not living ing with husband or wife, a per- with husband or wife, a personal sonal exemption of $1,000 $800; exemption of $1,000; or in the or in the case of the head of a fam- case of the head of a family or a ily or a married person living with married person living with hushusband or wife, a personal ex-band or wife, a personal exempemption of $2,500 $2,000. A hus- tion of $2,500. A husband and band and wife living together shall wife living together shall receive receive but one personal exemp- but one personal exemption. The tion. The amount of such per amount of such personal exempsonal exemption shall be $2,500 tion shall be $2,500. If such hus Taxable Years Beginning before 1939 Sec. 25. (b) Credits for both normal tax and surtax. See p. 66, Eighth Edition. Sec. 25. (b) (1) Personal exemption. See p. 68, Eighth Edition. make separate returns, the personal $1,500. If such husband and wife Sec. 25 (b) (1), I. R. C., supra, amended by Sec. 131 (a) (1), of 1942, to read as above. Sec. 101 of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1941. See 1942 column for Sec. 25 (b) (1), I. R. C., before amendment. Sec. 25. (b) (2) Credits for dependents. Sec. 25 (b) (1), I. R. C., supra, amended by Sec. 131 (a) (1), of 1942, by omitting language in stricken through type and adding language in italics. Sec. 101 of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1941. See 1941 column for Sec. 25 (b) (1), I. R. C., before amendment. Sec. 25. (b) (2) Credits for dependents. Taxable Years $2,000. If such husband and wife make separate returns, the personal exemption may be taken by either or divided between them, except that if one spouse makes a return under Supplement T, the personal exemption of the other spouse shall be $750. Sec. 25 (b) (1), I. R. C., supra, amended by Sec. 111 (a) of 1941, by omitting language in stricken through type and adding language in italics. Sec. 118 of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1940. See 1940 column for Sec. 25 (b) (1), I. R. C., before amendment. Sec. 25. (b) (2) Credit for dependents. (A) Allowance in General.- (A) Allowance in General.-$400 (A) Allowance in General.-$400 $350 for each person (other than $350 for each person (other than for each person (other than hushusband or wife) dependent upon husband or wife) dependent upon band or wife) dependent upon and and receiving his chief support and receiving his chief support receiving his chief support from the from the taxpayer if such depend- from the taxpayer if such depend- taxpayer if such dependent person ent person is under eighteen years ent person is under eighteen years is under eighteen years of age or of age or is incapable of self- of age or is incapable of self- is incapable of self-support because support because mentally or physi- support because mentally or physi- mentally or physically defective. cally defective. A payment to a cally defective. A payment to a wife wife which is includible under sec- which is includible under section 22 tion 22 (k) or section 171 in the (k) or section 171 in the gross ingross income of such wife shall not come of such wife shall not be conbe considered a payment by her sidered a payment by her husband husband for the support of any for the support of any dependent. dependent. (B) Exception for Certain Heads of Families.-If the taxpayer would not occupy the status of head of a family except by reason of there being one or more dependents for whom he would be entitled to credit under subparagraph (A), the credit under such subparagraph shall be disallowed with respect to one of such dependents. Sec. 25 (b) (2) (A), I. R. C., supra, amended by Sec. 131 (b), R. A. of 1942, by striking out "$400" and inserting in lieu thereof "$350." Sec. 101 of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1941. Sec. 25 (b) (2) (A), I. R. C., supra, again amended by Sec. 120 (e) (1), R. A. of 1942, by adding last sentence. Sec. 120 (g) of said Act makes amendment applicable only with respect to taxable years beginning after December 31, 1941; except that if the first taxable year beginning after December 31, 1941, of the husband does not begin on the same day as the first taxable year beginning after December 31, 1941, of the wife, such amendment shall first become applicable in the case of the husband on the first day of the wife's (B) Exception for Certain Heads of Families.-If the taxpayer would not occupy the status of head of a family except by reason of there being one or more dependents for whom he would be entitled to credit under subparagraph (A), the credit under such subparagraph shall be disallowed with respect to one of such dependents. Sec. 25 (b) (2) (A), I. R. C. supra, amended by Sec. 131 (b), R. A. of 1942, by striking out "$400" and inserting in lieu thereof "$350." Sec. 101 of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1941. Sec. 25 (b) (2) (A), I. R. C., supra, again amended by Sec. 120 (e) (1), R. A. of 1942, by adding last sentence shown in italics. Sec. 120 (g) of said Act makes amendment applicable only with respect to taxable years beginning after December 31, 1941; except that if the first taxable year beginning after December 31, 1941, of the husband does not begin on the same day as the first taxable year beginning after December 31, 1941, of the wife, such amendments shall first become applicable in the case of the husband on the first day of the wife's first taxable year beginning after December 31, 1941, re (B) Exception for Certain Heads of Families.—If the taxpayer would not occupy the status of head of a family except by reason of there being one or more dependents for whom he would be entitled to credit under subparagraph (A), the credit under such subparagraph shall be disallowed with respect to one of such dependents. Sec. 25 (b) (2), I. R. C., supra, amended by Sec. 113, R. A. of 1941, by adding language in italics. Sec. 118 of said Act makes amendment taxable years after Dec. 31, applicable to |