Amendment to Interest paid on indebtedness exempt securities sions or securities issued under the provisions of the Federal Farm Loan Act of July seventeenth, nineteen hundred and sixteen; the compensation of the present President of the United States during the term for which he has been elected and the judges of the supreme and inferior courts of the United States now in office, and the compensation of all officers and employees of a State, or any political subdivision thereof, except when such compensation is paid by the United States Government." SEC. 1201. (1) That paragraphs second and third of subdivision (a) of section five of such Act of September eighth, nineteen hundred and sixteen, are hereby amended to read as follows: "Second. All interest paid within the year on incurred for tax his indebtedness except on indebtedness incurred for the purchase of obligations or securities the interest upon which is exempt from taxation as income under this title; cannot be deducted from individual income Income and excess profits taxes paid within taxable year cannot be deducted from individual income Amendment to "Third. Taxes paid within the year imposed by the authority of the United States (except income and excess profits taxes) or of its Territories, or possessions, or any foreign country, or by the authority of any State, county, school district, or municipality, or other taxing subdivision of any State, not including those assessed against local benefits;" (2) Section five of such Act of September New paragraph eighth, nineteen hundred and sixteen, is hereby amended by adding at the end of subdivision ( a further paragraph numbered nine, to read as follows: Charitable contributions deductible from individual income up to 15% of such income "Ninth. Contributions (a) or gifts actually made within the year to corporations or associations organized and operated exclusively for religious, charitable, scientific, or educational pur poses, or to societies for the prevention of cruelty to children or animals, no part of the net income of which inures to the benefit of any private stockholder or individual, to an amount not in excess of fifteen per centum of the taxpayer's taxable net income as computed without the benefit of this paragraph. Such contributions or gifts shall be allowable as deductions only if verified under rules and regulations prescribed by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury." Sec. 6 (a, 2 SEC. 1202. That (1) paragraphs second and Amendment to third of subdivision (a) of section six of such Act and 3) of September eighth, nineteen hundred and sixteen, are hereby amended to read as follows: incurred in exempt securities from net income aliens "Second. The proportion of all interest paid Interest on debt within the year by such person on his indebtedness purchase of tax (except on indebtedness incurred for the purchase is not deductible of obligations or securities the interest upon which of nonresident is exempt from taxation as income under this title) which the gross amount of his income for the year derived from sources within the United States bears to the gross amount of his income for the year derived from all sources within and without the United States, but this deduction shall be allowed only if such person includes in the return required by section eight all the information necessary for its calculation; excess profits not deductible non-resident allens "Third. Taxes paid within the year imposed Income and by the authority of the United States (except in- taxes paid are come and excess profits taxes), or of its Territor- from income of ies, or possessions, or by the authority of any State, county, school district, or municipality, or other taxing subdivision of any State, paid within the United States, not including those assessed against local benefits;" Sec. 6, new (2) Section six of such Act of September Amendment to eighth, nineteen hundred and sixteen, is also fur- paragraph Non-resident aliens must file to obtain benefits of deductions and credits ther amended by adding a new subdivision to read as follows: "(c) A nonresident alien individual shall recomplete returns ceive the benefit of the deductions and credits provided for in this section only by filing or causing to be filed with the collector of internal revenue a true and accurate return of his total income, received from all sources, corporate or otherwise, in the United States, in the manner prescribed by this title; and in case of his failure to file such return the collector shall collect the tax on such income, and all property belonging to such nonresident alien individual shall be liable to distraint for the tax." Amendment to Specific personal SEC. 1203. (1) That section seven of such Act of September eighth, nineteen hundred and sixteen, is hereby amended to read as follows: "SEC. 7. That for the purpose of the normal tax only, there shall be allowed as an exemption in the nature of a deduction from the amount of the net income of each citizen or resident of the United States, ascertained as provided herein, the sum of $3,000, plus $1,000 additional if the person making the return be a head of a family or a married man with a wife living with him, or plus the sum of $1,000 additional if the person making the return be a married woman with a husband living with her; but in no event shall this additional exemption of $1,000 be deducted by both a husband specific personal and a wife: Provided, That only one deduction of Additional exemption of $4,000 shall be made from the aggregate income of both husband and wife when living together: Provided further, That if the person making the return is the head of a family there shall be an additional exemption of $200 for each child dependent upon such person, if under eighteen years of age, or if incapable of self-support because mentally or physically defective, but this provi sion shall operate only in the case of one parent in the same family: Provided further, That guardians or trustees shall be allowed to make this personal exemption as to income derived from the property of which such guardian or trustee has charge in favor of each ward or cestui que trust: Provided further, That in no event shall a ward or cestui que trust be allowed a greater personal exemption than as provided in this section from the amount of net income received from all sources. There shall also be allowed an exemption from the amount of the net income of estates of deceased citizens or residents of the United States during the period of administration or settlement, and of trust or other estate of citizens or residents of the United States the income of which is not distributed annually or regularly under the provisions of subdivision (b) of section two, the sum of $3,000, including such deductions as are allowed under section five.” such (2) Subdivision (b) of section seven of Act of September eighth, nineteen hundred and sixteen, is hereby repealed. Repeal of (Sec. 7, b) requirement of returns from non-resident personal aliens to obtain exemption Amendments to SEC. 1204. (1) That subdivisions (c) and (e) of section eight of such Act of September sec. 8, (c) eighth, nineteen hundred and sixteen, are hereby and (e) amended to read as follows: need make no not exceeding "(c) Guardians, trustees, executors, adminis- Fiduciaries trators, receivers, conservators, and all persons, return of income corporations, or associations, acting in any fiduci- $3,000 ary capacity, shall make and render a return of the income of the person, trust, or estate for whom or which they act, and be subject to all the provisions of this title which apply to individuals. Such fiduciary shall make oath that he has sufficient knowledge of the affairs of such person, trust, or estate to enable him to make such return and that the same is, to the best of his knowledge and belief, true and correct, and be subject to all the provisions of this title which apply to individuals: Provided, That a return made by one of two or more joint fiduciaries filed in the district where such fiduciary resides, under such regulations as the Secretary of the Treasury may prescribe, shall be a sufficient compliance with the requirements of this paragraph: Provided further, That no return of income not exceeding $3,000 shall be required except as in this title otherwise provided. "(e) Persons carrying on business in partnership shall be liable for income tax only in their individual capacity, and the share of the profits of the partnership to which any taxable partner would be entitled if the same were divided, whether divided or otherwise, shall be returned for taxation and the tax paid under the provisions of this title: Provided, That from the net distributive interests on which the individual members shall be liable for tax, normal and additional, there shall be excluded their proportionate shares received from interest on the obligations of a State or any political or taxing subdivision thereof, and upon the obligations of the United States (if and to the extent that it is provided in the Act authorextent provided izing the issue of such obligations of the United States that they are exempt from taxation) and its possessions, and that for the purpose of computing the normal tax there shall be allowed a credit, as provided by section five, subdivision (b), for their proportionate share of the profits derived from dividends. Such partnership, when requested by the Commissioner of Internal Revenue or any district collector, shall render a correct return of the earnings, profits, and income of the partnership, except income exempt under section four of this Act, setting forth the item of the gross income and the deductions and credits allowed by Interest on U. S. obligations is exempt only to in Act of issue |