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Taxable Years Beginning in 1940

R. A. of 1940, by omitting figures in stricken through ordinary type and adding italicized figures "19" "$3,775" and "33". Sec. 9 of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1939.

Sec. 13 (b), I. R. C., supra, again amended by Sec. 101 (a), Second R. A. of 1940, by omitting italicized figures "19" and "33" and adding underlined italicized figures "22 1/10" and "35." Sec. 101 (e) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1939.

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dividends, then the tax computed under this subsection shall be as follows:

(A) The net income shall be divided into two divisions, the first division consisting of $25,000, and the second division consisting of the remainder of the net income.

(B) To the first division shall be allocated, until an aggregate of $25,000 has been so allocated: First, the portion of the gross income consisting of such interest; second, the portion of the gross income consisting of such dividends; and third, an amount equal to the excess, if any, of $25,000 over the amounts already allocated to the first division.

(C) To the second division shall be allocated, until there has been so allocated an aggregate equal to the excess of the net income over $25,000: First, the portion of the gross income consisting of such interest which is not already allocated to the first division; second, the portion of the gross income consisting of such dividends which is not already allocated to the first division; and third, an amount equal to the excess, if any, of the net income over the sum of $25,000 plus the amounts already allocated to the second division.

(D) The tax shall be equal to the sum of the following:

(i) A tax on the $25,000 allocated to the first division, computed under section 14 (c), on the basis of the allocation made to the first division and as if the amount so allocated constituted the entire net income of the corporation.

(ii) 12 per centum of the dividends received allocated as such to the second division.

(iii) 32 per centum of the remainder of the amount allocated to the second division, except interest allowed as a credit under section 26 (a).

Taxable Years

Beginning before 1939

Sec. 13. (e) Corporations in Sec. 13. (e) Corporations in bankruptcy and receivership.-If bankruptcy and receivership.

a domestic corporation is for any

portion of the taxable year in bankruptcy under the laws of the United States, or insolvent and in receivership in any court of the United States or of any State, Territory, or the District of Columbia, then, when the tax is computed under subsection (c), the tentative tax shall be reduced by

See p. 16, Eighth Edition.

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Sec. 13. (f) Joint-stock land Sec. 13. (f) Joint-stock land

banks. In the case of a joint- banks.

stock land bank organized under
the Federal Farm Loan Act, 39
Stat. 360, 42 Stat. 1454 (U. S. C.
Title 12, § 641), as amended, when
the tax is computed under subsec-
tion (c), the tentative tax shall
be reduced by 22 per centum of
the adjusted net income, instead
of by 22 per centum of the divi-
dends paid credit.

See p. 18, Eighth Edition.

Sec. 13. (g) Rental housing cor

See p. 18, Eighth Edition.

Sec. 13. (g) Rental housing cor-
porations. In the case of a corporations.
poration which at the close of the
taxable year is regulated or re-
stricted by the Federal Housing
Administrator under section 207
(b) (2) of the National Housing
Act, as amended, 52 Stat. 17, when
the tax is computed under subsec-
tion (c), the tentative tax shall
be reduced by 21⁄2 per centum of
the adjusted net income, instead
of by 22 per centum of the divi-
dends paid credit; but only if
such Administrator certifies to the
Commissioner the fact that such
regulation or restriction existed at
the close of the taxable year. It
shall be the duty of such Adminis-
trator promptly to make such cer-
tification to the Commissioner
after the close of the taxable year
of each corporation which is so
regulated or restricted by him.

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Sec. 14. (b) Corporations with Sec. 14. (b) Corporations with Sec. 14. (b) Corporations with normal-tax net incomes of not normal-tax net incomes of not normal-tax net incomes of not more than $25,000.-If the normal- more than $25,000.-If the normal- more than $25,000.-If the normaltax net income of the corporation tax net income of the corporation tax net income of the corporation is not more than $25,000, and if the is not more than $25,000, and if the is not more than $25,000, and if the corporation does not come within corporation does not come within corporation does not come within one of the classes specified in sub- one of the classes specified in sub- one of the classes specified in subsection (c), (d), or (e) of this sec-section (c), (d), or (e) of this sec-section (c), (d), or (e) of this seetion, the tax shall be as follows:

Upon normal-tax net incomes not in excess of $5,000, 15 per centum. $750 upon normal-tax net incomes of $5,000, and upon normaltax net incomes in excess of $5,000 and not in excess of $20,000, 17 per centum in addition of such ex

cess.

$3,300 upon normal-tax net incomes of $20,000, and upon normaltax net incomes in excess of $20,000, 19 per centum in addition of such

excess.

tion, the tax shall be as follows:
Upon normal-tax net incomes not
in excess of $5,000, 15 per centum.
$750 upon normal-tax net in-
comes of $5,000, and upon normal-
tax net incomes in excess of $5,000
and not in excess of $20,000, 17
per centum in addition of such ex-

cess.

$3,300 upon normal-tax net incomes of $20,000, and upon normaltax net incomes in excess of $20,000, 19 per centum in addition of such

excess.

tion, the tax shall be as follows:

Upon normal-tax net incomes not in excess of $5,000, 13 15 per centum.

$675 $750 upon normal-tax net incomes of $5,000, and upon normal-tax net incomes in excess of $5,000 and not in excess of $20,000, 1517 per centum in addition of such excess.

$2,025 $3,300 upon normal-tax net incomes of $20,000, and upon normal-tax net incomes in excess of $20,000, 1719 per centum in addition of such excess.

2 Sec. 501, R. A. of 1942, reads as follows:

Sec. 501. Additional Credits for undistributed profits tax.

(a) AMENDMENTS TO THE REVENUE ACT OF 1936.(1) Section 14 (a) (2) of the Revenue Act of 1936 (relating to definition of undistributed net income) is amended to read as follows:

(2) The term 'undistributed net income' means the adjusted net income minus the sum of (A) the dividend paid credit provided in section 27, (B) the credit provided in section 26 (c) relating to restrictions on payment of dividends, (C) except in cases where section 26 (c) (1) is applicable, the deficit credit provided in section 26 (f), and (D) the redemption credit provided in section 26 (g)."

(2) Section 26 (c) of the Revenue Act of 1936 (relating to credits of corporations) is amended by amending the heading to read as follows:

"(c) RESTRICTIONS ON PAYMENT OF DIVIDENDS.—''; and by amending paragraph (3) to read as follows:

(3) DEFICIT CORPORATIONS.-In the case of a corporation having a deficit in accumulated earnings and profits as of the close of the preceding taxable year, the amount of such deficit, if the corporation is prohibited by a provision of a law or of an order of a public regulatory body from paying dividends during the existence of a deficit in accumulated earnings and profits, and if such provision was in effect prior to May 1, 1936.

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Sec. 14. (b) Corporations with Sec. 14. (c) Corporations with normal-tax net incomes of not net incomes of not more than more than $25,000.-If the normal- $25,000.-If the net income of the tax net income of the corporation corporation is not more than $25,is not more than $25,000, and if the 000, and if the corporation does corporation does not come within not come within one of the classes one of the classes specified in sub-specified in subsection (d), (e), section (c), (d), or (e) of this sec- (f), or (g) of this section, the tax tion, the tax shall be as follows: shall be as follows:

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Upon special class net incomes not in excess of $5,000, 121⁄2 per centum.

$625 upon special class net incomes of $5,000, and upon special class net incomes in excess of $5,000 and not in excess of $20,000, 14 per centum in addition of such excess.

$2,725 upon special class net incomes of $20,000, and upon special class net incomes in excess of $20,000, 16 per centum in addition of such excess.

Sec. 14. (d) Special classes of corporations. In the case of the following corporations the tax shall

“(f) DEFICIT CREDIT.-The amount by which the adjusted net income exceeds the sum of (1) the earnings and profits accumulated after February 28, 1913, as of the beginning of the taxable year, and (2) the earnings and profits of the taxable year (computed as of the close of the taxable year without diminution by reason of any distributions made during the taxable year). For the purposes of this subsection, earnings and profits of the taxable year shall be computed without diminution by the amount of the tax imposed under section 14, 102, 103, or 351 for such taxable year; and earnings and profits accumulated after February 28, 1913, as of the beginning of the taxable year, shall be diminished on account of the tax under section 14, 102, 103, or 351 for any previous taxable year only by the amount of such tax as computed under the amendments made by section 501 of the Revenue Act of 1942.

"(g) STOCK REDEMPTION CREDIT.-An amount equal to the portion of the recognized gain, realized within the taxable year and prior to March 3, 1936, from the sale or other disposition of a capital asset, which, pursuant to a contract, was distributed prior to such date to share

See p. 18, Eighth Edition.

See Sec. 501 (a), R. A. of 1942, in fn. 2, for retroactive amendment of Sec. 14 (a) (2), R. A. of 1936.

Sec. 14. (c) Corporations with net incomes of not more than $25,000.

See p. 20, Eighth Edition.

Sec. 14. (d) Special classes of corporations.

See p. 20, Eighth Edition. holders in redemption in whole or in part of preferred stock and which is not otherwise allowable as a credit under any other provision of this section or section 27.”

(b) EFFECTIVE DATE OF AMENDMENTS.-The amendments made by subsection (a) shall be effective as of the date of the enactment of the Revenue Act of 1936.

(c) OVERPAYMENTS.-If the refund or credit of any overpayment for any taxable year, to the extent resulting from the application of this section, is prevented on the date of the enactment of this Act or within one year from such date, then, notwithstanding any other provision of law or rule of law (other than this subsection and other than section 3761 of the Internal Revenue Code or section 3229 of the Revised Statutes, or such section as amended by section 815 of the Revenue Act of 1938, relating to compromises), such overpayment shall be refunded or credited in the same manner as in the case of an income tax erroneously collected under the Revenue Act of 1936, if claim therefor is filed within one year from the date of the enactment of this Act,

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