Taxable Years Taxable Years Taxable Years of the first day of the taxable year of the first day of the taxable year of the first day of the taxable year in which such discharge occurred) in which such discharge occurred) in which such discharge occurred) with respect to such indebtedness with respect to such indebtedness with respect to such indebtedness shall not be allowed as a deduction. shall not be allowed as a deduction. shall not be allowed as a deduction. Paragraph (9) shall not apply with Paragraph (9) shall not apply with Paragraph (9) shall not apply with respect to any discharge of indebt- respect to any discharge of indebt-respect to any discharge of indebtedness to which this paragraph ap-edness to which this paragraph ap-edness to which this paragraph applies. This paragraph shall not plies. This paragraph shall not plies. This paragraph shall not apply to any discharge occurring apply to any discharge occurring apply to any discharge occurring in a taxable year beginning after in a taxable year beginning after in a taxable year beginning after December 31, 1945. December 31, 1945. December 31, 1945. Sec. 22 (b) (10), I. R. C., supra, added to I. R. C., by Sec. 114 (b), R. A. of 1942. Sec. 114 (c) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1939. Sec. 22. (b) (11) Improvements by lessee on lessor's property.Income, other than rent, derived by a lessor of real property upon the termination of a lease, representing the value of such property attributable to buildings erected or other improvements made by the lessee. Sec. 22 (b) (11), I. R. C., supra, added to I. R. C. by Sec. 115 (a), R. A. of 1942. Sec. 101 of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1941. Sec. 22 (b) (10), I. R. C., supra, added to I. R. C., by Sec. 114 (b), R. A. of 1942. Sec. 114 (c) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1939. Sec. 22. (b) (11) Improvements by lessee on lessor's property.— Income, other than rent, derived by a lessor of real property upon the termination of a lease, representing the value of such property attributable to buildings erected or other improvements made by the lessee. Sec. 22 (b) (11), I. R. C., supra, added to I. R. C. by Sec. 115 (a), R. A. of 1942. Sec. 101 of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1941. Sec. 22 (b) (10), I. R. C., supra, added to I. R. C., by Sec. 114 (b), R. A. of 1942. Sec. 114 (c) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1939. Sec. 22. (b) (12) Recovery of Sec. 22. (b) (12) Recovery of Sec. 22. (b) (12) Recovery of bad debts, prior taxes, and delin- bad debts, prior taxes, and delin- bad debts, prior taxes, and delinquency amounts.-Income attribu-quency amounts.-Income attribu-quency amounts.-Income attributable to the recovery during the table to the recovery during the table to the recovery during the taxable year of a bad debt, prior taxable year of a bad debt, prior taxable year of a bad debt, prior tax, or delinquency amount, to the tax, or delinquency amount, to the extent of the amount of the re-extent of the amount of the recovery exclusion with respect to covery exclusion with respect to such debt, tax, or amount. For the such debt, tax, or amount. For the purposes of this paragraph: purposes of this paragraph: (A) Definition of Bad Debt.— (A) Definition of Bad Debt.The term "bad debt" means a debt The term "bad debt" means a debt on account of worthlessness or par- on account of worthlessness or partial worthlessness of which a deduc- tial worthlessness of which a deduction was allowed for a prior tax-tion was allowed for a prior taxable year. able year. (B) Definition of Prior Tax.- (B) Definition of Prior Tax.— The term "prior tax" means a tax The term "prior tax" means a tax on account of which a deduction or on account of which a deduction or credit was allowed for a prior tax-credit was allowed for a prior taxable year. able year. (C) Definition of Delinquency Amount. The term "delinquency amount" means an amount paid or accrued on account of which a deduction or credit was allowed for a prior taxable year and which is attributable to failure to file return with respect to a tax, or pay a tax, within the time required by the law under which the tax is imposed, or to failure to file return with respect to a tax or pay a tax. tax, or delinquency amount, to the extent of the amount of the recovery exclusion with respect to such debt, tax, or amount. For the purposes of this paragraph: (A) Definition of Bad Debt.The term "bad debt" means a debt on account of worthlessness or partial worthlessness of which a deduction was allowed for a prior taxable year. (B) Definition of Prior Tax.The term "prior tax" means a tax on account of which a deduction or credit was allowed for a prior taxable year. (C) Definition of Delinquency (C) Definition of Delinquency Amount.-The term "delinquency Amount.-The term "delinquency amount" means an amount paid or amount" means an amount paid or accrued on account of which a de-accrued on account of which a deduction or credit was allowed for duction or credit was allowed for a prior taxable year and which is attributable to failure to file return with respect to a tax, or pay a tax, within the time required by the law under which the tax is imposed, or to failure to file return with respect to a tax or pay a tax. a prior taxable year and which is attributable to failure to file return with respect to a tax, or pay a tax, within the time required by the law under which the tax is imposed, or to failure to file return with respect to a tax or pay a tax. Taxable Years of the first day of the taxable year in which such discharge occurred) with respect to such indebtedness shall not be allowed as a deduction. Paragraph (9) shall not apply with respect to any discharge of indebtedness to which this paragraph applies. This paragraph shall not apply to any discharge occurring in a taxable year beginning after December 31, 1945. Sec. 22(b) (10), I. R. C., supra, added to I. R. C., by Sec. 114(b), R. A. of 1942. Sec. 114(c) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1939. Taxable Years Taxable Years Beginning before 1939 Retroactivity Sec. 22. (b) (12) Recovery of Sec. 22. (b) (12) Recovery of Sec. 22. (b) (12) Recovery of bad debts, prior taxes, and delin- bad debts, prior taxes, and delin- bad debts, prior taxes, and delinquency amounts.-Income attribu- quency amounts.-Income attribu-quency amounts. table to the recovery during the table to the recovery during the taxable year of a bad debt, prior taxable year of a bad debt, prior tax, or delinquency amount, to the tax, or delinquency amount, to the extent of the amount of the re-extent of the amount of the recovery exclusion with respect to such debt, tax, or amount. For the purposes of this paragraph: covery exclusion with respect to (A) Definition of Bad Debt.- (A) Definition of Bad Debt.— The term "bad debt" means a debt The term "bad debt" means a debt on account of worthlessness or par- on account of worthlessness or partial worthlessness of which a deduc- tial worthlessness of which a deduction was allowed for a prior tax-tion was allowed for a prior taxable year. able year. (B) Definition of Prior Tax.The term "prior tax" means a tax on account of which a deduction or credit was allowed for a prior taxable year. (C) Definition of Delinquency Amount. The term "delinquency amount" means an amount paid or accrued on account of which a deduction or credit was allowed for a prior taxable year and which is attributable to failure to file return with respect to a tax, or pay a tax, within the time required by the law under which the tax is imposed, or to failure to file return with respect to a tax or pay a tax. | (B) Definition of Prior Tax.The term "prior tax" means a tax on account of which a deduction or credit was allowed for a prior taxable year. (C) Definition of Delinquency Amount.-The term "delinquency amount" means an amount paid or accrued on account of which a deduction or credit was allowed for a prior taxable year and which is |attributable to failure to file return with respect to a tax, or pay a tax, within the time required by the law under which the tax is imposed, or to failure to file return with respect to a tax or pay a tax. Sec. 116 (c), R. A. of 1942, provides that the amendment made to the I. R. C. by Sec. 116 (a), R. A. of 1942, adding Sec. 22 (b) (12), I. R. C., shown in 1939 and other columns, shall be effective as if it were made a part of the R. A. of 1938, or any prior revenue act, on the date of its enactment. Taxable Years Taxable Years Taxable Years (D) Definition of Recovery Ex- (D) Definition of Recovery Ex- (D) Definition of Recovery Exclusion. The term "recovery exclu- clusion.-The term "recovery exclu- clusion.—The term “recovery exclusion," with respect to a bad debt, sion," with respect to a bad debt, sion," with respect to a bad debt, prior tax, or delinquency amount, prior tax, or delinquency amount, prior tax, or delinquency amount, means the amount, determined in means the amount, determined in means the amount, determined in accordance with regulations pre- accordance with regulations pre- accordance with regulations prescribed by the Commissioner with scribed by the Commissioner with scribed by the Commissioner with the approval of the Secretary, of the approval of the Secretary, of the approval of the Secretary, of the deductions or credits allowed, the deductions or credits allowed, the deductions or credits allowed, on account of such bad debt, prior on account of such bad debt, prior on account of such bad debt, prior tax, or delinquency amount, which tax, or delinquency amount, which did not result in a reduction of the did not result in a reduction of the taxpayer's tax under this chapter taxpayer's tax under this chapter (not including the tax under section (not including the tax under section 102) or corresponding provisions of 102) or corresponding provisions of prior revenue laws, reduced by the prior revenue laws, reduced by the amount excludible in previous tax-amount excludible in previous taxable years with respect to such debt, able years with respect to such debt, tax, or amount under this para-tar, or amount under this paragraph. graph. tax, or delinquency amount, which did not result in a reduction of the taxpayer's tax under this chapter (not including the tax under section 102) or corresponding provisions of prior revenue laws, reduced by the amount excludible in previous taxable years with respect to such debt, tax, or amount under this paragraph. (E) Special Rules in Case of (E) Special Rules in Case of (E) Special Rules in Case of Section 102 Tax and Personal Hold- Section 102 Tax and Personal Hold- Section 102 Tax and Personal Holding Company Tax. In the appli- ing Company Tax.-In the appli-ing Company Tax.-In the application of subparagraphs (A), (B), cation of subparagraphs (A), (B), cation of subparagraphs (A), (B), (C), and (D) in determining the (C), and (D) in determining the (C), and (D) in determining the tax under section 102 or Subchap- tar under section 102 or Subchap-tax under section 102 or Subchapter A of Chapter 2, a recovery ex- ter A of Chapter 2, a recovery ex- ter A of Chapter 2, a recovery exclusion allowed for the purposes of clusion allowed for the purposes of clusion allowed for the purposes of Chapter 1 shall be allowed for the Chapter 1 shall be allowed for the Chapter 1 shall be allowed for the purpose of such section or subchap- purpose of such section or subchap- purpose of such section or subchapter whether or not the bad debt, ter whether or not the bad debt, ter whether or not the bad debt, prior tax, or delinquency amount prior tax, or delinquency amount prior tax, or delinquency amount resulted in a reduction of the sec- resulted in a reduction of the sec- resulted in a reduction of the section 102 tax or Subchapter A tax tion 102 tax or Subchapter A tax tion 102 tax or Subchapter A tax for the prior taxable year; and in for the prior taxable year; and in for the prior taxable year; and in the case of a bad debt, prior tax, or the case of a bad debt, prior tax, or the case of a bad debt, prior tax, or delinquency amount not allowable delinquency amount not allowable delinquency amount not allowable as a deduction or credit for the as a deduction or credit for the as a deduction or credit for the prior taxable year under Chapter 1 prior taxable year under Chapter 1 prior taxable year under Chapter 1 (except section 102) but allowable (except section 102) but allowable (except section 102) but allowable for the same taxable year under for the same taxable year under for the same taxable year under such section or subchapter a re- such section or subchapter a re- such section or subchapter a recovery exclusion shall be allowable covery exclusion shall be allowable covery exclusion shall be allowable for the purposes of such section or for the purposes of such section or for the purposes of such section or subchapter if such bad debt, prior subchapter if such bad debt, prior subchapter if such bad debt, prior tax, or delinquency amount did not tax, or delinquency amount did not tax, or delinquency amount did not result in a reduction of the tax result in a reduction of the tax result in a reduction of the tax under such section 102 or such Sub- under such section 102 or such Sub- under such section 102 or such Subchapter A. As used in this sub- chapter A. As used in this sub-chapter A. As used in this subparagraph references to Chapter 1, paragraph references to Chapter 1, paragraph references to Chapter 1, section 102, and Subchapter A in section 102, and Subchapter A in section 102, and Subchapter A in the case of taxable years not sub- the case of taxable years not sub- the case of taxable years not subject to the Internal Revenue Code, ject to the Internal Revenue Code, ject to the Internal Revenue Code, Ishall be held to be made to corre- shall be held to be made to corre- shall be held to be made to corresponding provisions of prior reve-sponding provisions of prior reve-sponding provisions of prior revenue Acts. nue Acts. Sec. 22 (b), I. R. C., supra, amended by Sec. 116 (a), R. A. of 1942, by adding par. (12). Sec. 116 (b) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1938. Sec. 22. (b) (13) Additional allowance for military and naval personnel. In the case of compen Sec. 22 (b), I. R. C., supra, amended by Sec. 116 (a), R. A. of 1942, by adding par. (12). Sec. 116 (b) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1938. Sec. 22. (b) (13) Additional allowance for military and naval personnel.-So much of the amount nue Acts. Sec. 22 (b), I. R. C., supra, amended by Sec. 116 (a), R. A. of 1942, by adding par. (12). Sec. 116 (b) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1938. (D) Definition of Recovery Ex- (D) Definition of Recovery Exclusion. The term "recovery exclu- clusion.-The term "recovery exclusion," with respect to a bad debt, sion," with respect to a bad debt, prior tax, or delinquency amount, prior tax, or delinquency amount, means the amount, determined in means the amount, determined in accordance with regulations pre-accordance with regulations prescribed by the Commissioner with scribed by the Commissioner with the approval of the Secretary, of the approval of the Secretary, of the deductions or credits allowed, the deductions or credits allowed, on account of such bad debt, prior on account of such bad debt, prior tax, or delinquency amount, which tax, or delinquency amount, which did not result in a reduction of the did not result in a reduction of the taxpayer's tax under this chapter taxpayer's tax under this chapter (not including the tax under section (not including the tax under section 102) or corresponding provisions 102) or corresponding provisions of of prior revenue laws, reduced by prior revenue laws, reduced by the the amount excludible in previous amount excludible in previous taxtaxable years with respect to such able years with respect to such debt, debt, tax, or amount under this tax, or amount under this paraparagraph. graph. (E) Special Rules in Case of (E) Special Rules in Case of Section 102 Tax and Personal Hold- Section 102 Tax and Personal Holding Company Tax.-In the appli- ing Company Tax.-In the application of subparagraphs (A), (B), cation of subparagraphs (A), (B), (C), and (D) in determining the (C), and (D) in determining the tax under section 102 or Subchap- tax under section 102 or Subchapter A of Chapter 2, a recovery ex-ter A of Chapter 2, a recovery exclusion allowed for the purposes of clusion allowed for the purposes of Chapter 1 shall be allowed for the Chapter 1 shall be allowed for the purpose of such section or subchap- purpose of such section or subchapter whether or not the bad debt, ter whether or not the bad debt, prior tax, or delinquency amount prior tax, or delinquency amount resulted in a reduction of the sec-resulted in a reduction of the section 102 tax or Subchapter A tax tion 102 tax or Subchapter A tax for the prior taxable year; and in for the prior taxable year; and in the case of a bad debt, prior tax, or the case of a bad debt, prior tax, or delinquency amount not allowable delinquency amount not allowable as a deduction or credit for the as a deduction or credit for the prior taxable year under Chapter 1| prior taxable year under Chapter 1 (except section 102) but allowable (except section 102) but allowable for the same taxable year under for the same taxable year under such section or subchapter a re- such section or subchapter a recovery exclusion shall be allowable covery exclusion shall be allowable for the purposes of such section or for the purposes of such section or subchapter if such bad debt, prior subchapter if such bad debt, prior tax, or delinquency amount did not tax, or delinquency amount did not result in a reduction of the tax result in a reduction of the tax under such section 102 or such Sub- under such section 102 or such Subchapter A. As used in this sub- chapter A. As used in this subparagraph references to Chapter 1, paragraph references to Chapter 1, section 102, and Subchapter A in section 102, and Subchapter A in the case of taxable years not sub- the case of taxable years not subject to the Internal Revenue Code, ject to the Internal Revenue Code, shall be held to be made to corre- shall be held to be made to corresponding provisions of prior reve-sponding provisions of prior revenue Acts. nue Acts. Taxable Years Beginning before 1939 sation received during any taxable received, before the termination of as does not exceed $1,500. Sec. 22 (b) (13), I. R. C., amended to read as above by Sec. 7 (a), Current Tax Payment Act of 1943. Sec. 7 (b) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1942. For Sec. 22 (b) (13), I. R. C.. before amendment, see 1942 column. Sec. 22. (c) Inventories.-Whenever in the opinion of the Commissioner the use of inventories is necessary in order clearly to determine the income of any taxpayer, inventories shall be taken by such taxpayer upon such basis as the Commissioner, with the approval of the Secretary, may prescribe as conforming as nearly as may be to the best accounting practice in the trade or business and as most clearly reflecting the income. Sec. 22 (b) (13), I. R. C., added to I. R. C. by Sec. 117, R. A. of 1942. Sec. 101 of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1941. Taxable Years Sec. 22. (c) Inventories. When- Sec. 22. (c) Inventories.—Whenever in the opinion of the Commis-ever in the opinion of the Commissioner the use of inventories is nec- sioner the use of inventories is neeessary in order clearly to determine essary in order clearly to determine the income of any taxpayer, inven- the income of any taxpayer, inventories shall be taken by such tax-tories shall be taken by such taxpayer upon such basis as the Com- payer upon such basis as the Commissioner, with the approval of the missioner, with the approval of the Secretary, may prescribe as con- Secretary, may prescribe as conforming as nearly as may be to the forming as nearly as may be to the best accounting practice in the best accounting practice in the trade or business and as most trade or business and as clearly reflecting the income. clearly reflecting the income. most Sec. 22. (d) (1) A taxpayer Sec. 22. (d) (1) A taxpayer Sec. 22. (d) (1) A taxpayer use the following method may may use the following method may use the following method (whether or not such method has (whether or not such method has (whether or not such method has been prescribed under subsection been prescribed under subsection been prescribed under subsection (c)) in inventorying goods speci-(e)) in inventorying goods speci- (c)) in inventorying goods specified in the application required fied in the application required fied in the application required under paragraph (2): under paragraph (2): under paragraph (2): (A) Inventory them at cost; (A) Inventory them at cost; (A) Inventory them at cost; (B) Treat those remaining on (B) Treat those remaining on (B) Treat those remaining on hand at the close of the taxable hand at the close of the taxable hand at the close of the taxable year as being: First, those included year as being: First, those included year as being: First, those included in the opening inventory of the in the opening inventory of the in the opening inventory of the taxable year (in the order of acqui- taxable year (in the order of acquitaxable year (in the order of acquisition) to the extent thereof, and sition) to the extent thereof, and sition) to the extent thereof, and second, those acquired in the tax-second, those acquired in the taxsecond, those acquired in the taxable year; and (C) Treat those included in the opening inventory of the taxable year in which such method is first used as having been acquired at the same time and determine their cost by the average cost method. Sec. 22. (d) (2) The method described in paragraph (1) may be used able year; and (C) Treat those included in the opening inventory of the taxable year in which such method is first used as having been acquired at the same time and determine their cost by the average cost method. Sec. 22. (d) (2) The method described in paragraph (1) may be used able year; and (C) Treat those included in the opening inventory of the taxable year in which such method is first used as having been acquired at the same time and determine their cost by the average cost method. Sec. 22. (d) (2) The method described in paragraph (1) may be used |