which remains undistributed at that time. A stockholder who receives any amount in distribution of the net income of the corporation accumulated since December 31, 1917, which has not been accounted for by a stockholder as undistributed income is required to account therefor and is taxable thereon. A stockholder who receives any amount in distribution of earnings or profits of the corporation accumulated since February 28, 1913, and prior to Jan- . uary 1, 1918, is required to account therefor and is taxable thereon; but he is not required to account for any earnings or profits accumulated prior to March 1, 1913.81

PERSONAL-SERVICE CORPORATIONS MAKING RETURN FOR FISCAL YEAR Beginning IN 1917 AND Ending in 1918. If the fiscal year of a personal-service corporation began in the calendar year 1917 and ended in the calendar year 1918, it is, as a corporation, subject to income and excessprofits taxes for the part of such fiscal year which falls within the calendar year 1917. The amounts for which such a corporation is liable are such proportions respectively of the income taxes for the entire fiscal year, computed in accordance with Title I of the Revenue Act of 1916 as amended by the Revenue Act of 1917 and with Title I of the Revenue Act of 1917, and of the excess-profits taxes computed in accordance with Title II of the Revenue Act of 1917 for the entire fiscal year, as the portion of such fiscal year falling within the calendar year 1917 is of the entire period. Amounts previously paid by the corporation on account of income taxes for such fiscal year shall be credited toward the payment of the income taxes for the portion of the fiscal year falling within the calendar year 1917. Any excess will be credited or refunded in accordance with the provisions of Section 252 of the statute. Amounts previously paid by the corporation on account of excess-profits taxes for any period beginning on or after

81 Reg. 45, Arts. 326, 1541, 1542, Revenue Act of 1918, § 201.

January 1, 1918, shall be immediately refunded as a tax erroneously or illegally collected.82

TAXATION OF STOCKHOLDERS OF PERSONAL-SERVICE CORPORATION WITH FISCAL YEAR ENDING IN 1918. An individual stockholder of a personal service corporation with a fiscal year ending in 1918, is, moreover, subject to taxation (a) upon his distributive share of the net income of the corporation for its fiscal year whether distributed or not, and (b) upon the earnings or profits of the corporation accumulated since February 28, 1913, and prior to the beginning of such fiscal year, distributed during such fiscal year. Such part of a stockholder's distributive share of the net income of a corporation for its fiscal year as is attributable to the calendar year 1918 is taxable at the rates for such calendar year, and such part of such distributive share as is attributable to the calendar year 1917 is taxable at the rates for such calendar year, but is not subject to normal tax. The part of a stockholder's distributive share of the net income of a corporation for its fiscal year attributable to the calendar year 1918 is found by determining his distributive share of the net income of the corporation for its fiscal year, whether distributed or not, in the same manner as if the fiscal year were the calendar year 1918, and then taking the proportion thereof which the part of such fiscal year falling within such calendar year bears to the full fiscal year. The part of a stockholder's distributive share of the net income of a corporation for its fiscal year attributable to the calendar year 1917 is found by determining the net income of the corporation for its fiscal year in accordance with the law applicable to the calendar year 1917 and determining the stockholder's distributive share thereof by adding to the amounts of such net income distributed to him during such fiscal year his proportion of the net income of such fiscal year remaining undistributed at the close thereof, and then taking the proportion of such distributive share which

82 Reg. 45, Arts. 327, 1034, 1035, 1621. Revenue Act of 1918, $$ 205, 252, 335.

the part of such fiscal year falling within the calendar year 1917 bears to the full fiscal year.83

APPLICATION OF DIFFERENT TAX RATES IN THE CASE OF FISCAL YEAR ENDING IN 1918. Any deductions, exemptions, or credits to which the stockholder of a personal service corporation with a fiscal year ending in 1918 is entitled shall first be applied against his income subject to the rates for the calendar year 1918, unless of a kind plainly and properly chargeable against income taxable at the rates for the calendar year 1917. The proportionate share of a stockholder of any excess profits tax imposed upon the corporation under the Revenue Act of 1917 with respect to that part of the fiscal year falling within the calendar year 1917, is plainly and properly chargeable against income taxable at the rates for that year and shall be credited against such income of the stockholder. In determining the rates of tax applicable to the amounts of the distributive shares of the stockholders attributable to the calendar years 1917 and 1918, respectively, the amounts subject to the rates for the calendar year shall be placed in the lower brackets of the rate schedule provided in the present statute, and the amounts attributable to the calendar year 1917 in the next higher brackets of the rate schedule applicable to that year.84

PERSONAL-SERVICE CORPORATION MAKING RETURN FOR FISCAL YEAR ENDING IN 1919 OR LATER. If the fiscal year of a personal-service corporation began in the calendar year 1918 or later and ends in the calendar year 1919 or later, it is not subject to taxation as a corporation under the statute. An individual stockholder is, however, subject to taxation (a) upon his distributive share of the net income of the corporation for its fiscal year whether distributed or not, and (b) upon the earnings or profits of the corporation accumulated since February 28, 1913, and

83 Reg. 45, Arts. 328, 1541, 1542. Revenue Act of 1918, §§ 201,

84 Reg. 45, Arts. 329, 1641. Revenue Act of 1918, § 206.

prior to January 1, 1918, distributed during such fiscal year.85

TAXATION OF STOCKHOLDERS OF PERSONAL-SERVICE CORPORATION WITH FISCAL YEAR ENDING IN 1919. Such part of a stockholder's distributive share of the net income of a personal-service corporation for its fiscal year ending in 1919 as is attributable to the calendar year 1919 is taxable at the rates for such calendar year, and such part of such distributive share as is attributable to the calendar year 1918 is taxable at the rates for such calendar year. The part of a stockholder's distributive share of the net income of a corporation for its fiscal year attributable to the calendar year 1919 is found by determining his distributive share of the net income of the corporation for its fiscal year, whether distributed or not, in the same manner as if the fiscal year were the calendar year 1919, and then taking the proportion thereof which the part of such fiscal year falling within such calendar year bears to the full fiscal year. The part of a stockholder's distributive share of the net income of a corporation for its fiscal year attributable to the calendar year 1918 is found by determining his distributive share of the net income of the corporation for its fiscal year, whether distributed or not, in the same manner as if the fiscal year were the calendar year 1918, and then taking the proportion thereof which the part of such fiscal year falling within such calendar year bears to the full fiscal year.8

86

APPLICATION OF DIFFERENT TAX RATES IN THE CASE OF FISCAL YEAR ENDING IN 1919. Any deductions, exemptions, or credits to which the stockholder of a personal service corporation with a fiscal year ending in 1919 is entitled shall first be applied against his income subject to the rates for the calendar year 1919, unless of a kind plainly and properly chargeable against income taxable at the rates for the calendar year 1918. In determining

85 Reg. 45, Arts. 330, 1541, 1542. Revenue Act of 1918, $201. 86 Reg. 45, Arts. 331, 1621. Revenue Act of 1918, § 205.

the rates of tax applicable to the amounts of the distributive shares of the stockholders attributable to the calendar years 1918 and 1919, respectively, the amounts subject to the rates for the calendar year 1919, shall be placed in the lower brackets of the rate schedule provided in the statute and the amounts attributable to the calendar year 1918 in the next higher brackets of the rate schedule applicable to that year.87

CREDITS ALLOWED STOCKHOLDERS OF PERSONAL-SERVICE CORPORATIONS. A stockholder of a personal-service corporation is entitled to credit, for the purpose of the normal tax only, for amounts received in distribution of earnings or profits of the corporation accumulated since February 28, 1913, and prior to January 1, 1918, or, in the case of a personal-service corporation with a fiscal year ending in 1918, prior to the beginning of the fiscal year. In addition to the credits ordinarily allowed to an individual, a stockholder of a personal-service corporation is entitled to the following credits: (a) a credit against net income for the purpose of the normal tax only of his proportionate share of such dividends from a corporation subject to tax and of such interest not entirely exempt from tax upon obligations of the United States and bonds of the War Finance Corporation as are received by the personal-service corporation, and (b) a credit against income tax of the stockholder's proportionate share of income, war-profits, and excess-profits taxes of the personal-service corporation paid or accrued during the taxable year to a foreign country upon income derived from sources therein, or to any possession of the United States.88

CORPORATIONS FORMED TO EVADE THE SURTAXES. If any corporation, however created or organized, is formed or availed or for the purpose of preventing the imposition of the surtax upon its stockholders or members through the

87 Reg. 45, Arts. 332, 1641. Revenue Act of 1918, § 206.

88 Reg. 45, Arts. 333, 301, 381, 384, 1541. Revenue Act of 1918, S$ 201, 216, 222.