Taxable Years Taxable Years Taxable Years in the case of a head of a family, in the case of a head of a family, would be excluded under section 25 one who would be excluded under one who would be excluded under (b) (2) (B). section 25 (b) (2) (B). A pay- section 25 (b) (2) (B). A payment ment to a wife which is includible under section 22 (k) or section 171 in the gross income of such wife shall not be considered a payment by her husband for the support of any dependent. to a wife which is includible under See. 401. (b) Determination of Sec. 401. (b) Determination of status.-The determination of whether a person is living with husband or wife, is a head of a family, or is a dependent, shall be made as of the last day of the taxpayer's taxable year. Sec. 401. (b) Married and not living with husband or wife.-An individual not a head of a family and not living with husband or wife on July 1 of the taxable year shall be treated as a single person. Sec. 401, I. R. C., supra, amended by Sec. 104 (b), R. A. of 1942, to read as above. Sec. 101 of said Act makes amendments applicable to taxable years beginning after Dec. 31, 1941. For Sec. 401 I. R. C., before amendment, see 1942 column. See note following Sec. 404, I. R. C., infra. Sec. 402. Manner of election. The election referred to in section 400 shall be considered to have been made if the taxpayer files the return prescribed for this Supplement and such election shall be irrevocable. If the taxpayer for any taxable year has filed a return computing his tax without regard to this Supplement, he may not thereafter elect for such year to compute his tax under this Supplement. See note following Sec. 404, I. R. C., infra. See. 401. (e) Separate return of husband and wife. If a husband and wife living together file separate returns, each shall be treated as a single person. Sec. 401. (c) Separate return of husband and wife.-If a husband and wife living together file separate returns, each shall be treated as a single person. Sec. 401. (b) (d) Married per- Sec. 401. (d) Married persons sons and not living with husband not living with husband or wife.— or wife. A married person An A married person not a head of a individual not a head of a family family and not living with husband and not living with husband or wife or wife shall be treated as a single on July 1 of the taxable year shall person. be treated as a single person. Sec. 401, I. R. C., supra, amended by Sec. 104 (b), R. A. of 1942, by omitting language in stricken through type, by adding language in italics, and by adding "and" shown in underlined bold face type in subsection (d). Sec. 101 of said Act makes amendments applicable to taxable years beginning after Dec. 31, 1941. See note following Sec. 404, Sec. 402. Manner of election. The election referred to in section See note following Sec. 404, I. R. C., infra. Sec. 402. Manner of election. The election referred to in section 400 shall be considered to have been | 400 shall be considered to have been made if the taxpayer files the re-made if the taxpayer files the return prescribed for this Supple- turn prescribed for this Supplement and such election shall be ir- ment and such election shall be irrevocable. If the taxpayer for any taxable year has filed a return computing his tax without regard to this Supplement, he may not thereafter elect for such year to compute his tax under this Supplement. See note following Sec. 404, revocable. If the taxpayer for any taxable year has filed a return computing his tax without regard to this Supplement, he may not thereafter elect for such year to compute his tax under this Supplement. See note following Sec. 404, I. R. C., infra. Taxable Years Beginning in 1943 Sec. 403. Credits against tax not allowed. Section 31 (relating to foreign tax credit) and section 32 (relating to credit for taxes withheld at source) shall not apply with respect to the tax imposed by this Supple ment. See note following Sec. 404, Sec. 404. Certain taxpayers ineligible. This Supplement shall not apply to a nonresident alien individual, to an estate or trust, to an individual filing a return for a period of less than twelve months or for any taxable year other than a calendar year, or to a married individual married and living with husband or wife at any time during the taxable year whose spouse files return and computes tax without regard to this supplement. Sec. 404, I. R. C., supra, amended by Sec. 104 (c), 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. 404, I. R. C., before amendment, see 1942 column. Secs. 400-404, I. R. C. supra, added to I. R. C. by Sec. 102 (a), R. A. of 1941. Sec. 118 of said Act makes amendments applicable to taxable years beginning after Dec. 31, 1940. Supplement U-Abatement of Sec. 421. Abatement of tax for members of armed forces upon death. In the case of any individual who dies on or after December 7, 1941, while in active service as a member of the military or naval forces of the United States or of any of the other United Nations and prior to the termination of the present war as proclaimed by the President, the tax imposed by this chapter shall not apply with respect to the taxable year in which falls the date of his death, and the tax under this chapter and under the corresponding title of each prior revenue law for preceding taxable years which is unpaid at the date of his death (including interest, Sec. 403. Credits against tax not allowed. Sec. 403. Credits against tax not allowed. Section 31 (relating to foreign Section 31 (relating to foreign tax credit) and section 32 (relating tax credit) and section 32 (relating to credit for taxes withheld at to credit for taxes withheld at source) shall not apply with respect source) shall not apply with respect to the tax imposed by this Supple- to the tax imposed by this Supple ment. See note following Sec. 404, Sec. 404. Certain taxpayers not ineligible. This Supplement shall not apply to a nonresident alien individual, or to an estate or trust, to an individual filing a return for a period of less than twelve months or for any taxable year other than a calendar year, or to a married individual married and living with husband or wife at any time during the taxable year whose spouse files return and computes tax without regard to this supplement. Sec. 404, I. R. C., supra, amended by Sec. 104 (c), R. A. of 1942, by striking out "not" and changing "eligible" to "ineligible" in bold face heading, by omitting language in stricken through type, and by adding language in italics. Sec. 101 of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1941. Secs. 400-404, I. R. C., supra, added to I. R. C. by Sec. 102 (a), R. A. of 1941. Sec. 118 of said Act makes amendments applicable to taxable years beginning after Dec. 31, 1940. Sec. 421. Abatement of tax for members of armed forces upon death. Retroactivity See Sec. 421, I. R. C., in 1943 column and retroactive effect thereof. ment. See note following Sec. 404, Sec. 404. Certain taxpayers not eligible. This Supplement shall not apply to a nonresident alien individual, or an estate or trust. Secs. 400-404, I. R. C. supra, added to I. R. C. by Sec 102 (a), R. A. of 1941. Sec. 118 of said Act makes amendments applicable to taxable years beginning after Dec. 31, 1940. Sec. 421. Abatement of tax for members of armed forces upon death. Retroactivity See Sec. 421 in 1943 column and retroactive effect thereof. Taxable Years Taxable Years Taxable Years Beginning before 1939 Sec. 421. Abatement of tax for Sec. 421. Abatement of tax for members of armed forces upon members of armed forces upon death. Retroactivity See Sec. 421 in 1943 column and retroactive effect thereof. death. Retroactivity See Sec. 421 in 1943 column and retroactive effect thereof. Taxable Years Beginning in 1943 additions to the tax, and additional amounts) shall not be assessed, and if assessed the assessment shall be abated, and if collected shall be credited or refunded as an overpay ment. Supplement U and Sec. 421, SUBCHAPTER D-VICTORY TAX ON PART I-RATE AND COMPUTATION OF TAX Secs. 450-456, inclusive, Secs. 465-470, inclusive, and Secs. 475 and 476, comprising Subchapter D, which were added to I. R. C. by Sec. 172 (a), R. A. of 1942, are shown in fn. 21a. Sec. 172 (g) of said Act makes victory tax on individuals effective Jan. 1, 1943. (Continued on page 664) Taxable Years Beginning in 1942 21a SUBCHAPTER D-VICTORY TAX ON INDIVIDUALS PART I-RATE AND COMPUTATION OF TAX Sec. 450. Imposition of tax. There shall be levied, collected, and paid for each taxable year beginning after December 31, 1942, a victory tax of 5 per centum upon the victory tax net income of every individual (other than a nonresident alien subject to the tax imposed by section 211 (a)). Sec. 451. Victory tax net income. (a) DEFINITION.-The term "victory tax net income'' in the case of any taxable year means (except as provided in subsection (c)) the gross income for such year (not including gain from the sale or exchange of capital assets as defined in section 117, or interest allowed as a credit against net income under section 25 (a) (1) and (2), or amounts received as compensation for injury or sickness which are included in gross income by reason of the exception contained in section 22 (b) (5)) minus the sum of the following deductions: (1) EXPENSES.-The expenses allowable as a deduction by section 23 (a) (1) and (2). (2) INTEREST.-Interest allowable as a deduction by section 23 (b), if the indebtedness in respect of which such interest is allowed was incurred in carrying on any trade or business, or was incurred for the production or collection of income, or for the management, conservation, or maintenance of property held for the production of income. (3) TAXES.-Amounts allowable as a deduction by section 23 (c), to the extent such amounts are paid or incurred in connection with the carrying on of a trade or business, or in connection with property used in the trade or business, or in connection with property held for the production of income. (4) LOSSES.-Losses (other than losses from the sale or exchange of capital assets) allowable as a deduction under section 23 (e) (1), subject to the limitation provided in section 23 (h). (5) BAD DEBTS.-The amount allowable by section 23 (k) (1). (6) DEPRECIATION.-The amount allowable by section 23 (1). (7) DEPLETION.-The amount allowable by section 23 (m) and (n). Taxable Years Beginning in 1941 (8) PENSION TRUSTS.-The amount allowable by section 23 (p). (9) NET OPERATING LOSS.-The net operating loss deduction allowable by section 23 (s). (10) AMORTIZATION.-The amount allowable by seetion 23 (t). (11) ALIMONY.-The amount allowable by section 23 (u). (12) SPECIAL DEDUCTION.-The amount allowable by section 120. (13) ESTATES AND TRUSTS.-In the case of an estate or trust, the amount allowable by subsection (a) of seetion 162 in addition to the amounts allowable by subsections (b) and (c) of such section. (b) ITEMS NOT DEDUCTIBLE.-The deductions allowable by subsection (a) shall be subject to the limitations contained in section 24 and Supplement J and, in the case of nonresident aliens subject to the victory tax, shall be subject to the limitations contained in Supplement H. (c) SUPPLEMENT T TAXPAYER.-If for any taxable year a taxpayer makes his return and pays his tax under Supplement T, the term "victory tax net income" means the gross income for such year. (d) BASIS FOR DETERMINING LOSS.-The basis for determining the amount of deduction for losses sustained, to be allowed under paragraph (4) of subsection (a), and for bad debts, to be allowed under paragraph (5) of subsection (a), shall be the adjusted basis provided in section 113 (b) for determining the loss from the sale or other disposition of property. (e) RULE APPLICABLE TO PARTICIPANTS IN A COMMON TRUST FUND. In the case of a participant in a common trust fund, he shall in respect of the common trust fund income include in computing his victory tax net income, whether or not distributed and whether or not distributable, only his proportionate share of the ordinary net income or the ordinary net loss of the common trust fund, computed as provided in section 169 (d). (f) RULE APPLICABLE TO PARTNERS.-In the case of an individual carrying on business in partnership, he shall in respect of the partnership income include in computing his victory tax net income, whether or not distribution is made to him, only his distributive share of the ordinary net income or the ordinary net loss of |